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Student Loan Debt Will Stifle Housing Market


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2011 Aug 23, 9:37am   13,647 views  55 comments

by Patrick   ➕follow (59)   💰tip   ignore  

From Patrick.net reader Tom:

Hi Patrick-

Yesterday the LA Times ran a story on UC tuition. For the first time UC tuition (after huge increases) will top the state funding for the Universities. UC graduates are your typical first time buyers. All these young people will be strapped for cash and paying off HUGE (student loans now total more than US car loans) student debts, which can not be relieved in bankruptcy.

How will buy the boomers houses in 10 years, when they want to retire?

Tom

#housing

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45   bubblesitter   2011 Aug 26, 1:43am  

gdcapra says

out of control health care expenses, and University tuition

You have some point there. Those can be easily offset by subsidizing it through tax with tax increases of course,if not then we are slowly heading toward third world country situation. Most youth in third world country don't go to college.

46   corntrollio   2011 Aug 26, 6:57am  

tts says

Cars have improved quite a bit but the quality of the housing construction has dropped quite a bit.

Yes, cars have improved dramatically. I'm glad you acknowledge this, because most people don't. Usually a fear of computerization bugs them.

Housing construction is a market issue -- many people don't care about quality construction for some bizarre reason. I don't quite understand this. However, I doubt the run of the mill tract house is that much worse than a 50s tract house, and the modern one is better insulated and ventilated and much safer.

tts says

I have a 20 yr old tube TV that is still going strong but my 5 yr old LCD is starting to go already and that doesn't seem to be unheard of either.

But that has nothing to do with quality. The tube was originally not nearly as reliable. Even your 20 year old TV is well into the product development cycle for CRTs. Yes, tube TVs are somewhat rock solid these days, but they weren't always. In addition, are you really going to buy a 40" tube -- with its attendant size, weight, power consumption, etc.? Is that your solution?

LCD is a different technology, and one that has gone through less development. Nonetheless, even now, you can buy a longer lasting LCD than you could a few years ago. In addition, there's a lot of user error too -- people use their stuff in less than ideal conditions and use weird settings (almost everyone I know has their screen set to be way too bright and to have bizarre contrasts because they think it looks better), and yeah, in those less than ideal conditions, stuff doesn't last as long. But I don't think that indicates a fundamental flaw in LCD TVs.

Tenouncetrout says

Though I avoid buying appliances and television from Johnny come lately companies, like Samsung, and LG. Because who in the hell are they? How can people say they are good products they just sprouted up on the scene around 2005 or so.

You mean Samsung the company founded in 1938 and LG the one founded in 1947? Sounds more like xenophobia than anything else. Also, if you think Samsung has only sold in the US since 2005, you must live in a cave. Samsung built a TV assembly plant in NY in 1985. Many of these "johnny come lately" companies were there in the background anyway, by making component parts or making white-labeled products.

When do you think the last year was that GE manufactured a TV?

Tenouncetrout says

I'll buy Samsung phones, but I don't expect them to last beyond 2 years 3 tops, which they rarely do. but for the price, and by the end of the life, I'm ready for a new phone anyway. As by two years, they've gone through 2 or more generations of that model.

I look at how long their Cell phones last, and I'd never buy a Samsung dishwasher, fridge, washing machine or LCD television.

Two big problems:
1) cell phones become obsolete, but most of the time they still work -- I've kept the same cell phone for 4+ years before, and mostly got mocked for doing so. It worked fine, but my phone wasn't cool.
2) trying to extrapolate from cell phones to dishwashers, fridges, and washing machines seems highly misguided, considering that the basic technology in these things is more mechanical and physical than electrical.

The problem with Tude's original complaint is that it's one thing to spend $50 to fix a $1500 vacuum cleaner (as could be the case back in the day). It's another to be able to buy a decent $100 vacuum cleaner. I didn't make up that $1500 price -- that was the estimate by this person on Amazon of the price she paid for a Rainbow vacuum in 1985.

Even the example of musical equipment example -- yeah, I could buy a shitty guitar made of laminate in Mexico or Asia for really cheap. It might not even sound that bad. Or I could buy a Martin made of solid wood for a hell of a lot more, but I do have to pay for it. This was always the case -- you always paid dearly for a bespoke guitar handmade by your neighborhood luthier back in the day.

47   corntrollio   2011 Aug 26, 7:03am  

Sybrib says

Oh yes they have: they've made taxpayer-subsidized UC and CSU educations more accessible to the kids of illegal aliens.

I'm not espousing any particularly ideology here, but as someone said above, isn't that better than having uneducated undocumented immigrants? This really doesn't cost us very much considering how few undocumented kids there are relative to the entire universe of UC students, and the amount of taxpayer subsidy provided to UC keeps dwindling in any case.

