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Topic: Did Someone Say, "Bubble"?
Replies: 6   Last Post: May 12, 2013 3:02 PM

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Bret Taylor

Posts: 174
Registered: 12/6/04
Re: Did Someone Say, "Bubble"?
Posted: May 11, 2013 1:14 PM
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I would suggest very unpopular, I'm sure, viewpoint.

Quote: ?Let?s send a whole class of people out into their professional
lives with a negative net worth. Not starting at zero, but starting at a
minus that is often measured in the tens of thousands of dollars. Those
minus signs have psychological impact, I suspect. They might have a
dollars-and-cents impact in what you can afford, too.?

Maybe the problem was we made it way too easy for folks to go tens of
thousands of dollars into debt to get an education. Maybe we shouldn't have
made all those "easy" loans so available. Maybe we should have suggested
working while in school, or working during the summer and saving the money
for tuition and expenses. Maybe we should have suggested that a smart phone
is a luxury that can be postponed until after you have a degree and a job
and can afford it.Maybe we should have suggested that an apartment with a
flat screen TV and 400 cable channels was not an entitlement while still in
college, but an option only a few could afford.

Maybe we should have taught them a little fiscal responsibility on the front
end, rather than treating them as "victims of an unfair society" on the
back end.

I have zero sympathy for a person who gets so far in debt in college loans
that bankruptcy appears the only way out.

I have even less sympathy for whichever institution loaned them the money.

But, I'm just an old geezer who thinks you ought to live within your means
and use debt only in a reasonable and rational manner. I'm definitely a
dinosaur in a culture that has the philosophy, "I want it; I want it all;
and I want it right now." (And, I am entitled to it. I shouldn't have to
pay for it.)



-----Original Message-----
From: Haim
Sent: Saturday, May 11, 2013 8:41 AM
To: mathedcc@mathforum.org
Subject: Did Someone Say, "Bubble"?

>Consider Shane Gill, a 33-year-old high-school teacher
>in New York City. He does not have a car. He does not
>own a home. He is not married. And he is no anomaly:
>like hundreds of thousands of others in his generation,
>he has put off such major purchases or decisions in part
>because of his debts.


http://www.nytimes.com/2013/05/11/business/economy/student-loan-debt-weighing-down-younger-us-workers.html?hpw
May 10, 2013
Student Debt Slows Growth as Young Spend Less
By ANNIE LOWREY

The anemic economy has left millions of younger working Americans struggling
to get ahead. The added millstone of student loan debt, which recently
exceeded $1 trillion in total, is making it even harder for many of them,
delaying purchases of things like homes, cars and other big-ticket items and
acting as a drag on growth, economists said.

Consider Shane Gill, a 33-year-old high-school teacher in New York City. He
does not have a car. He does not own a home. He is not married. And he is no
anomaly: like hundreds of thousands of others in his generation, he has put
off such major purchases or decisions in part because of his debts.

Mr. Gill owes about $45,000 in federal student loans, plus another $40,000
to his parents. That investment in his future has led to a secure job with
decent pay and good benefits. But it has left him with tremendous financial
constraints, as he faces chipping away at the debt for years on end.

?There?s this anxiety: what if I decided I wanted to get married or have
children?? Mr. Gill said. ?I don?t know how I would. And that adds to the
sense of precariousness. There?s a persistent, buzzing kind of toothache
around it.?

The Federal Reserve Bank of New York, in a new study, found that
30-year-olds with student loans were now less likely to have debts like home
mortgages than 30-year-olds without student loans ? even though most of
those with student loans are better educated and can expect to earn more
money over their lifetimes. The same pattern holds true for 25-year-olds and
car loans.

?It is a new thing, a big social experiment that we?ve accidentally decided
to engage in,? said Kevin Carey, the director of the Education Policy
Program at the New America Foundation, a research group based in Washington.
?Let?s send a whole class of people out into their professional lives with a
negative net worth. Not starting at zero, but starting at a minus that is
often measured in the tens of thousands of dollars. Those minus signs have
psychological impact, I suspect. They might have a dollars-and-cents impact
in what you can afford, too.?

The weak economy and tight credit standards remain the main culprits
preventing young people just establishing themselves from making major
purchases. But millions now face putting a substantial share of their
take-home pay toward past debts rather than present needs. Student loan debt
leaves them with less money for things like clothes and restaurant meals.
And it is even more likely to suppress purchases of more expensive items
that need to be bought with credit. A poor job market is compounding the
problem: the educational debt burden of many so-called millennials has
sharply increased even as they are being forced to get by on significantly
less income than the previous generation ? a decline of about 15 percent in
real terms since 2000, with much of that drop coming from the recession.

According to calculations by the Pew Research Center, the measure of debt to
income for households under the age of 35 has ballooned to about 1.5-to-1 in
2010 from about 1-to-1 in 2001. The composition of that debt has shifted,
too: more is tied to student debts, and less to homes. ?Having a lot of
student loan debt makes it harder to qualify for a mortgage and harder to
save for a down payment,? said Jed Kolko, the chief economist at Trulia.

With the interest rate on some federal student loans set to double on July
1, House Republicans and Senate Democrats have both put forward proposals to
try to hold them down. Representative John Kline, Republican of Minnesota,
has proposed tying the rate on several federal student loans to the
government?s borrowing costs. Democratic senators, including Dick Durbin of
Illinois, have made a similar proposal. Some have suggested going further:
Senator Elizabeth Warren, Democrat of Massachusetts, has proposed letting
students borrow at the same ?discount rate? that the Federal Reserve charges
to banks, currently 0.75 percent.

Student loan debt is not only constraining young adults, but also, at least
in the near term, holding back the recovery itself, some economists say. The
shadows might remain even as the economy picks up, by making young workers
more cautious when it comes to decisions about their careers and their
finances. Millennials might end up buying less expensive homes or more often
choosing to rent than previous generations.

?The debt is shifting how much young people can spend, and it can also be a
powerful psychological thing as well,? said Selma Hepp, an economist at the
California Association of Realtors.

On the other side of the equation, many college graduates now in their 20s
and early 30s should eventually be able to make up for lost ground. Students
who take on debt to pay for higher education commit themselves to paying off
huge sums, but they usually lift their lifetime earnings by substantial
amounts. And they are in a better position to insulate themselves against
economic bad times, given the profound rewards the job market provides to
the college-educated.

Indeed, the economy is far more punishing to workers without a college
degree. The college-educated earn, on average, 80 percent more than those
who only completed high school, a premium that has widened over the last 30
years. Unemployment rates for the less educated are higher, too.

For most young workers, gaining a college degree remains well worth it in
the long run, even if it delays some purchases in the near term. ?For an
individual going to college and ending up with a lot of debt ? you?re still
better off,? said Chris G. Christopher of the forecasting firm IHS Global
Insight. There might, however, be a slice of young workers who paid huge
sums for degrees that prove less valuable on the job market, saddled by a
debt burden that could end up holding them back for decades.

Mr. Gill said his education remained a vital investment, even if the debt
overhang has for now put white picket fences or a condo with a gleaming view
out of reach. ?Sometimes I think: ?What if I were to buy an apartment?? ? he
said. ?It is like asking: ?What am I going to do when I first land on the
moon? What?s the first thought that I will have when I see Earth from outer
space?? ?
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