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A New Milestone in Household Debt
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It will be interesting/scary to see what happens to the student loan and credit card debt that just keeps accumulating:

"It took nearly a decade, but debt has made a comeback.
Americans have now borrowed more money than they did at the height of the credit bubble in 2008, just as the global financial system began to fall apart.

The Federal Reserve Bank of New York said Wednesday that total household debt had reached a new peak — $12.7 trillion — in the first three months of the year, another milestone in the long, slow recovery of the United States economy.
One of the big drivers of the latest debt binge has been student loans, whose mounting burden can prevent Americans from buying homes or spending on big-ticket items, stifling economic growth.

The fear is that growing debt from student loans — as well as auto loans and credit cards — could put many Americans back in a hole, triggering a new wave of defaults, much like what happened in the mortgage meltdown a decade ago."

https://www.nytimes.com/...ted-states.html?_r=0

"If one does not know to which port one is sailing, no wind is favorable." - Lucius Annaeus Seneca
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Re: A New Milestone in Household Debt [jkca1] [ In reply to ]
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When buying and selling is the cornerstone of your culture you have to spend capital whether you got it or not.
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Re: A New Milestone in Household Debt [jkca1] [ In reply to ]
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jkca1 wrote:
It will be interesting/scary to see what happens to the student loan and credit card debt that just keeps accumulating:

"It took nearly a decade, but debt has made a comeback.
Americans have now borrowed more money than they did at the height of the credit bubble in 2008, just as the global financial system began to fall apart.

The Federal Reserve Bank of New York said Wednesday that total household debt had reached a new peak — $12.7 trillion — in the first three months of the year, another milestone in the long, slow recovery of the United States economy.
One of the big drivers of the latest debt binge has been student loans, whose mounting burden can prevent Americans from buying homes or spending on big-ticket items, stifling economic growth.

The fear is that growing debt from student loans
— as well as auto loans and credit cards — could put many Americans back in a hole, triggering a new wave of defaults, much like what happened in the mortgage meltdown a decade ago."

https://www.nytimes.com/...ted-states.html?_r=0[/quote]

specific to student loans what is the ultimate "fall out" of large scale default. Who "holds" the loan, and are they tied to anything that one holds as investments on Wall Street like mortgages were. How does the value of the education behind it decline for resale as the housing market did?

thanks
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Re: A New Milestone in Household Debt [jkca1] [ In reply to ]
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It's no secret that auto loans were going to be a next bubble with sub-prime auto getting out of control.

Student loan defaults shouldn't be either. Even at low rates, SLs are difficult to get out from underneath. And they're marketed at kids who will often graduate with more SL debt than they might even have later tied up in a mortgage, kids who don't have the mental maturity to understand what they're getting into and what they're being trapped with for the next 25 years. Somewhere that system needs to change and somewhere along the line we culturally have to become OK again with telling kids that it might be OK if they don't get a degree if it means that they have debt, and we have to do a better job at helping kids and families understand that it actually might be worse for them economically than getting a blue collar job. The cultural elements of that need to change and our high schools need to train counselors away from steering the overwhelming majority of kids toward college as the only option. It'll be difficult, though, because sometimes certain employers only see the degree, even above people with a lot of experience.




jkca1 wrote:
It will be interesting/scary to see what happens to the student loan and credit card debt that just keeps accumulating:

"It took nearly a decade, but debt has made a comeback.
Americans have now borrowed more money than they did at the height of the credit bubble in 2008, just as the global financial system began to fall apart.

The Federal Reserve Bank of New York said Wednesday that total household debt had reached a new peak — $12.7 trillion — in the first three months of the year, another milestone in the long, slow recovery of the United States economy.
One of the big drivers of the latest debt binge has been student loans, whose mounting burden can prevent Americans from buying homes or spending on big-ticket items, stifling economic growth.

