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The student loan system is propping up weak real estate markets in college towns by using guaranteed student funds from student loans to pay for outrageous rent
by ChuckFrank 11y ago
The student loan system is propping up weak real estate markets in college towns by using guaranteed student funds from student loans to pay for outrageous rents. Many of these communities would not be able to afford their lifestyles (see. Davis, California vs. Woodland, California rental rates) if it was not for the fact they the student loan money is being laundered through attending students, and funneled directly into the local economy through increased rents and cost of services.
At this level it's a scam.
As anecdotal evidence, my father went to Berkeley when there was no student loan structure, and the community was considered a poor real estate investment, since it was commonly known as a 'Student Ghetto'. A term which has since disappeared as rents in Berkeley are among the highest in the East Bay. All on the back of the students financing their housing costs on student loans.
Again, it's a scam.
The students don't get a better education than my father, and while the housing might be nicer, it's debt that they have to pay well into their later years, as opposed to being able to graduate debt free.
My father thinks this is directly attributable to the death of the student free speech movement and other student political enterprises, since being forced to accommodate ones debt takes priority over trying to change the world, or fix the system. In short it becomes a type of indentured servitude, where lower and middle class people are unqualified for good paying jobs without the debt, and with the debt, they are forced into high level debt maintenance, and can't have any other discussions about where society is going, or how it is getting there.
- rpedela 11y agoAny references for the first paragraph? I would like to learn more.
- ChuckFrank 11y agoI just googled. College towns are often seem as insulated from larger market conditions because of the constant supply of student loan support students. http://money.cnn.com/galleries/2012/real_estate/1203/gallery.college-towns/ http://money.cnn.com/galleries/2012/real_estate/1203/gallery... http://www.investopedia.com/articles/mortgages-real-estate/08/real-estate-speculation.asp http://www.investopedia.com/articles/mortgages-real-estate/0...
- jazzyk 11y agoDefinitely true - I can confirm prices in Amherst,MA (UMass, Amherst College and a few others) are shockingly high.
- pbreit 11y agoYou're throwing around the term "scam" a little too easily. Berkeley rents obviously have a lot to do with Bay Area rents for the past 20+ years.
- ChuckFrank 11y agoYou are right. Partially it's emotional language for me, and the other part is that I do feel that the money is being laundered through the students. But you are right.
- choppaface 11y agoIs this a scam or a trap? Do landlords really collude with student loan institutions, or are landlords simply leveraging 1. the necessity of their resource and 2. the lack of rent control? There's no basic regulation on what fraction of income landlords can charge tenants, and landlords get critical financial information on tenants. If loans are so easy to obtain, there's zero incentive for landlords not to gouge tenants (by progressively raising rents). I don't see how any explicit fraud is happening. I also don't see how things will ever get better without tighter regulation of rents. Well I guess we could turn down loans and kill the demand ...
- ChuckFrank 11y agoIt's certainly not explicit fraud, but it is a type of social scam, which becomes a trap, and yes, I think the solution is to turn down the loans, and force the landlords to deal with lower rents, because, as you say, now they have tremendous price gouging incentives. And while it's bad in Berkeley, it's really bad in Westwood, where the UCLAers live.
- choppaface 11y agoOne of the difficulties with reducing student loans (in volume) is that fewer people will then have access to education. Besides rent control, one option could be for the Fed to cut debt issuance slightly and to explicitly fund school-owned student housing. This would cut out the greedy landlords without having an especially negative impact on local economies-- the schools would still pay to maintain the properties. Doesn't help private schools much, but a lot of for-profit private schools are abusing student loan availability too.