- large and increasing cost of housing due to artificial restrictions of housing through zoning and housing permitting
- large and increasing cost of education due to subsidized education with no cost control of the product, leading to bloat in administration and unnecessary spending at universities [cost increase is both monetary and in time due to grade inflation]
- opportunities are increasingly centered in jobs and cities where the two previous problems are aggravated the most
Neither of these are productive uses of the amount of debt millenials accrue for this purpose.
University education is mostly signaling that you are conscientious, smart enough and execute an imposed set of tasks over an extended period of time . The book in the link argue although an individual benefit from graduating at a good college the society as a whole does not get extra value from more people needing a college education to get a job. Maybe we could get a cheaper signal for this?
When buying a home housing has the main purpose of sheltering a family. Short-term increases in house prices lead to a decline in births among non-owners and a net increase among owners . With decreasing birth rates that is already below replacement in the west making it impossible for most to buy and making rent crazy high seem like an incredibly short sighted idea.
Edit: added extra info on education having a time cost. This is Peter Thiels long-standing point.
Exclusionary zoning benefit those that own housing the most, so it does benefit a bunch of baby boomers. However, those with leverage of existing rental units seem to benefit the most because they gain leverage through rental income in the same market as they buy new units in so they can slowly gain new low-risk wealth over time without changing their cost/revenue balance.
In general low-risk investments such as student loan bonds and rental properties should be low-margin. However, due to regulations that stop the market from doing its thing that is not the case.
One could replace "education" with "health care" and make another valid important point.
1) Independent living -- did they go to university a long way from where they lived? If they treated it as 3 more years of school, they've missed a major point. I'm not going to be parenting them as they are dropped into the real world at the deep end.
2) Extra curricular activities at uni -- did they do student radio? Or theatre? Or music? This indicates they aren't just doing what they think is required of them, but have the ability to think for themselves.
Kids straight out of school are a massive risk, not only can they do the job, but can adapt to an adult world? Graduates that just did 3 more years of school are the same risk.
Kids that dropped out at 16 and worked in a garage for a few years and solved some problems the business had? Brilliant.
A large corporation might tilt more towards someone that does an assigned task on time regardless of how mind-numbing it is, and even when they have to invent the instructions as they go along.
Income inequality and the falling prices, in real terms, of virtually everything the upper-middle-class-and-above need to live their lives, means there is more spare money to allocate towards housing, bidding housing costs up.
In a world where food and clothing is cheaper than ever to "most of us", why not pay those rising costs, thus bidding prices ever higher?
Obviously every additional unit places a very slight downward pressure on housing prices, I just disagree that regulation is a primary factor at play here.
Furthermore, low interest rates has increased the cost of homes as well and increased the amount of money swimming around looking for a home.
My wife and I had $120,000 in student loans, which we were fortunately able to pay it off in 36 months. Granted, we didn’t do much else.
University degreees are not created equal. Having six figures of debt isn’t a problem if you have a reasonable expectation to have six figures of income.
On the other hand, my cousin went to a private liberal arts college for a $90,000 Communications degree before returning to RadioShack. He may never pay his loans off.
Student loans become a problem when they are used to subsidize high-tuition schools teaching skills which don’t connect to a wage-premium.
A classic liberal arts education is therefore generate reliable value for the holder in the same way as the sciences, because you would be a perfect fit for complex jobs in running our government and corporations.
Professor Drout makes a great argument for this in one of my favorite books that made me as a physicist and computer science PhD finally appreciate the value of the liberal arts .
The problem is that many of our universities have abdicated their responsibility to teach a liberal arts curriculum that teaches people how to think, and are instead teaching people what to think in a very political curriculum. Employers recognize this, and therefore we see the decreasing value of liberal arts degrees in the market.
Learning how to become an effective activist is not worth $90k+ in loans towards your future self.
And one problem is that universities seem ok with this, There's a ton of discussions here about how those people should not go to college, or go to community college etc. One could argue that it's not the university's fault, that the students, should make reasonable adult choices.