The fear is that growing debt from student loans — as well as auto loans and credit cards — could put many Americans back in a hole, triggering a new wave of defaults, much like what happened in the mortgage meltdown a decade ago."

https://www.nytimes.com/...ted-states.html?_r=0
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Re: A New Milestone in Household Debt [ironmayb] [ In reply to ]
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ironmayb wrote:
jkca1 wrote:
It will be interesting/scary to see what happens to the student loan and credit card debt that just keeps accumulating:

"It took nearly a decade, but debt has made a comeback.
Americans have now borrowed more money than they did at the height of the credit bubble in 2008, just as the global financial system began to fall apart.

The Federal Reserve Bank of New York said Wednesday that total household debt had reached a new peak — $12.7 trillion — in the first three months of the year, another milestone in the long, slow recovery of the United States economy.
One of the big drivers of the latest debt binge has been student loans, whose mounting burden can prevent Americans from buying homes or spending on big-ticket items, stifling economic growth.

The fear is that growing debt from student loans
— as well as auto loans and credit cards — could put many Americans back in a hole, triggering a new wave of defaults, much like what happened in the mortgage meltdown a decade ago."

https://www.nytimes.com/...ted-states.html?_r=0[/quote]

specific to student loans what is the ultimate "fall out" of large scale default. Who "holds" the loan, and are they tied to anything that one holds as investments on Wall Street like mortgages were. How does the value of the education behind it decline for resale as the housing market did?

thanks

The US taxpayer
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Re: A New Milestone in Household Debt [MidwestRoadie] [ In reply to ]
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I love everything you wrote.
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Re: A New Milestone in Household Debt [MidwestRoadie] [ In reply to ]
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MidwestRoadie wrote:
It's no secret that auto loans were going to be a next bubble with sub-prime auto getting out of control.

Student loan defaults shouldn't be either. Even at low rates, SLs are difficult to get out from underneath. And they're marketed at kids who will often graduate with more SL debt than they might even have later tied up in a mortgage, kids who don't have the mental maturity to understand what they're getting into and what they're being trapped with for the next 25 years. Somewhere that system needs to change and somewhere along the line we culturally have to become OK again with telling kids that it might be OK if they don't get a degree if it means that they have debt, and we have to do a better job at helping kids and families understand that it actually might be worse for them economically than getting a blue collar job. The cultural elements of that need to change and our high schools need to train counselors away from steering the overwhelming majority of kids toward college as the only option. It'll be difficult, though, because sometimes certain employers only see the degree, even above people with a lot of experience.




jkca1 wrote:
It will be interesting/scary to see what happens to the student loan and credit card debt that just keeps accumulating:

"It took nearly a decade, but debt has made a comeback.
Americans have now borrowed more money than they did at the height of the credit bubble in 2008, just as the global financial system began to fall apart.

The Federal Reserve Bank of New York said Wednesday that total household debt had reached a new peak — $12.7 trillion — in the first three months of the year, another milestone in the long, slow recovery of the United States economy.
One of the big drivers of the latest debt binge has been student loans, whose mounting burden can prevent Americans from buying homes or spending on big-ticket items, stifling economic growth.

The fear is that growing debt from student loans — as well as auto loans and credit cards — could put many Americans back in a hole, triggering a new wave of defaults, much like what happened in the mortgage meltdown a decade ago."

https://www.nytimes.com/...ted-states.html?_r=0
[/quote]

I asked the question above specific to SL's because I believe eventual wide scale default is the way many will get out from under SL's when they come to realize all the things you state above.

I believe that because I watched on this very forum several years ago how relatively easy it was for many to justify (either for themselves or on behalf of others) defaulting on mortgages they had committed to. Much of the justification revolved around the fact that people had been duped in the mortgage process and therefore were justified in the process.

Notwithstanding whether I agree or not, I can easily see that same logic applied by an entire generation once they figure out that have been "duped" by colleges and SL provider into getting themselves into something that will take decades to pay off (and prevent them from doing other things they want to do in the meantime).

