[ScaryRacoon]

I think a big point that wasn't touched on in the article (maybe her book does, I haven't read it) is that the increased debt load on students means they are delaying or forgoing buying other major purchases, such as homes and cars. Both of which are huge economic drivers. It isn't that people can't afford the loan payments, it is that the loan payments are reducing the disposable income of those students for quite some time.

[freehunter]

Complete anecdote, but I have a friend who went to the same college, for the same major, and we started the same year. He went on for six years before he got his degree (plus a minor), I "dropped out" of being an on-campus full time student after two and only continued to take classes when I was able to pay for them out of pocket, which meant one or two classes per semester while working full time.

Now granted I got lucky and found a company that was willing to pick me up as an intern, then hire me part time, then hire me full time while I was working on my degree. Five years past graduation, my friend and I work for the same company now making roughly the same money in exactly the same job. I bought a house a year ago, he lives with his parents. I got into the workforce and started making money four years before he did, and he racked up four years more student loan debt than I did, so his monthly payments are over $800. That's the price of my mortgage.

We make the same money in the same job with the same education credentials, but instead of him making a house payment, he makes a student loan payment of the same size.

[yardie]

Indeed you were lucky. Most land grant colleges are in far off rural areas. The local economy is built around the university so it can be very hard for students to find part-time or even full-time work that isn't service jobs. If you can find an employer that will work around a class schedule then you've hit the jackpot.

[freehunter]

That was actually part of the challenge for me, my school was 50+ miles from the nearest real city. I didn't have a job that worked around my school schedule, I had a school schedule that worked around my job, which is why it took so long for me. Lots of online classes and classes transferred from the local community college.

[_dominic]

You would factor that as the cost of his quality of life, while you were a full-time worker and half student he was a full time student.

[Phlarp]

As a data sample of one, roughly 2.5 years post graduation: I've found "quality of life" to be far higher in the professional world than it ever was as a student. Managers are generally more reasonable than stodgy tenure track professors and "group projects" have a lot more buy-in from group members when everyone is getting cut a paycheck at the end of the week.

[ryandrake]

I've been a full-time student (twice!) and a professional worker, and I would never, ever choose to go back to the lifestyle of being a full time student. Ever again. Full stop.

It's just like work, but instead of making money you're losing it--both gradually and in large chunks every 6 months. The workload is the same (probably greater as a student), the pressure is the same, the lack of free time is the same. You're subject to the same arbitrary deadlines and due dates. Plus, as a student, you have the privilege of needing to take high-stakes tests every semester or so. It's basically years of hazing for a credential that's become a requirement for getting any job later.

It's as if devised by a Bond villain: "I know, Let's have a system where we take a bunch of people in the prime of their lives, work them like slaves, subject them to enormous pressures and tests, put their social and productive lives on hold, and if they make it through N years of this hazing, only then do we let them participate as full members of society. AND TO TOP IT OFF THEY WILL PAY US FOR IT!"

[freehunter]

The only thing I truly enjoyed about the time I lived on-campus was hanging out with my friends. Fortunately most of them are still around and we get together several times per year.

I seriously do not miss studying, attending classes, doing homework, or having to walk everywhere. These days if I'm reading something boring, it's because I want to read something boring.

[antisthenes]

And now we should factor in his quality of life, since he lives with his parents and not independently.

[burkaman]

This seems like two extreme examples, though. You were able to pay most of your way through college and start your career early, he for some reason took six years for an undergraduate degree and paid for it all with loans. Most people are somewhere in the middle, spending 4 years in college with maybe some internships and/or part-time jobs to help out.

[freehunter]

It is, which is partly why I picked him as an example. I have another friend (in a different field) who did it in four and had an internship during his last year. He's doing well for himself, though he makes a bit less due to his career choices versus mine.

But don't be fooled into thinking a part-time job pays for college in any way, any way at all. I had a full time job making $40k and could only afford one or two classes per semester, and I lived extremely frugally. Paid-off car, apartment under $400/mo, no vices, no parties, and no pets. Someone making $8.15/hr for 20 hours a week only makes ~$8000/yr, or ~$4000 per semester. My mid-size state university costs over $13k per semester, plus books.

[zekevermillion]

Yes. Starting your professional life with a large debt obligation is severely limiting. The interviewee completely ignores the opportunity cost, what else graduates could do with that money that would be productive or fulfilling.