For those who go into the field to truly learn, they can indeed get a ton of very useful knowledge, but I'd argue they're a minority, and they'll have a harder time to succeed due to all the "lemons".
Those usually graduated from a mid to top tier school with a marketable degree, and won't have many issues paying the loans.
The ones struggling usually have lower amounts, and got leo-marketability degrees from for-profit or low-tier schools.
But this doesn't mean that there isn't a problem. There is one, it is massive, and it is bad for society.
Only 5.4% of Americans make over $100k. I believe 20% of students graduate with over $100k in student loans. The problem is the Pandora’s box and unwillingness to admit we tried an experiment and it failed, it’s great we wanted to guarantee loans to pay for secondary education, but we have to admit the American economy sucks and overwhelmingly can’t support this student debt (good luck finding a politician who will say that, much less be able to take any action to remove guaranteed student loans.
Other interesting facts:
More Americans hold student loan debt than the population of over 200 countries
Over 7 million (>2%) of the U.S. population has defaulted on their student loans
Student loan debt is the second highest form of debt in the U.S., second only to mortgages
Almost 30% student loan borrowers move back in with their parents after graduation
Over 34% of borrowers have delayed starting a family because of their debt
Over 47% of borrowers have delayed buying a car because of their debt
Over 73% of borrowers have delayed saving for retirement because of their debt
Around 63% of borrowers have delayed buying a home because of their debt
Almost 28% borrowers have delayed getting married because of their debt
I'd hate to think that the ideal American higher education system is one where only the idle rich get to study what they want or are interested in.
If you buy a truck that gets 13mpg, and you get mad at how expensive gas is costing you every time it increases and how fast your vehicle goes through it, should we get mad at the truck manufacturer or the company that gave you the loan for your decision, that could have been fairly accurately determined beforehand with a bit of research and critical thinking (gas prices will rise in the future)?
I pushed my daughters very hard to research what they wanted to do with their lives, and made them think hard about the upcoming automation revolution. A great number of modern day jobs are going to just go away and won't be directly replaceable. People should be aware of that and go into fields that aren't as easily automated if they want to do well in the future. We all know self driving cars/trucks are coming, and fairly soon. Would you encourage someone to go into the trucking industry today if they are young and figuring out what they want to do with the rest of their lives?
In what way? I think it's working exactly as intended, to siphon wealth off to the ruling class. Spending is like a gas, it will expand to fit its constraints.
Those stats are not great for borrowers, but they're great for lenders. One take is to blame the lenders -- they lend too much, chaining the borrowers to debt. The other take is to blame the debtors, reframing those stats as, e.g., "Over 34% of borrowers have delayed starting a family because they preferred spending borrowed money."
The truth is of course somewhere in the middle: debt is a wonderful leverage tool when used properly, but lenders will gladly give you more than enough rope to hang yourself. In today's world the only one looking out for you is you.
(for the sake of this comment, I'm talking about non-medical debt)
Intended according to who? The founders? The central banks? Creditors?
It’s all an experiment. Capitalism is. Consumer debt is. To think anyone intends the economy to work as it is (government shut down, debt across the board at record highs, defaults at record highs, economic bubbles, mass fraud, etc...) is pretty crazy...but that’s my point, good luck finding a politician to speak that way, much less being able to mobilize the government to correct these issues.
It’s pretty easy to get caught up in the idea it’s working for you. I take it youre not one of the federal government employees living paycheck to paycheck as a political pawn? Is that the way the economy is really intended to work?
We are in the lowest default rate period since the Great Recession, I don’t know where you’re getting this sky-is-falling take on the economy.
We have told people, particularly people with low income or disadvantaged backgrounds, that college is the ticket to a high paying job. And then for-profit and other sketchy institutions prey on these people to get them to take out loans for ow value degrees. That probably aren't even completed.
