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> But the people here are holding Masters Degrees and student debt I wonder how long before we finally admit that said student debt is the very source of money

> But the people here are holding Masters Degrees and student debt I wonder how long before we finally admit that said student debt is the very source of money that has pushed home prices so high? Not backed by anything real and non-dischargeable makes it a dream for the benefactors.

iosguyryan 2y ago
Huh? Debt. Paid to another entity that was not the house seller. Walk me through the logic.
- randomdata 2y ago
  It turns out colleges don't burn the money they receive. They either invest it themselves or pass it on to the next guy to do the same.
rchaud 2y ago
Student debt didn't cause the financial crisis of '08, opaque securitization of home mortgages did. That created a domino effect of brokers handing out variable-rate loans to people who didn't understand the terms. They didn't care about the deliquency rate because they could sell that mortgage to another party and make it their problem. The whole thing was a ticking time bomb. None of that applies to student loans because those aren't collateralized with a real asset the way home loans are.
- randomdata 2y ago
  > Student debt didn't cause the financial crisis of '08, opaque securitization of home mortgages did. That's what Canada said in 2008, claiming its much more regulated financial sector avoided the situation. Yet look now... While you are right that subprime mortgages contributed a temporary exacerbation, they still needed a catalyst to drive the price of homes higher in the first place. Said mortgages only became available because homes were increasing in value already (which was historically unusual), making lenders see it as a safe bet. That is, of course, until the homes started falling in price in late 2006, which brought on panic as the mortgages started coming up for renewal.
  - rchaud 2y ago
    Outside of the US, UK and Switzerland, OECD countries did not experience major bank failures in 2008 (maybe also France w/ BNP Paribas). Yet housing costs are rising in all OECD economies. The point I'm making is that housing is seen as an asset class, so it's a political priority to keep prices high. There is no such equivalent in the student loans market because outside of the US, higher education doesn't cost an arm and a leg.
    - randomdata 2y ago
      > Yet housing costs are rising in all OECD economies. Exactly. Especially in economies that are struggling to turn the education into something real. The US fares a little better here compared to many other OCED countries because of its strong tech industry creating things that are real, but it is certainly not immune. After all, if you spend $100,000 on an education, and then use that education to create a widget that sees buyers send $100,000 back to you there is no impact on housing. You got an education, they got widgets, you can pay your loan back. This is a win-win situation and the economy is better for it. If students turn the debt into something real, you don't have a problem. This is why we offer student loans. They can be leveraged to benefit an economy. The problem is when someone spends $100,000 on an education and then resorts to taking a regular job – a job just like they would have done anyway. Now you have an extra $100,000 floating around in the economy with no home. An extra $100,000 that needs to find a home, and it turns out a literal home has been a good place for it to end up. At least with traditional debt, if you failed to create a compelling widget you'd be forced to give up your security, and the $100,000 you borrowed would go back into someone else buying that security. Worst