"American Dream Eluding Under-40s with Student Debt," by Kathleen M. Howley (Business Week)
Money quote #1: "“Buying a home and having a family are the hallmarks of middle-class American life,” said Robert Lawless, a professor at the University of Illinois College of Law in Champaign. “The hope is still alive, but for now a lot of people are being forced to rent because all their money is going to pay off their student loans.”
Money quote #2: "Thwarted would-be homeowners are helping to support rental demand for single-family foreclosed homes, the emerging institutional asset class that investors including Blackstone Group LP (BX), based in New York, and Colony Capital LLC, in Santa Monica, California are accumulating."
So, not only are student loan debt slaves paying a huge amount of money to the investor class in interest, late charges, etc., they are also shut out of the housing market (and the tax advantages thereof) and forced to pay rent to the investor class.
*****
"New GSU Law School to be 'showplace' on key downtown block," by Maria Saporta and Doug Sams (Saporta Report)
Money quote: "We are literally out of space," said Steven Kaminshine, dean of Georgia State's College of Law. "We can't add one more faculty member. It's time for a school with our trajectory to have a building that is commensurate with our reputation."
And the law school arms race continues....
I totally agree. The amount of debt students are taking on is absurd. Unfortunately, no school, at any level (be it college or high school) trains kids on debt management. This is something kids are going to have to learn, or they are going to wind up debt-slaves, whether it be college tuition, car debt, credit card debt, home loans, etc. The average American seems not to fear the repercussions of debt enough.
ReplyDeleteAgree. Bring back Home Ec. Have a boglehead teach it and watch college applications plummet and CCs swell.
Delete"This is something kids are going to have to learn..." It's something law schools also are going to have to learn, the hard way:
Delete"Law School Enrollment Dropoff Causes Departmental Budget Cuts" (Catholic University Law School)
http://www.cuatower.com/news/2013/04/14/law-school-enrollment-dropoff-causes-departmental-budget-cuts/
So basically the law school was subsidizing the rest of the university. More of this to come. Why haven't law students been rebelling that they are grossly overcharged so someone else doesn't have to pay the actual cost of their degree?
DeleteI'm surprised to see that the (seemingly unchallenged) view of home "ownership" as a wise decision has survived the housing crisis unscathed.
ReplyDeleteOh, woe is me! I sure wish I didn't have my student loans - THEN I could chain myself to a monster-size mortgage on a house that is still going down in value.
Not all real estate investments are bad. NYC is on another planet. If you bought in Brooklyn near 2,3 (stations), in 2007, you'd still see material appreciation.
DeleteSo you'd be chained to a "good investment" for 30 years, then?
DeleteRemember how 10 years ago, people were claiming that student loans were "good debt?" Aren't you pretty much saying that a mortgage is "good debt," too?
There's nothing all so bad about a modest mortgage on a modest home which you can pay off well in advance of maturity (say 10 years). Once you don't have a note/rent payment, you can start accumulating for retirement quicker.
DeleteYou know, many people in 2007 were saying, "Buy land and buy real estate. It will always - ALWAYS! - go up in value." Right at the top of the bubble.
DeletePeople listened, and they paid the price.
Other people invested and made money. It's just a deal -- like buying Apple stock. Brooklyn Heights, Flatbush, etc. You're not tied to "30 years" if you do it right (you can realize 7% yearly appreciation... and dump it whenever you want). Would I suggest buying in Las Vegas (no... not back then either). London? Yes. Also, "good debt" is something like "non-reimbursable business expense" (and it has 70% upside of profitability), while "bad debt" is... student loans.
DeleteBuying makes a lot less sense today than it did 20 or 30 years ago. You don't chain yourself to a property for 30 years, but you do make a statement that you expect to live in the same place for at least 7 years. Most jobs today don't last that long. In the Marxist capital vs. labor struggle, capital is winning, so why lose all the flexibility by buying? It makes sense for a lot of people to buy, just not nearly as many as it used to. There's more to this than just student loan debt.
DeleteAgree. Makes a lot less sense if you're thinking about it in those terms. However, as investments and business model, the notion is building an annuity. Quotes like, "why would I buy something if someone can buy it for me" makes sense. Essentially, buying real estate and renting it out for more than the note and upkeep is the plan. Over years, the debt goes down while equity accrues, the corp is net positive cash-flow, and you're writing off expenses/mortgage/debts, etc. In places like NYC, this is possible.
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Real estate is like anything else -- buy wisely and with discipline. I put 25% down and obtained a 15 year mortgage.
ReplyDeleteThe problem is that young people cannot do what I did. Government policies put way too many bidders into the market (who could not service the loans) and we are still recovering from that bubble. Put on top of this the fact that younger entrants are saddled by predatory student loans made without any underwriting to support the academic industrial complex (most members of this complex claim to be liberal, but don't act like it), and well, I can see why younger people have a negative view of the housing market and almost anything else.
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