[rahimnathwani]

I can see how car buying increases GDP (as each new car must be produced) but the same doesn't necessarily apply to home buying. Home supply is relatively fixed. Increases in demand cause asset price inflation, more than they do additional homebuilding. So home purchases don't 'drive the economy' in the sense of causing additional economic output.

[freehunter]

Home supply is fixed in some areas, but certainly not in all. Plenty of people around me are buying new houses in brand new subdivisions. When I bought my house, the sellers were moving to a brand new house. If someone hadn't bought their house, they would't have bought a brand new house. My area is growing by thousands of people per year, and the existing houses are already filled. If people want to move in, they have to build more houses.

Meanwhile I buy only used cars, so me purchasing a car doesn't drive the economy any more than buying a used house does.

[rahimnathwani]

Your point about used home sales enabling the sellers to buy new homes applies equally to used cars.

But cars are different from homes:

1) No zoning preventing new cars from being built

2) Cars wear out within a decade or two

[freehunter]

Cars vs houses is actually a pretty interesting comparison. Houses wear out after a decade or two as well, we're just willing to spend more money keeping a house in good working order than we are keeping a car running. If your central air goes out, it could cost you $7000 to fix it. If your car's engine goes out, that repair would cost $4000. But no one throws away their house, they just pay to get a new air conditioner put in. Few people would put a new engine in their car, though.

The average price to replace a roof is $12,000. But again, people are more likely to replace a roof than they are to replace an engine in their car. They'd just scrap it and buy a new car.

Houses wear out just as fast as cars do, but we're more willing to fix our house versus fixing our car. And it's not just a function of cost: you can get a new modular home for $50,000 and it will last decades. The double-wide I grew up in was installed in 1994 and there are still people living there over 20 years later. Very few people keep $50,000 cars for 20 years, though. And I see a lot of people with $5000 used cars parked in front of $150,000 houses. But if they bought a $50,000 brand new manufactured home, they could be parking a BMW out front instead. And if they wanted to, they could throw the house away just as fast as they throw away their car.

[rjsw]

Buying the home itself may not increase GDP but people tend to upgrade their furniture and appliances a bit when they feel secure enough to buy rather than rent.

[lintiness]

maintenance alone keeps a lot of people working.

[steveax]

When people buy houses, they also buy all the things that fill up a house.

[Houshalter]

Also if the car is manufactured in a foreign country it doesn't really benefit the US economy. Maybe in some complicated and indirect way it does. But if that's the strongest argument for subsidizing education, we should just give the money to car companies directly and skip the middle man. Or whatever economists say is the most effective use of that money, perhaps giving it directly to the poorest.

[djrogers]

This is completely wrong. Housing starts - the number of new home units which began construction in a given quarter - have long been a significant economic indicator.

More specifically, new residential construction accounts for roughly 15% of the GDP, compared to the 3-3.5% from the automobile industry.

Housing supply is so far from being 'fixed' that it contributes 5x more to the GDP than automobiles.

[rahimnathwani]

You are correct. I was forgetting the fact that homes in the US are produced in the US, but that, on the whole, cars, and especially car parts, are not.

I looked at this data from 2014: http://www.bea.gov/industry/gdpbyind_data.htm

It shows the value added rather than gross GDP. So if I import $7000 of parts from Asia, and use them to make a $12000 car, that would show up as a $5000 value add, representing the work that was done in the US.

From this data it appears that construction is about just under 4%, and motor vehicles are just under 1%. So, 4x, which is not far off the 5x you stated.

[ScaryRacoon]

Home construction and remodel services has always been a very strong indicator of how well or poor the economy is going.

[ryandrake]

A lot of expensive things and events get deferred with the sword of student debt hanging over your head. Home buying, marriage, children, hobbies, investment. I barely managed to pay off my student debt by 40 and can now start on some of these things. My parents ('Boomers) were well into them all by the time they were in their late 20s. I'm finding the age at which I have most of my life events is about 10 years or so delayed from the age at which my parents did all these things.

[xemdetia]

I'm still surprised that more people haven't started talking about birth rates. There are too many people who are coming out with student debt where having a child is just something people feel financially priced out of. It's definitely not the immediate debt, just that a lifetime of production for an individual is not going forward, it's flowing backwards.

[seansrk]

You nailed it on the head. Great post.