case, if someone declares bankruptcy then someone else ends up giving up something real. But student loans create a 'fake' situation if the student fails to create something real afterwards. There is nothing real that already exists to fall back on if they fail to succeed, and if it is also not dischargeable in bankruptcy... > higher education doesn't cost an arm and a leg. Not true. Any unsecured, non-dischargeable debt always costs an arm and a leg. The only way to repay it is to put those arms and legs to use. The same arm and leg that one would have otherwise used to buy their own home, now helping to pay for someone else's. It turns out that when you help someone else pay for their home with your arms and legs, they can pay more than they would be able to without your help. Who'd a thunk it.
maxsilver 2y ago
I'm lost. How did people being poorer (having more student debt) push prices higher? Most of the people I'm thinking of don't have student debt for fun. They did it because their jobs either hard-required it (to get licensed), or soft-required it (to get hired). Think folks who are teachers, social workers, LPN nurses, therapists, healthcare admins, etc. Education and Mental Health seem to be the worst cases for this -- it's expected that you have 4 to 7 years of expensive college education, and 1 to 3 years of internships/practice, and after all of that, you get to maybe make $40k. If you are lucky you can eventually work your way up to $60k-$75k/yr.
- randomdata 2y ago
  > I'm lost. How did people being poorer (having more student debt) push prices higher? Huh? Why would it make people poorer? If you take a $100,000 loan and then give the $100,000 to me, I'll be $100,000 richer. That is $100,000 more than I can spend on a house. A college brings more indirection than you simply handing me $100,000, but the essence is the same. Were you under the impression that colleges burn the money?
  - maxsilver 2y ago
    > Why would it make people poorer? Because people buying something means they no longer have the money, and are thus, poorer. If you have $20, and you buy lunch for $10, you now are $10 poorer. > Were you under the impression that colleges burn the money? (looking around at my alma mater, which has tripled the size of administration and built like four new sports stadiums, while the wages of professors have remained flat for ten years and cost-per-credit-hour has tripled) -- um, yes? Are there colleges that don't just burn the money, or dump it into stocks/bonds/trusts/etc?
    - randomdata 2y ago
      > Because people buying something means they no longer have the money, and are thus, poorer. How does you, hypothetically, paying me $100,000 to teach you how to weave baskets under water make me poorer? By my math I gained $100,000. $100,000 more I now have to spend on a house that I wouldn't have had otherwise. > Are there colleges that don't just burn the money? Presumably all of them. At very least they pass a large portion of that money off to administrators, who then often buy houses with the money.
prewett 2y ago
A much more salient cause is the 0% (base) interest rates. Obviously you can afford the a larger mortgage at 3% than at 7%. This should eventually reverse itself with higher interest rates, but right now no one with a 3% mortgage is selling, because then they'd be stuck with a higher mortgage, so there are even fewer houses available for purchase, but roughly the same demand. I also think AirBnB has increased housing prices, although I don't know how one would find evidence for that. But with AirBnB, now your house can also produce income, so the price of a home should rise to account for that. Plus it reduces supply, because some people rent out homes on AirBnB without even living in them.

