US Economy thread

[jesmu84]

Expansion of the student loan debt relief program for teachers and law enforcement isn’t necessarily bad public policy.

The majority of the recently announced cancellations (I assume that's what rocket is referencing) is just upholding the governments side of legitimate PSLF claims.

[Hards Alumni]

!10% inflation for 10+ years with stagnant wages from the 70s until the 90s. You are being reductive, but I don't think it's on purpose. It's worth reading about imo.

People in the US are currently whining about 8% inflation for 1 year.

Edit: I'm not trying to say today is better or worse than the 70s because I don't think that argument is valuable to have. I'm just trying to say that you shouldn't discount dgies experience when he was fresh out of college. They were not easy times.

I'm not discounting them, and obviously there were a myriad of issues to contend with as a 1970s new college grad.  In contrast, he's suggesting that 'kids these days' don't have it so bad, and is comparing it back to a time where life was objectively more affordable.

[Hards Alumni]

If you think data that is nine years old supports your opinion, that's fine.

I don't though.

Then you're being as disingenuous as Heisey, or you didn't bother to read the article.  You're usually smarter than that, but maybe you were just being lazy.

[Hards Alumni]

I'm not entirely victim blaming, but the idea of "go to college and you'll be fine no matter what" hasn't been true for 20 years.  People using that myth to justify complaining that they can't find a job or they are underemployed with a degree from a middling university in a silly major.  Some of that definitely falls to parents for buying into it, but it wasn't a prevailing theme even recently.

I graduated HS in 2003 and even then my parents and my friends parents were very much of the mentality of "we'll help you with school, but make sure its a degree with value."  Hell, I was a Psych major (eventually double major) and I had to work out what I planned to do with it for my dad and my grandfather (one for college help, the other for avoiding stern lectures about my future).   I got into a good school so I was fortunate, but my neighbor who was a year younger ended up going to CC for 2 years and transferring to Marquette (instead of going 4 years at a lower level school), not in small part to discussions his father and my father had.

I'm firmly a millennial and I have siblings aged across the next decade into the zoomers, so I have a broad scope of viewpoints and experiences of the age range.  I don't disagree with some of the points, what I do disagree with is supposedly smart people (both parents and children) who employed little to no critical thinking and now perpetually complain about the system.  For everyone first generation college grad with a ton of debt who is underemployed (who has truly been screwed and I feel for) you have another one or two 20 somethings who graduated with a 3.0 from a mid level university with a marketing degree and expect a very well paying job because they have a degree.
 
Also, for your statement about middle class income, I think people havent scaled what they think of as middle class.  I saw median income for middle class nationally was roughly $91K.  I know 3 different friends/family who make within $10K of that number who are a single earner household with 1-2 kids.  They don't live in Lincoln Park or Brookfield or Highland Park (they are in Chicago, MKE, and Dallas burbs respectively) but they have no issue with it.  I would cede that its tougher with current interest rates, but 2 of them bought in the 4% range (the other still rents a 3BR apartment).  I feel like people making the "middle class can't do XYZ" argument still view middle class as $60-70K.

If you don't remember this being a part of the cultural zeitgeist of the mid 90s to middle 00s then I'm not sure you were paying attention.  It was pounded into me from an early age and I graduated HS in 2000.  Not only from my parents (both educators with advanced degrees), but TV and school as well.

I read TAMUs post and it is very similar to my experience.

[The Hippie Satan of Hyperbole]

Then you're being as disingenuous as Heisey, or you didn't bother to read the article.  You're usually smarter than that, but maybe you were just being lazy.

If any of this was your attempt at a dunk, you got rejected by the rim.

BM at least posted actual current and relevant data.

[Goose]

Wags

You’re correct that the middle class has changed income wise and it can be done. IMO, the most difficult part for that group is the ability to save. There is no doubt people can survive on pretty much income, but saving is the hard part.

Our country has changed dramatically over the past 25 years and adjusting is not always easy. I just look at what we pay for cell phones (I still have my adult kids on the plan) and internet, streaming/cable and I am floored every month. These are now considered normal expenses, but it is real money.

I agree with BM that overall changes need to be made, both by all of us and the government. Truthfully, a simpler life would probably benefit all of us. In addition, help with increased savings.