The chapter in "Weapons of Math Destruction" on how for-profit colleges use "big data" to prey on low income people is terrifying. They look for people getting government assistance and other indicators of "struggle" and use facebook retargeting to bombard them with ads on why they need to go to college at a for profit institution.
You kind a have to luck out on a lot of parameters to easily pay off student loan debt. Even Barack Obama couldn't pay off his student loan debt until recently.
many don't seem to take issue the government setting rates with hospitals and considering the costs involved it should do so with college level education.
many colleges would trip over themselves to offer degree programs fitting within the limits provided. Yes there will be moans and groans, end of the world declarations, but the free ride on the backs of students who have the federal loan programs to fall back onto needs to stop.
I don't know, maybe he is doing what a communications degree'd individual should be and he just vastly underpaid? Or the degree is overpriced?
Why are we blaming the 18 year old in this scenario?? Isn't this why parents are helicoptering their kids nowadays so that a simple choice like this doesn't doom them during their formative years?
We treat degrees that don't award high-paying jobs as a disease worth stomping out. We see this already with people demonizing those who choose to go into the soft sciences or more art-inclined degrees. This isn't to say that there aren't degrees that are a scam, but rather that we need to be careful if we solely value education for how valuable the careers are, rather than valuing education and the societal benefits it grants.
The #1 reason why in-demand markets are that way is jobs. Moving out of these areas is not an easy answer.
Part of me would love to move back to KY where I'm from, but where would I work? That's the reason I left in the first place, no good jobs.
Salary seldom keeps up with real estate costs. The real estate cost difference can be a factor of 10, but you won't see that difference for salary.
Lots of low-cost areas will specialize in an industry. You shouldn't expect to pick a random low-cost area and find the industry you want, but the industry you want is probably in at least one low-cost area. Find that area, move there, and do well in life.
The popularity of wanting to live in Toronto makes detached housing for everyone who wants it untenable. There just isn't enough space.
There is plenty of "space;" Toronto, like many municipalities, just makes increasing the housing supply illegal: https://www.vox.com/policy-and-politics/2018/9/24/17896482/b.... When supply is restricted in the face of rising demand, prices rise. This is what existing owners want: http://cityobservatory.org/homevoters-v-the-growth-machine/ and that's why we're getting it. Baby boomers are, sometimes literally, forcing their own children out of the city.
YIMBY or bust.
There may be a billion people who would move there now if they could afford it. The additional units required to get things into the affordable price range would degrade the experience though, causing most people to reject the result.
So what this accomplishes is the destruction of a desirable place to be. The smaller buildings and easier parking are inherently part of the desirability. Even the exclusiveness itself is part of the desirability.
For you, maybe.
I know it sounds obvious, but if you haven't looked into it in the past year, I think you'll find it's easier now more than ever to manage the (admittedly many) logistics of finding a new area for yourself and your family. Tons of tools for each aspect.
I was fortunate to attend a state school before the tuition exploded.
And a better summary, if you'd prefer an article:
Every one else has started to view the world with pinko-commie lenses. I'm genuinely amused at the confusion this causes to the people I talk to who are at the end of their careers. This really ought to be scaring the upper 20%, but I guess it's hard to feel the heat when the system is working for you.
I bought my house when I was 22. I received no down payment assistance from my parents, in fact my parents were actively stealing money from me. I also had a boatload of student debt, still do.
Now what I did do, was take advantage of government programs that were and still are in place to qualify for an FHA backed mortgage loan.
My mortgage is $640/mo roughly while my peers see their rent increase massively year over year..
I’m guessing the effect the grandparent is seing is in high cost of living, coastal cities. It’s certainly not the norm across the US.
Pet theory with zero evidence attempted : Geography really does affect one's filter bubble / worldview more than we've explored.
Edit: with no down payment or student loan assistance from guardians.
It would have been useful if the parent comment had specified his/her age and location, since otherwise we get a smattering of data points that can neither confirm no reject the original anecdotal observation.