iosguyryan 2y ago

Huh? Debt. Paid to another entity that was not the house seller. Walk me through the logic.

randomdata 2y ago
It turns out colleges don't burn the money they receive. They either invest it themselves or pass it on to the next guy to do the same.

rchaud 2y ago

Student debt didn't cause the financial crisis of '08, opaque securitization of home mortgages did. That created a domino effect of brokers handing out variable-rate loans to people who didn't understand the terms. They didn't care about the deliquency rate because they could sell that mortgage to another party and make it their problem. The whole thing was a ticking time bomb. None of that applies to student loans because those aren't collateralized with a real asset the way home loans are.

randomdata 2y ago
> Student debt didn't cause the financial crisis of '08, opaque securitization of home mortgages did. That's what Canada said in 2008, claiming its much more regulated financial sector avoided the situation. Yet look now... While you are right that subprime mortgages contributed a temporary exacerbation, they still needed a catalyst to drive the price of homes higher in the first place. Said mortgages only became available because homes were increasing in value already (which was historically unusual), making lenders see it as a safe bet. That is, of course, until the homes started falling in price in late 2006, which brought on panic as the mortgages started coming up for renewal.
- rchaud 2y ago
  Outside of the US, UK and Switzerland, OECD countries did not experience major bank failures in 2008 (maybe also France w/ BNP Paribas). Yet housing costs are rising in all OECD economies. The point I'm making is that housing is seen as an asset class, so it's a political priority to keep prices high. There is no such equivalent in the student loans market because outside of the US, higher education doesn't cost an arm and a leg.
  - randomdata 2y ago
    > Yet housing costs are rising in all OECD economies. Exactly. Especially in economies that are struggling to turn the education into something real. The US fares a little better here compared to many other OCED countries because of its strong tech industry creating things that are real, but it is certainly not immune. After all, if you spend $100,000 on an education, and then use that education to create a widget that sees buyers send $100,000 back to you there is no impact on housing. You got an education, they got widgets, you can pay your loan back. This is a win-win situation and the economy is better for it. If students turn the debt into something real, you don't have a problem. This is why we offer student loans. They can be leveraged to benefit an economy. The problem is when someone spends $100,000 on an education and then resorts to taking a regular job – a job just like they would have done anyway. Now you have an extra $100,000 floating around in the economy with no home. An extra $100,000 that needs to find a home, and it turns out a literal home has been a good place for it to end up. At least with traditional debt, if you failed to create a compelling widget you'd be forced to give up your security, and the $100,000 you borrowed would go back into someone else buying that security. Worst case, if someone declares bankruptcy then someone else ends up giving up something real. But student loans create a 'fake' situation if the student fails to create something real afterwards. There is nothing real that already exists to fall back on if they fail to succeed, and if it is also not dischargeable in bankruptcy... > higher education doesn't cost an arm and a leg. Not true. Any unsecured, non-dischargeable debt always costs an arm and a leg. The only way to repay it is to put those arms and legs to use. The same arm and leg that one would have otherwise used to buy their own home, now helping to pay for someone else's. It turns out that when you help someone else pay for their home with your arms and legs, they can pay more than they would be able to without your help. Who'd a thunk it.

maxsilver 2y ago

I'm lost. How did people being poorer (having more student debt) push prices higher? Most of the people I'm thinking of don't have student debt for fun. They did it because their jobs either hard-required it (to get licensed), or soft-required it (to get hired). Think folks who are teachers, social workers, LPN nurses, therapists, healthcare admins, etc. Education and Mental Health seem to be the worst cases for this -- it's expected that you have 4 to 7 years of expensive college education, and 1 to 3 years of internships/practice, and after all of that, you get to maybe make $40k. If you are lucky you can eventually work your way up to $60k-$75k/yr.

randomdata 2y ago
> I'm lost. How did people being poorer (having more student debt) push prices higher? Huh? Why would it make people poorer? If you take a $100,000 loan and then give the $100,000 to me, I'll be $100,000 richer. That is $100,000 more than I can spend on a house. A college brings more indirection than you simply handing me $100,000, but the essence is the same. Were you under the impression that colleges burn the money?
- maxsilver 2y ago
  > Why would it make people poorer? Because people buying something means they no longer have the money, and are thus, poorer. If you have $20, and you buy lunch for $10, you now are $10 poorer. > Were you under the impression that colleges burn the money? (looking around at my alma mater, which has tripled the size of administration and built like four new sports stadiums, while the wages of professors have remained flat for ten years and cost-per-credit-hour has tripled) -- um, yes? Are there colleges that don't just burn the money, or dump it into stocks/bonds/trusts/etc?
  - randomdata 2y ago
    > Because people buying something means they no longer have the money, and are thus, poorer. How does you, hypothetically, paying me $100,000 to teach you how to weave baskets under water make me poorer? By my math I gained $100,000. $100,000 more I now have to spend on a house that I wouldn't have had otherwise. > Are there colleges that don't just burn the money? Presumably all of them. At very least they pass a large portion of that money off to administrators, who then often buy houses with the money.

prewett 2y ago

A much more salient cause is the 0% (base) interest rates. Obviously you can afford the a larger mortgage at 3% than at 7%. This should eventually reverse itself with higher interest rates, but right now no one with a 3% mortgage is selling, because then they'd be stuck with a higher mortgage, so there are even fewer houses available for purchase, but roughly the same demand. I also think AirBnB has increased housing prices, although I don't know how one would find evidence for that. But with AirBnB, now your house can also produce income, so the price of a home should rise to account for that. Plus it reduces supply, because some people rent out homes on AirBnB without even living in them.