[dgies9156]

I find the notion that being graduated from college "guarantees" a middle class lifestyle naïve at best.

The only thing being graduated from college guarantees you is a piece of paper saying you were graduated from college. It's what you do with the expertise you gain from going to college, as well as being a life-long learner, that gets one into a middle class lifestyle. You have to sell people who are hiring and promoting that you can do the job effectively and fit into whatever business culture exists where you work. They may not be enough but it's up to an employee to sell themselves every day.

President Obama, to his credit, raised serious concerns about the cost of college and the debt folks were taking on. He was right -- and still is. The debt that people take on to go to college without a vision of what they're going to do afterward is a hinderance to gaining a middle class lifestyle -- no doubt. Forgiving debt isn't the answer. Tightening up lending standards probably is.

[Hards Alumni]

If any of this was your attempt at a dunk, you got rejected by the rim.

BM at least posted actual current and relevant data.

I posted two articles with actual data.  You chose to read neither, and led with an NPR interview. 

I'm going to just move on since you're not interested in having an honest discussion with me because your heels are dug in as usual.

[The Hippie Satan of Hyperbole]

The wage gap between those with a college degree and those with just a high school diploma increased last year and is now at its largest point ever.

https://www.newyorkfed.org/research/college-labor-market#--:explore:wages

[Hards Alumni]

I find the notion that being graduated from college "guarantees" a middle class lifestyle naïve at best.

The only thing being graduated from college guarantees you is a piece of paper saying you were graduated from college. It's what you do with the expertise you gain from going to college, as well as being a life-long learner, that gets one into a middle class lifestyle. You have to sell people who are hiring and promoting that you can do the job effectively and fit into whatever business culture exists where you work. They may not be enough but it's up to an employee to sell themselves every day.

President Obama, to his credit, raised serious concerns about the cost of college and the debt folks were taking on. He was right -- and still is. The debt that people take on to go to college without a vision of what they're going to do afterward is a hinderance to gaining a middle class lifestyle -- no doubt. Forgiving debt isn't the answer. Tightening up lending standards probably is.

Why not both?  Long term damage has been done, so why not resolve a lot of suffering for the price of 1.5 F35's?  One will change the lives of thousands and the other will probably malfunction and the pilot.

[MU82]

The majority of the recently announced cancellations (I assume that's what rocket is referencing) is just upholding the governments side of legitimate PSLF claims.

Meh. Much better to give corporate welfare to buddies and handouts to megachurches. And much, much better to require Secret Service agents to pay rack rates (and then some) to stay at president-owned golf resorts.

[dgies9156]

Why not both?  Long term damage has been done, so why not resolve a lot of suffering for the price of 1.5 F35's?  One will change the lives of thousands and the other will probably malfunction and the pilot.

It's a fair question.

My concern with forgiving college loans is that the borrower entered into a legally binding contract. The borrower did so of his/her free will and agreed to the terms and conditions under which the debt was issued.

If the debt was originated under duress or the terms and conditions of the debt mis-represented, then surely relief is appropriate. That may include forgiving of the debt or revising the terms and conditions. If there is a written guarantee, for example, of a post-collegiate compensation level, then yeah, that's an outright falsehood.

But, is it "fair", whatever that means, to the people who sacrificed and paid off their college debt, delaying house purchases, having a family or other things, to get the debt paid off? Or to families that saved everything they could to get their children through college and then discover they could have done it for free by borrowing to their eyeballs and let the federal government forgive the loans?

One of the things I advocate is tightening lending standards. I honestly believe loose debt is a big reason why college costs are through the roof. The way I would recommend would be to underwrite college loans the same way commercial debt is underwritten: debt service ratios and loan to cost. The DSR is a calculation that would consider future earnings of a graduate in a field as a multiple of debt service (P&I). You set a standard below which you won't go, taking into consideration regional or national average salaries for persons with an intended degree, normalized living costs and taxes (since college debt is an after-tax expense).

The downside to this equation would be it would favor STEM and business majors. I question whether journalism could even get credit for a college education! Liberal Arts would require more down because there would be severe limits on how much a lender could lend on a liberal arts degree.

[MU82]

Companies and individuals who file for bankruptcy also signed contracts.

[The Hippie Satan of Hyperbole]

It's a fair question.