Furthermore, are we really going to blame people who were *kids* when their parents brought them here? That seems short-sighted. For one thing, these kids probably have almost no connection to their supposed home country. If you're a kid, and your parents brought you here, it's in our best interest to educate you and make you a contributing member of society. We should be happy that people want to better themselves.

48   Cautious1   2011 Aug 26, 1:34pm  

austrian_man says

Come to think of it - anyone saving for their kids in a 529 plan? lol, that thing would be meaningless if it cannot keep up with higher education fee inflation.

Given the highly uncertain economic times we live in, how are any of you saving for their kids college? precious metals? or something else? or just forget-about-it-the-kid-can-take-care-of-him/herself approach?

Yes, 529s...a joke, but a tragic one too. I think they spend more on advertising and desperate pleas for greater contributions than they actually credit to your kids' accounts.

My kids collect pop cans and put the recycling money in their "College Account" CD which makes 0%. Also birthday money and dollars from Helping Grandma. They are quite smart and test well, so if they can challenge any courses or take AP in high school, we'll definitely go for that. But without scholarships or miraculous intervention, they will be getting their higher education through the school of hard knocks.
http://ocw.mit.edu/index.htm
http://www.openculture.com/freeonlinecourses
http://oyc.yale.edu/
http://webcast.berkeley.edu/
Don't worry, none of them plan to be brain surgeons.

49   BelindaC   2011 Aug 26, 2:44pm  

corntrollio says

Furthermore, are we really going to blame people who were *kids* when their parents brought them here? That seems short-sighted. For one thing, these kids probably have almost no connection to their supposed home country. If you're a kid, and your parents brought you here, it's in our best interest to educate you and make you a contributing member of society. We should be happy that people want to better themselves.

Nobody is blaming illegal immigrant children for being brought to this country illegally. But the idea that it's in our interests to educate them for free is crazy. Bettering yourself costs money, and American taxpapers foot the bill, while American kids loose out with higher class sizes and too many dollars spent teaching English or accomodating non-English education. Taking it to the college level just compounds the problem.

50   corntrollio   2011 Aug 29, 5:18am  

BelindaC says

But the idea that it's in our interests to educate them for free is crazy.

That's fallacy #1. It's not for free, and it is in our interest to give them in-state tuition. Out of state tuition subsidizes everyone else these days -- not the other way around. Furthermore, it is in our interest, because your solution causes the potential student to become an unskilled worker, which will ultimately cost us more and will never help our economy.

BelindaC says

too many dollars spent teaching English or accomodating non-English education.

That's fallacy #2. Plenty of these kids have been here for years, to the point where English is basically their first language.

BelindaC says

Taking it to the college level just compounds the problem.

I'd love to know who these children are that don't speak English but are somehow magically going to college here.

The extremists say "deport them all," but that is incredibly expensive, as shown by every study, and would lower GDP significantly. Deporting an 18 year old who has basically lived here all their life and who wants to better themselves and become a contributing skilled worker in our economy seems exceedingly stupid. The virtues of sensible immigration policies include incentivizing skilled workers to be here in order to grow our economy.

51   madhaus   2011 Aug 29, 6:10am  

BelindaC says

Bettering yourself costs money, and American taxpapers foot the bill, while American kids loose out with higher class sizes and too many dollars spent teaching English or accomodating non-English education.

I, for one, am always intrigued by I've-got-mine-Jack types who belittle immigrants for any number of reasons, but can't properly use the only language they know.

Investing in education makes sense. We gain so much more than we "loose." Unfortunately, people who weren't paying attention in school feel qualified to decide on the future of education for everyone.

52   EBGuy   2011 Aug 29, 8:52am  

I'm going with PRIME on this one; the revolution will not be televised. I expect Khan College to be online by the time my kids are ready to head off to school. The education racket is about to be disrupted... (or sustained, or shaken up, YMMV).

53   thomas.wong1986   2011 Aug 29, 9:15am  


All these young people will be strapped for cash and paying off HUGE (student loans now total more than US car loans) student debts, which can not be relieved in bankruptcy

In the case of some professions, like CPAs, on going education continues during your career. Its not cheap, and required to keep your license. It can be 2-5K a year for CPA seminars and it comes from your own earnings.

54   corntrollio   2011 Aug 29, 9:19am  

thomas.wong1986 says

In the case of some professions, like CPAs, on going education continues during your career. Its not cheap, and required to keep your license.

Lawyers have continuing legal education. If your employer provides a lot of it, it can be cheap, otherwise not. I believe doctors have continuing requirements as well, and occasional re-licensing in some cases.

55   AdamCarollaFan   2012 Jan 12, 3:10am  

You tell me college is expensive? For clueless poly. sci. and theater majors, perhaps.
Fisk says

You tell me college is expensive? For clueless poly. sci. and theater majors, perhaps.

so smug, yet so true.

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