When you defaulted on a mortgage, whatever justification you had, theoretically you at a minimum needed to vacate the house that mortgage was on. If you default on your SL (under similar justification) it would seem to me you can do so without fear of significant immediate penalty (beyond credit score/status).

I absolutely believe this will happen. My question is what will the fallout be, so I can effectively avoid it.
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Re: A New Milestone in Household Debt [windywave] [ In reply to ]
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windywave wrote:
ironmayb wrote:
jkca1 wrote:
It will be interesting/scary to see what happens to the student loan and credit card debt that just keeps accumulating:

"It took nearly a decade, but debt has made a comeback.
Americans have now borrowed more money than they did at the height of the credit bubble in 2008, just as the global financial system began to fall apart.

The Federal Reserve Bank of New York said Wednesday that total household debt had reached a new peak — $12.7 trillion — in the first three months of the year, another milestone in the long, slow recovery of the United States economy.
One of the big drivers of the latest debt binge has been student loans, whose mounting burden can prevent Americans from buying homes or spending on big-ticket items, stifling economic growth.

The fear is that growing debt from student loans
— as well as auto loans and credit cards — could put many Americans back in a hole, triggering a new wave of defaults, much like what happened in the mortgage meltdown a decade ago."

https://www.nytimes.com/...ted-states.html?_r=0[/quote]

specific to student loans what is the ultimate "fall out" of large scale default. Who "holds" the loan, and are they tied to anything that one holds as investments on Wall Street like mortgages were. How does the value of the education behind it decline for resale as the housing market did?

thanks


The US taxpayer

is that "entirely" true. As in add to the deficit, print more money or raise taxes, true. Or as in Fannie Mae and Freddy Mac true?
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Re: A New Milestone in Household Debt [ironmayb] [ In reply to ]
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ironmayb wrote:
windywave wrote:
ironmayb wrote:
jkca1 wrote:
It will be interesting/scary to see what happens to the student loan and credit card debt that just keeps accumulating:

"It took nearly a decade, but debt has made a comeback.
Americans have now borrowed more money than they did at the height of the credit bubble in 2008, just as the global financial system began to fall apart.

The Federal Reserve Bank of New York said Wednesday that total household debt had reached a new peak — $12.7 trillion — in the first three months of the year, another milestone in the long, slow recovery of the United States economy.
One of the big drivers of the latest debt binge has been student loans, whose mounting burden can prevent Americans from buying homes or spending on big-ticket items, stifling economic growth.

The fear is that growing debt from student loans
— as well as auto loans and credit cards — could put many Americans back in a hole, triggering a new wave of defaults, much like what happened in the mortgage meltdown a decade ago."

https://www.nytimes.com/...ted-states.html?_r=0[/quote]

specific to student loans what is the ultimate "fall out" of large scale default. Who "holds" the loan, and are they tied to anything that one holds as investments on Wall Street like mortgages were. How does the value of the education behind it decline for resale as the housing market did?

thanks


The US taxpayer

is that "entirely" true. As in add to the deficit, print more money or raise taxes, true. Or as in Fannie Mae and Freddy Mac true?

As in guaranteed by the full faith and credit of the United States of America true
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Re: A New Milestone in Household Debt [jkca1] [ In reply to ]
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yes people can simply not pay their student loans, but they can't get rid of that thru bankruptcy like you could a home loan or auto loan.
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Re: A New Milestone in Household Debt [justgeorge] [ In reply to ]
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justgeorge wrote:
yes people can simply not pay their student loans, but they can't get rid of that thru bankruptcy like you could a home loan or auto loan.

Blame doctors for that... rack up 500K in loans declare BK on graduation .... resident and fellow for 7 years then get a house loan with their first paycheck
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Re: A New Milestone in Household Debt [jkca1] [ In reply to ]
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Supposedly there are ~125.8M households in the USA, so that adds up to just over $100,000/household. USA, USA, USA!!

BTW, my household is far above that average. Thanks, MID! (from another thread)
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Re: A New Milestone in Household Debt [windywave] [ In reply to ]
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windywave wrote:
justgeorge wrote:
yes people can simply not pay their student loans, but they can't get rid of that thru bankruptcy like you could a home loan or auto loan.


