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comment by PTR
PTR  ·  807 days ago  ·  link  ·    ·  parent  ·  post: Student Loan Debt is Crushing Millennials

Yeah, I read Jobs Lost, Jobs Gained too. It's been out long enough. We all know job prospects are shit in the coming decades. People who don't know that yet are still voting R. But ya don't need a fancy corporate desk job to pay down $40k in 20 years. Garnished Starbucks paychecks will do just fine too.

We agree that Boomers have an incentive (recognized or not) to not let this debt restrict equity creation in younger generations, no? That was my main point, so if that's clear then we're good. I was replying to this: "Relieving their debt will not power consumption (so will say the old rich white people)." Whether the Olds realize it or whether they prefer to grip their withered jewels at us, debt forgiveness would power consumption in their interests.

But so "...because it better be. Everyone's counting on it." wasn't me saying shrug "It'll work out, let's ignore the facts." The situation is grim, and (as you know) this debt doesn't work like other debt. We're all stuck with it until it's (1) paid, (2) collective undue hardship is proven (i.e. debt forgiveness or generational bankruptcy), or (3) we die and/or the loan expires.

As the social/economic realities come to bear and the voting population reflects the people carrying the burden (in unsellable/uncompetitive home equity or debt liability) rather than gaining from it, we might see support shift from #1 to #2. And we'll see some creative politicians who want to keep their jobs and are willing to lie about the arithmetic to do it. Because it might not be subject to hope or threat, but it is subject to manipulation.

We'd still all be fucked of course.

kleinbl00  ·  807 days ago  ·  link  ·  

The Law of Averages

Let's take an average new grad. He's making $50,556 a year because he's average. he's got $40k in debt because he's average. He's paying $10k a year in federal tax because he's average. He's paying $3100 in FICA and $750 in medicare. His student loan at 5% is $438 a month ($271 if he's doing income-based repayment).

Every month he pulls down $2800 or so. $1000 of that goes to rent because he's average. $300 of that is groceries because he's average. Let's say his average-ness continues and his $4200/year transportation costs come down to $350/month. If he has no phone, no internet, no Netflix and no other joys in his life, he's got about a thousand dollars a month left.

Of which his student loans are between a quarter and a half of that.

Let's say he's gonna retire that damn debt - loan forgiveness be damned! If he wants the median house, he's gotta sock away $40k for the down payment. That's gonna take him about four and a half years of spending absolutely nothing that isn't essential and then he's gonna be paying out 75% of his remaining income on a mortgage payment, leaving the poor bastard $250 a month. I guess he can finally afford that cell phone.

he sure can't afford kids.

If he's smart he goes income-based repayment. Then he saves $150 a month. Of course he'll pay it forever, wink wink, nudge nudge, although really he's banking on forgiveness after 360 payments. The government, of course, is not doing this - income-based repayment is supposedly temporary so they're accounting for that as if it's debt that they'll get to collect. So now here we are - the government is planning on paying for money that isn't even there as much as they think it is. The Olds are planning on selling their houses to people who can't afford them, and on their retirements being paid for by workers who don't exist.

It amuses me that "debt forgiveness" and "debt jubilee" are good things we should all get behind without recognizing that they're euphemisms for "bankruptcy." Our system is built on IOUs and just because the money doesn't exist doesn't mean nobody's dependent on it. The Olds are dependent on selling their house for three times what they paid for it so they can retire. The Youngs are dependent on the old people retiring so they can afford to buy houses. And it's not going to work out.

There's going to have to be some serious seizure of wealth from those top brackets and it's still not gonna cut it. There's $210T in unfunded liabilities and $93T in household wealth. Our average new grad with the $50k salary? The US government has $100k in unfunded liabilities just for him.

I don't see a graceful unwinding for any of this. I've been looking. I think there's gonna be a lot of ramen and vans and I think the higher your income decile, the better off you'll be.

PTR  ·  807 days ago  ·  link  ·  

That average new grad? Me. Except higher rent 'cause Boston and lower transportation costs 'cause MBTA (at least for another week - then it's RTD for me!). I did an IBR plan, so I have a cell phone.

I think I'm kinda murky on your overall point here though. I don't think anyone's drawing a distinction between forgiveness and bankruptcy in this dialogue. They're the same thing in my mind at least, and I said that already ("i.e. debt forgiveness or generational bankruptcy"). And if you're predicting a choice between massive, gullible fuck-up (option #2 above) or slow, throttling burn (option #1), then so am I. And to be clear, option #2 won't work.

So maybe I'm missing it, but what I'm trying to point out is that this problem is going to get more and more serious as time passes and the usual schedule of generational maturation is stymied. Plenty of people who didn't take out the loans will be affected. One example are Boomers and the housing market, but there'll be others too.

And the more effect it has, the more people think an easy-peasy jubileezy will work, or will say it would work: Olds, Youngs, Political Husks, Corporate Demon Puppeteers. A whole generation (and probably the one following) of late financial bloomers is going to attract a lot of attention.

"Where are my debt-friendly, Millennial consumers!?!"

"Eating the rich."

Or that's what the memes say at least.

But we won't do that. Instead we'll keep the $50k jobs and pay monthly minimums and never have home equity and pipe-dream the next 20 years away, unless we're lied to about the viability of debt forgiveness by a Husk "who gets it." In which case we'll zeitgeist quick, because that's all anyone my age ever thinks about and fuck the arithmetic. And I don't think that movement will just be sub-30s. And I don't think it'll work.

kleinbl00  ·  807 days ago  ·  link  ·  

If I gave you the impression we're arguing I'm sorry. We're largely in agreement.

My principle concern in this whole miasma of shit is that the public discussion, when there is any, is about UBI and jubilees and we're already spent so far into nonexistence that if that money isn't in your filthy grubby hands right now you're a fool for counting on it.

ThurberMingus  ·  807 days ago  ·  link  ·  

    But ya don't need a fancy corporate desk job to pay down $40k in 20 years. Garnished Starbucks paychecks will do just fine too.

If you get stuck paying interest too, it gets out of hand quick. It only takes 3% interest on 40k over 20 years to eat all of full time minimum wage.

PTR  ·  807 days ago  ·  link  ·  

Source? I think your math's wrong. Or maybe mine is.

With 4% interest (closer to the subsidized rate for 2022 grads these days) and no payments towards principle or interest at all for 20 years, the loan doubles but interest accumulation per year is just shy of $3500 at year 20. Not easy to make on $15k/year, but no one's making it 20 years without intervention. Wage garnishments kick in about a year and a half after default notice and a collections referral (interest accumulation per year at around $1.6k, manageable). I have four friends in this situation right now.

A collections agency will take up to 15% of your income to pay down the debt. At minimum wage, that more than covers interest with a little to spare for principle, so it's paid down as long as the debtor works somewhere - APRs are just so low. And you'll live, just with roommates and side gigs mentioned above.

It's a slow bleed, not exsanguination. They need the debtor livestock to live.

ThurberMingus  ·  807 days ago  ·  link  ·  

Ouch yeah I was way off. I threw it in a spreadsheet and compounded monthly at the annual rate. Minimum payment is about 220, not 1200.