My concern with forgiving college loans is that the borrower entered into a legally binding contract. The borrower did so of his/her free will and agreed to the terms and conditions under which the debt was issued.

Government entities have been forgiving student loan debt to entice people into certain fields, to live in certain areas, etc. for a long time now. This isn't new.

There was an entire sitcom based on the premise in the 90s.

https://en.wikipedia.org/wiki/Northern_Exposure

One of the things I advocate is tightening lending standards. I honestly believe loose debt is a big reason why college costs are through the roof. The way I would recommend would be to underwrite college loans the same way commercial debt is underwritten: debt service ratios and loan to cost. The DSR is a calculation that would consider future earnings of a graduate in a field as a multiple of debt service (P&I). You set a standard below which you won't go, taking into consideration regional or national average salaries for persons with an intended degree, normalized living costs and taxes (since college debt is an after-tax expense).

The downside to this equation would be it would favor STEM and business majors. I question whether journalism could even get credit for a college education! Liberal Arts would require more down because there would be severe limits on how much a lender could lend on a liberal arts degree.

It would also make it extremely difficult for low-income students to qualify.  Which is why the Pell Grant should be significant expanded as well.

[TAMU, Knower of Ball]

My concern with forgiving college loans is that the borrower entered into a legally binding contract. The borrower did so of his/her free will and agreed to the terms and conditions under which the debt was issued.

Do you think all or even most 17 and 18 year olds are intelligent/experienced enough to make informed decisions on this?

[lawdog77]

Do you think all or even most 17 and 18 year olds are intelligent/experienced enough to make informed decisions on this?

Student loans are predatory lending, IMO, and I think companies should get some sort of government incentive from the Feds for paying off the student loans of their employees.

[dgies9156]

Good comments and I'll answer them as best I can.

Brother MU: Bankruptcy. I'm assuming that student debt is not dischargable in Bankruptcy. Maybe that should be changed. But before someone enters bankruptcy, he or she needs to think long and hard about the implications. If he/she thinks getting a house is tough now, try getting a mortgage or a car loan after a bankruptcy. It's about as difficult as can be (unless your hair is orange and your LLCs declared bankruptcy).

Brother Hippie: Government Service. It's part of compensation for working for the government. Just like my MBA Tuition Payments were part of my compensation for working for my employer years ago. I'm all in favor of folks getting debt forgiveness for working for VISTA, the Peace Corps or teaching in remote areas, to cite a few examples. This is an incredible opportunity for our country as well as for folks with large amounts of student debt. Again, non-traditional but it can solve the debt crisis.

Brother TAMU: Competency: Let me turn this around. Do I think most first-time homebuyers fully understand what they're signing? Doubtful. To that end, if you don't understand a contract, call a lawyer and have him or her explain it. It's not that expensive and most people know a lawyer who can do this as a routine course of business. The CFPB was formed in no small measure because of Senator Elizabeth Warren's concern that lenders were predatory and jamming provisions most folks don't understand down their throats. I've yet to hear the CFPB talk about extending their jurisdiction to government-guaranteed student loans. Maybe they have and I missed it, but I doubt it!

Brother Lawdog: Predatory: How? Do students not have free wills? Do they not have access to counsel?

One thing nobody has mentioned is the GI Bill. Go in the military for three years and you'll come out with a good hunk of college paid for. Or, take a Gap year or two and work. Yeah, neither is the "optimal" way of college, but both are alternatives to massive debt.

 

[The Hippie Satan of Hyperbole]

My solution to make college more affordable would be three-prong:

1. Increase the Pell Grant program significantly. Not only who is eligible but the amounts of the awards.

2. Require colleges who accept Pell Grant recipients to adhere to some sort of "instructional cost per student" cap. Of course, that metric would be extremely difficult to figure out since some programs (engineering and nursing) cost a lot more than others (philosophy and english). Also some schools are going to have higher facility costs than others, etc.

3. Require colleges who accept Pell Grant recipients to prove their financial viability. We have too many colleges and universities right now, and some of them just have to close.

[Jockey]

Student loans are predatory lending, IMO, and I think companies should get some sort of government incentive from the Feds for paying off the student loans of their employees.

Education is the ONLY answer. Whether it is a 2 year, 4 year, or beyond or even an apprenticeship for trade work. Let’s not pretend otherwise.