Blame doctors for that... rack up 500K in loans declare BK on graduation .... resident and fellow for 7 years then get a house loan with their first paycheck
If they COULD declare bankruptcy after graduation and discharge their student debt, what would happen to the availability of student loans? There would be none.

Bernie Sanders questions why auto and home loans are lower interest than student loans. What a moron.
https://twitter.com/...381294874624?lang=en
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Re: A New Milestone in Household Debt [justgeorge] [ In reply to ]
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justgeorge wrote:
windywave wrote:
justgeorge wrote:
yes people can simply not pay their student loans, but they can't get rid of that thru bankruptcy like you could a home loan or auto loan.


Blame doctors for that... rack up 500K in loans declare BK on graduation .... resident and fellow for 7 years then get a house loan with their first paycheck
If they COULD declare bankruptcy after graduation and discharge their student debt, what would happen to the availability of student loans? There would be none.

Bernie Sanders questions why auto and home loans are lower interest than student loans. What a moron.
https://twitter.com/...381294874624?lang=en

Well that was the case before 2005 and there were student loans sucka
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Re: A New Milestone in Household Debt [windywave] [ In reply to ]
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I think not being able to get out from under a student loan by bankruptcy is common sense given what do you have to lose as a strategy if you could declare bankruptcy. I think this applies to a wide variety of situations not just docs. The answer is making university more affordable by lowering the cost (not more grants and loans) and changing the culture such that it becomes acceptable to get a job without a university degree. Universities these days seem to be as much country clubs for kids and highly paid job creators for communities as they are educational institutions.

windywave wrote:
justgeorge wrote:
yes people can simply not pay their student loans, but they can't get rid of that thru bankruptcy like you could a home loan or auto loan.


Blame doctors for that... rack up 500K in loans declare BK on graduation .... resident and fellow for 7 years then get a house loan with their first paycheck

Life is full of froth and trouble, two things stand in stone
Kindness in another's troubles, courage in one's own
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Re: A New Milestone in Household Debt [ironmayb] [ In reply to ]
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Here's the problem with SLs, though: You can default in the sense that you stop making payments for a while, but the debt cannot go away through bankruptcy like credit card & consumer loan debt. They'll garnish wages in a punishing manner, sue the shit out of you, garnish tax returns, and they will get their money, or as much as can be extracted from you. Even if the payments are paused for a while, the interest rate meter keeps rolling, and it is punishing.

I've heard of people who've been making payments for 10 years or more and still have balances greater than the amount originally borrowed due to deferments, the interest stating to accumulate at the time the money is used (like as a freshman), and the way the loan is structured.

It's a mess of a system. I was personally lucky to have less than $10k in student debt, but could have done it with none; it's still something I wish my parents understood and counseled me on, but they were clueless and unaware of how it works.

In other words: You default and you're still fucked. That hook is sharp and the barbs dig deep.


ironmayb wrote:
MidwestRoadie wrote:
It's no secret that auto loans were going to be a next bubble with sub-prime auto getting out of control.

Student loan defaults shouldn't be either. Even at low rates, SLs are difficult to get out from underneath. And they're marketed at kids who will often graduate with more SL debt than they might even have later tied up in a mortgage, kids who don't have the mental maturity to understand what they're getting into and what they're being trapped with for the next 25 years. Somewhere that system needs to change and somewhere along the line we culturally have to become OK again with telling kids that it might be OK if they don't get a degree if it means that they have debt, and we have to do a better job at helping kids and families understand that it actually might be worse for them economically than getting a blue collar job. The cultural elements of that need to change and our high schools need to train counselors away from steering the overwhelming majority of kids toward college as the only option. It'll be difficult, though, because sometimes certain employers only see the degree, even above people with a lot of experience.




jkca1 wrote:
It will be interesting/scary to see what happens to the student loan and credit card debt that just keeps accumulating:

"It took nearly a decade, but debt has made a comeback.
Americans have now borrowed more money than they did at the height of the credit bubble in 2008, just as the global financial system began to fall apart.

