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I think this statement is a little sensational. If $30k in student debt is 'shakling', then did we ever expect the same person to take on a $300k mortgage, or o

I think this statement is a little sensational. If $30k in student debt is 'shakling', then did we ever expect the same person to take on a $300k mortgage, or other larger financial milestones typically associated with middle class life? I agree that this debt isn't helping achieve other goals, but it's magnitude seems small compared to large financial goals like home purchases. If you weren't going to qualify for the $300k mortgage (less down payment), it wasn't because you had student debt; it was become you didn't have the income. My point being, this debt isn't crushing. It delays other financial milestones, but it shouldn't end them. However, if the discussion was about borrowers that are taking 6-figure student loans and then becoming baristas, well I would agree that person is definitely shackled for life -- but that situation isn't representative of the typical college graduate. The typical graduate has about $25k in student loans.

abalashov 9y ago
Yeah, but it's not entirely fair to compare a $300k obligation secured by the house with a non-dischargeable student loan. I've gone through foreclosure on an underwater property, I can speak to that. When I was 21 and had far more money (relative to my age) than sense, I bought a $160K 1 BR condo in downtown Atlanta on underwriting terms that could only be described as housing bubblicious, and which certainly could not be found after the Great Recession. I got an 80/20 loan with 6.625% APR on the primary loan and 8.25% on the secondary. For May 2007, that wasn't terribly bad, considering it was a non-conforming property and I had barely six months of income history at the level necessary to qualify, and hardly any credit history. A mere three months later, those rates looked absolutely hilarious. Nevertheless, I kept paying for 6-7 more years. These were more or less default payments on 30-year notes, so obviously front-loaded with interest, so in 2015 I still owed $140k. Well, even in 2015, the property was worth $85k. I walked away for various reasons I don't need to get into here, and the primary lender went so far as to sue me for a $29k deficiency, to the great surprise of most people in the know. The other lender forgave the $26k principal outstanding. But the point is, that's something like a worst-case outcome (-48% underwater) of a real estate transaction. It's not at all like being made to pay back the entire $160k + interest! :)
- Y7ZCQtNo39 9y ago
  Sorry for your experience, that sounds terrible. But would've a student loan stop you from pursuing that mortgage? Certainly not in 2008, when they'd lend to anybody; but today, when the conforming standards are less relaxed? It's not going to be the student loan that makes or breaks you; it will be your assessed ability to repay, which means having a stable, high enough income to afford the repayment with some wiggle room (you know, debt-to-income ratios, etc).
  - abalashov 9y ago
    That really depends on the size of the loan, the APR and the monthly payment. But for a fair number of folk I know, the relatively high monthly student loan payment is material enough to impact their debt-income ratio and kick their monthly disposable income underneath the threshold required for today's tighter underwriting requirements. Of course, having learnt the lesson I did in the particular way I did, I'm not convinced that owning real estate is a particularly good course of action for most young people anyway. Unfortunately, we've got policy incentives that heavily skew toward owning over renting, mainly the mortgage interest tax deduction. That was my reasoning for buying: "A mostly tax-deductible monthly housing payment? Sounds good to me!"
tmnvix 9y ago
> If $30k in student debt is 'shakling', then did we ever expect the same person to take on a $300k mortgage... A student debt is different than a mortgage in that with a mortgage there is collateral. This reduces the risk to both parties considerably because usually the collateral can be used to settle the debt if needed. I forget which of the ancient philosophers said it but to paraphrase: "it is basically unethical to place a mortgage on yourself (because you are the collateral)". Not too far from what you are effectively doing when taking on a student loan.
grecy 9y ago
> If $30k in student debt is 'shakling' The Average was $37k in 2016, up 6% on the year before. [1] That makes my $15k(USD) debt look pretty low. [1] https://studentloanhero.com/student-loan-debt-statistics/ https://studentloanhero.com/student-loan-debt-statistics/

abalashov 9y ago

Yeah, but it's not entirely fair to compare a $300k obligation secured by the house with a non-dischargeable student loan. I've gone through foreclosure on an underwater property, I can speak to that. When I was 21 and had far more money (relative to my age) than sense, I bought a $160K 1 BR condo in downtown Atlanta on underwriting terms that could only be described as housing bubblicious, and which certainly could not be found after the Great Recession. I got an 80/20 loan with 6.625% APR on the primary loan and 8.25% on the secondary. For May 2007, that wasn't terribly bad, considering it was a non-conforming property and I had barely six months of income history at the level necessary to qualify, and hardly any credit history. A mere three months later, those rates looked absolutely hilarious. Nevertheless, I kept paying for 6-7 more years. These were more or less default payments on 30-year notes, so obviously front-loaded with interest, so in 2015 I still owed $140k. Well, even in 2015, the property was worth $85k. I walked away for various reasons I don't need to get into here, and the primary lender went so far as to sue me for a $29k deficiency, to the great surprise of most people in the know. The other lender forgave the $26k principal outstanding. But the point is, that's something like a worst-case outcome (-48% underwater) of a real estate transaction. It's not at all like being made to pay back the entire $160k + interest! :)

Y7ZCQtNo39 9y ago
Sorry for your experience, that sounds terrible. But would've a student loan stop you from pursuing that mortgage? Certainly not in 2008, when they'd lend to anybody; but today, when the conforming standards are less relaxed? It's not going to be the student loan that makes or breaks you; it will be your assessed ability to repay, which means having a stable, high enough income to afford the repayment with some wiggle room (you know, debt-to-income ratios, etc).
- abalashov 9y ago
  That really depends on the size of the loan, the APR and the monthly payment. But for a fair number of folk I know, the relatively high monthly student loan payment is material enough to impact their debt-income ratio and kick their monthly disposable income underneath the threshold required for today's tighter underwriting requirements. Of course, having learnt the lesson I did in the particular way I did, I'm not convinced that owning real estate is a particularly good course of action for most young people anyway. Unfortunately, we've got policy incentives that heavily skew toward owning over renting, mainly the mortgage interest tax deduction. That was my reasoning for buying: "A mostly tax-deductible monthly housing payment? Sounds good to me!"

tmnvix 9y ago

> If $30k in student debt is 'shakling', then did we ever expect the same person to take on a $300k mortgage... A student debt is different than a mortgage in that with a mortgage there is collateral. This reduces the risk to both parties considerably because usually the collateral can be used to settle the debt if needed. I forget which of the ancient philosophers said it but to paraphrase: "it is basically unethical to place a mortgage on yourself (because you are the collateral)". Not too far from what you are effectively doing when taking on a student loan.

grecy 9y ago

> If $30k in student debt is 'shakling' The Average was $37k in 2016, up 6% on the year before. [1] That makes my $15k(USD) debt look pretty low. [1] https://studentloanhero.com/student-loan-debt-statistics/ https://studentloanhero.com/student-loan-debt-statistics/