We can’t continue to act like education is just for those that are well off. Student loans are important and forgiveness is important. Society is better with education. There is no better solution.

[Goose]

Fluff

Was is the biggest obstacle universities are facing today? Is it declining enrollment? 

[Goose]

Jockey

I agree that education is essential. I mentioned my so yesterday that has an accounting degree and now works as a diesel mechanic. His education, both directly and indirectly, has helped his career a great deal. He currently is getting in Project Management and his experience and education will serve him well moving forward.

[lawdog77]

Brother Lawdog: Predatory: How? Do students not have free wills? Do they not have access to counsel?

One thing nobody has mentioned is the GI Bill. Go in the military for three years and you'll come out with a good hunk of college paid for. Or, take a Gap year or two and work. Yeah, neither is the "optimal" way of college, but both are alternatives to massive debt.

Predatory in terms of these are kids (17, 18 year olds) who have no financial acumen. These loans are guaranteed by the government, so if the person defaults, the lender still gets his money. The late fees should not exist, and interest rates should be close to 0.

Do you think kids could take a gap year, and then afford college? More like a gap decade. The GI Bill works because it is only utilized by a relatively small number. What if 5 million potential GI bill enrollees went into the military each year? How much would that cost the US taxpayer?

[TAMU, Knower of Ball]

Brother TAMU: Competency: Let me turn this around. Do I think most first-time homebuyers fully understand what they're signing? Doubtful. To that end, if you don't understand a contract, call a lawyer and have him or her explain it. It's not that expensive and most people know a lawyer who can do this as a routine course of business. The CFPB was formed in no small measure because of Senator Elizabeth Warren's concern that lenders were predatory and jamming provisions most folks don't understand down their throats. I've yet to hear the CFPB talk about extending their jurisdiction to government-guaranteed student loans. Maybe they have and I missed it, but I doubt it!

I think most  first time home buyers have a lot better understanding than 17 and 18 year olds do when they sign up for student loans. Especially now that most are significantly older when they buy their first house.

Do you think most 17 and 18 year olds are intellegent/experienced enough to ask for an attorney or have the means to hire an attorney?

One thing nobody has mentioned is the GI Bill. Go in the military for three years and you'll come out with a good hunk of college paid for. Or, take a Gap year or two and work. Yeah, neither is the "optimal" way of college, but both are alternatives to massive debt.

The GI Bill is a great alternative... but I don't really blame someone for not wanting to possibly be killed, needing to kill someone else, or providing support to someone killing else in order to go to college. To be clear,  I'm not disparging the military or those who serve. My cousin is currently serving and it's been fantastic for him.   It's an extremely noble service, but it is not for everyone.

We're long past the times when you could take a gap year and pay for college. It can help sure,  but you're sacrificing a year of earning at a theoretically higher salary which you will hopefully obtain after graduation.

[The Hippie Satan of Hyperbole]

Fluff

Was is the biggest obstacle universities are facing today? Is it declining enrollment? 

Declining enrollment by far. There are just less 18-22 year-olds, especially of students from "traditional" college backgrounds. (Which is wonderful, but it can be more costly.) Also, a good economy means a lot of students feel that they are better off entering the work-force. (And they might be.)

Elite privates will be fine.  Public flagships will be fine.  Even smaller, traditionally "liberal arts" schools will be fine as long as they show value and keep their costs in line. (So adding to their program array is very important.) 

For instance, Marquette is having an excellent year from what I understand. Their focusing on programs like engineering and nursing is really paying off for them.

But a lot of schools are desperate, especially if you don't have established "high return" programs and/or are located in the middle of nowhere. (A lot of small privates in the midwest fall into that category.) And those schools are doing some things like dangling huge, one-year awards in front of people to get them to commit and hoping they can hang onto them.

For instance, I know of one midwestern college, whom most people would know, that is contacting people who told them "no" months ago and offering them an extra $5,000 for their freshman year because their overall enrollment situation is so poor right now.

COVID relief funds have kept a number of schools open longer than they should have been. And with the demographics only getting worse, we will see a lot more closures in the coming years.

[Goose]

Fluff

Interesting stuff. Have to be honest, I never would have thought a good economy would have younger people join the workforce over college. I'll take your word on that one.