The Federal Reserve Bank of New York said Wednesday that total household debt had reached a new peak — $12.7 trillion — in the first three months of the year, another milestone in the long, slow recovery of the United States economy.
One of the big drivers of the latest debt binge has been student loans, whose mounting burden can prevent Americans from buying homes or spending on big-ticket items, stifling economic growth.

The fear is that growing debt from student loans — as well as auto loans and credit cards — could put many Americans back in a hole, triggering a new wave of defaults, much like what happened in the mortgage meltdown a decade ago."

https://www.nytimes.com/...ted-states.html?_r=0
[/quote]

I asked the question above specific to SL's because I believe eventual wide scale default is the way many will get out from under SL's when they come to realize all the things you state above.

I believe that because I watched on this very forum several years ago how relatively easy it was for many to justify (either for themselves or on behalf of others) defaulting on mortgages they had committed to. Much of the justification revolved around the fact that people had been duped in the mortgage process and therefore were justified in the process.

Notwithstanding whether I agree or not, I can easily see that same logic applied by an entire generation once they figure out that have been "duped" by colleges and SL provider into getting themselves into something that will take decades to pay off (and prevent them from doing other things they want to do in the meantime).

When you defaulted on a mortgage, whatever justification you had, theoretically you at a minimum needed to vacate the house that mortgage was on. If you default on your SL (under similar justification) it would seem to me you can do so without fear of significant immediate penalty (beyond credit score/status).

I absolutely believe this will happen. My question is what will the fallout be, so I can effectively avoid it.
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Re: A New Milestone in Household Debt [len] [ In reply to ]
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len wrote:
I think not being able to get out from under a student loan by bankruptcy is common sense given what do you have to lose as a strategy if you could declare bankruptcy. I think this applies to a wide variety of situations not just docs. The answer is making university more affordable by lowering the cost (not more grants and loans) and changing the culture such that it becomes acceptable to get a job without a university degree. Universities these days seem to be as much country clubs for kids and highly paid job creators for communities as they are educational institutions.

windywave wrote:
justgeorge wrote:
yes people can simply not pay their student loans, but they can't get rid of that thru bankruptcy like you could a home loan or auto loan.


Blame doctors for that... rack up 500K in loans declare BK on graduation .... resident and fellow for 7 years then get a house loan with their first paycheck

So much I agree with in here BUT an even better solution would be to have universities have skin in the game.
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Re: A New Milestone in Household Debt [len] [ In reply to ]
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Agreed. Any other approach is kicking the can down the road in a similar manner to Obamacare and the proposed ACHA, where the root issue is not even considered, let alone addressed.


len wrote:
I think not being able to get out from under a student loan by bankruptcy is common sense given what do you have to lose as a strategy if you could declare bankruptcy. I think this applies to a wide variety of situations not just docs. The answer is making university more affordable by lowering the cost (not more grants and loans) and changing the culture such that it becomes acceptable to get a job without a university degree.
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Re: A New Milestone in Household Debt [windywave] [ In reply to ]
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Quote:
So much I agree with in here BUT an even better solution would be to have universities have skin in the game.

+1
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Re: A New Milestone in Household Debt [MidwestRoadie] [ In reply to ]
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Which is too often what we do these days. I do think that some sort of relief at some point is appropriate. I mean if someone is not able to make payments and is more under water than when they started say ten years out what is the point in keeping them in economic servitude forever. I agree with someone else who said the universities need some skin in the game. Maybe they can make the loans and then they deal with the defaults and only loan appropriately. I graduated from med school 25 years ago with about 10 grand in debt thanks to low tuition and working every summer until I was a clerk in
forth year. One problem now is med schools want you to be a save the world person to get in these days. What, didn't go to Africa to drill wells during your summer? Shame on you.

Life is full of froth and trouble, two things stand in stone
Kindness in another's troubles, courage in one's own
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Re: A New Milestone in Household Debt [len] [ In reply to ]
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len wrote:
I think not being able to get out from under a student loan by bankruptcy is common sense given what do you have to lose as a strategy if you could declare bankruptcy. I think this applies to a wide variety of situations not just docs. The answer is making university more affordable by lowering the cost (not more grants and loans) and changing the culture such that it becomes acceptable to get a job without a university degree. Universities these days seem to be as much country clubs for kids and highly paid job creators for communities as they are educational institutions.

windywave wrote:
justgeorge wrote:
yes people can simply not pay their student loans, but they can't get rid of that thru bankruptcy like you could a home loan or auto loan.


Blame doctors for that... rack up 500K in loans declare BK on graduation .... resident and fellow for 7 years then get a house loan with their first paycheck

What do you have against heated outdoor buffalo shaped swimming pools and all organic fruit smoothies you make yourself by riding a bike blender. These lifestyle choices seem totally necessary to complement long days of boring lectures :-). Not to be all get off my lawn- but we did not have sushi at the college dining halls when I was in school. We had pizza, cheese or pepperoni and a salad bar with iceberg lettuce.

Having lived and gone to universities in both the US and Europe our amenities are killing us in Education and Healthcare. Hospital rooms do not need to look like 4 star hotels and have Peyton Manning selling them on prime time television and offer free massages after labor.

We have lost track of the goals of healthcare and education and care more about the experience than the outcome.
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Re: A New Milestone in Household Debt [jkca1] [ In reply to ]
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Having a college degree is a lot like owning a home.

Statistics say that people with degrees earn more, kids to better in school, less likely to get shot, are better looking etc.

The same is said about home ownership.

Of course the government's solution is to make it easier to get into college and to buy a house; incorrectly believing that the benefits are derived by just having the degree or owning the home, not by the hard work, discipline, sacrifice, delayed gratification, etc. that it (used to) take to get into college or buy a home in the past.
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Re: A New Milestone in Household Debt [efernand] [ In reply to ]
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But people that graduate from college are higher achievers to begin with (in general). It would be safe to assume that they would make more money whether they went to college or not.

More shocking to me than the debt is the very low net worth of the average American. According to a Motley Fool article you can find on your own, the average net worth for someone my age (45-54) is only $85K, and only $25K if you exclude home equity. I guess the average person has earned at least $1M by now, yet has very little to show for it. Geez even a couple of average cars should be worth $25K, so they have $0 invested and are likely in the peak of their earning years.
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Re: A New Milestone in Household Debt [efernand] [ In reply to ]
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efernand wrote:

Of course the government's solution is to make it easier to get into college and to buy a house; incorrectly believing that the benefits are derived by just having the degree or owning the home, not by the hard work, discipline, sacrifice, delayed gratification, etc. that it (used to) take to get into college or buy a home in the past.

that, or rich parents.

____________________________________
https://lshtm.academia.edu/MikeCallaghan

http://howtobeswiss.blogspot.ch/
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Re: A New Milestone in Household Debt [jkca1] [ In reply to ]
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There are so many problems for young people now. Remember the "brain drain?" The idea was that the first wave of baby boomers would start early retirement in 2008 making way in the workforce for younger people to get careers and promotions. Well, few baby boomers could afford to retire early. Now most people 55 or younger have less than one year of pay saved for retirement so they won't be able to retire at 65 either. You won't take old professional's jobs until you pry their cold deal fingers off of them. Young people will literally have to wait for people to die before good jobs will open up. Most decent paying jobs that don't require a college degree are gone. One of the few that remains are long haul truckers and these jobs will soon go away thanks to self driving trucks. I paid $4/semester hour for tuition in 1979; last I checked it is now $280/semester hour at my alma mater. According to the inflation calculator $4 in 1979 is equivalent to $13.11 today. After accounting for inflation tuition has gone up over 20 times! WTF? Young people are so fucked.
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