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Half of the US government's financial assets are student loans (community.finimize.com)
353 points by prostoalex a year ago | hide | past | web | 269 comments | favorite

Recent reports from the Treasury Department show that the US government owns nearly $1.5 trillion in student loans.

That’s pretty sad when you think about it: the US government’s #1 financial asset is debt owed by tens of millions of its young people for university education that didn’t even necessarily qualify them for a real career.

Millennials are the most educated generation in history. Yet there are record numbers of them working off student debts as waiters and bartenders, and supplementing their income on the side with ‘gigs’ (like being an Uber driver).


On top of all that, young people will spend their entire working lives paying into a pension system that likely won’t be there for them when it comes time to collect.

The Board of Trustees of Social Security tells us that the program is going to completely run out of money within the next 15 years. Millennials’ retirement horizon is far beyond that.


Miami-based homebuilder, Lennar Homes, recently announced it would pay a big chunk of a student loan for any borrower buying a home from them.

Through its subsidiary Eagle Home Mortgage, the company will make a payment to a buyer’s student loans of as much as 3% of the purchase price, up to $13,000.

Debt has become such a keystone of our society, that the only way we can afford something is to swap one type of debt they can’t afford with another type of debt.

-- Simon Black

Buyer beware... "pension system that likely won't be there" is a right wing frame.

In reality, social security very likely WILL be there. But fostering cynicism about it is a prerequisite towards imagining it won't be, which makes it (theoretically) easier to dismantle. "Well it's in poor shape anyway, we should just blow it up..."

There are good informative comments below that are being downvoted, that are about how social security actually works. You just can't seem to avoid political crap here.

There is plenty of good information out there on various easy, non-disturbing ways to tweak social security if necessary. Google some of the ole trustee reports or publications by the late Bob Ball.

There are already unfunded pension plans and systems waiting to blow up in the next decade. This article [0] details the South Carolina government pension plan, covering 550,000 residents, which is currently $24 billion in the red.

Your response is engaging in "political crap" by providing no evidence besides name-calling. For some actual proof of the Social Security situation, here's the SSA report [1] explaining how its Trust Fund will run out in 2035. So yes, Social Security will still exist, but it will rely on short-term funding rather than a big account. That's fine in theory, provided the budget is there. (It likely will be; I imagine the politicians will cut military funding before they hurt SS!)

[0] https://www.marketwatch.com/story/collapsing-pensions-will-f...

[1] https://www.ssa.gov/policy/docs/ssb/v70n3/v70n3p111.html

Once the trust fund is exhausted, unless the law is changed, SS payouts are made equal to SS payroll taxes. This is projected to settle out to payments being ~70% of what has been promised.

Ok so the next question is whether that should be considered failure or not. Also they'll go below that (because some of their "investments" are government bonds which they won't be allowed to unload, as it would affect the government too much).

For current or future recipients of said benefits, the answer is pretty clear : yes.

And, frankly, the government has promised these people compensation in terms of years or work, and amounts of income after those years of work. It should be illegal to make these claims. (and for the private sector, it mostly is, so frankly these laws are letting government lie on compensation letter, which is low, dishonest)

It wasn't just a promise: they took 15% of my salary for it against my will. If I don't get it back, then it's a tax, and not only that, but it makes the tax on the middle class significantly higher than on the uber rich. The Boston Tea Party ain't nothing compared to what's going to happen in this country if they mess with Social Security.

Normally I don’t unload like this, but framing this as a “right-wing” thing is both stupid and dangerous.

Pensions in this country have made unrealistic assumptions for years.

Just google it. Here’s one for you from the Brits, so no right/left anything: https://www.ft.com/content/456172b4-6b11-11e6-ae5b-a7cc5dd5a...

And here’s another: http://www.wfaa.com/news/local/dallas-county/retired-dallas-...

And another: http://www.sacbee.com/news/politics-government/capitol-alert...

And another: http://www.star-telegram.com/news/local/community/fort-worth...

And another: https://www.ai-cio.com/news/decennial-commission-seeks-aid-n...

Do I need to continue? I will if you continue on your asinine positions that pensions are just fine in this country. So the idea that Social Security has issues is quite well founded.

And if social security doesn’t pay out, politicians on both sides will be to blame for kicking the can down the road.

State government pensions are totally unrelated to Social Security.

Under Federal law and under many state constitutions, vested benefits under state and municipal employee pension plans are a property right, and cannot be reduced unilaterally (depending on the theory, either because of the Takings Clause or Contracts Clause of the Federal constitution). And because, unlike private pensions and the USPS, Federal law doesn't require state or municipal governments to fully fund liabilities as they accrue, these particular pensions have turned into a disaster.

But Social Security was designed and intended at its very inception to require adjustment to both benefits and retirement age.[1] It's not a form of deferred compensation or other property right. So retirement age and benefits can and has and _will_ be adjusted to keep it solvent.

More over, Social Security was never designed to provide continuity of lifestyle, but rather to keep the elderly from starving and living homeless. All it has to do is provide as much as it can, no more or no less. It's a carefully designed social welfare program that is patterned after, but shouldn't be confused with, pensions and annuities.

The Social Security department has never made unrealistic assumptions, nor has Congress. The problem with Social Security is that there exists a political party that will cynically bemoan the pending collapse of Social Security while refusing to make the simple and obvious changes that were foreseen and expected of them 80 years ago and ever since.

[1] Actuarial tables back then were insanely accurate, and the bureaucrats who designed Social Security understand very well how things would play out. See this 1947 study, which also includes historical actuarial tables from the 1920s and earlier. https://www.cdc.gov/nchs/data/lifetables/life39-41_acturial....

In particular, note (PDF) pages 14 and 18 where it discusses the trends in longevity. I've seen better historical papers to make my point but don't have the references on hand. But I think that document suffices to show how actuarial science was well developed back then. And it's also worth noting that Social Security came about before the post-WWII baby boom. Populations were understood to be able to grow and shrink. Social Security was never predicated on a steadily growing population.

So what you're saying is

People should worry about pensions because they won't fail, instead they'll be adjusted to become much less, both in terms of years (longer work) and in terms of benefits (which will be your only form of income for decades).

This makes me wonder, what, exactly, do you think "failure" means, to normal people, for their pension fund/social security/... ?

In my humble opinion, it is that they'll have to work longer and make more money themselves, after getting a pension. And for various other social security recipients it'll be analogous.

So your long comment essentially says "pensions won't fail, they'll fail !". (Or perhaps one could say that you're being extremely pedantic on the exact meaning of fail versus the common meaning of fail)

Obviously the claim made to the population by social security is that they'll receive benefits for a given period. You clearly agree that that promise is unsustainable, and fail/("will be adjusted").

We just spent 8 years of another party in the White House, and they didn’t solve the problem.

So no, it’s not one party - it’s both. And that’s what the problem is.

The Democrats controlled all 3 branches for less than a year, and they chose to pursue healthcare reform. After that Republican leaders admitted in public that their #1 priority was preventing Democrats from passing any further substantial legislation whatsoever in a bid to make them look ineffectual.

If you want to criticize Democrats, they did choose to expand Medicaid and Medicare without a more comprehensive long-term financing plan. OTOH, unlike the GOP tax reform, these expansions were at least nominally revenue neutral thanks to some targeted tax increases, the insurance mandate, etc. Democrats may spend but they _tax_ and spend, which is better than spending or (as Republicans do) cut taxes and spend.

Republicans could come to the table and attempt to compromise with Democrats. Democrats would want to expand benefits. Republicans would like to cut them, at the very least, if not eliminate benefits or privatize the entire program. But compromise theoretically could be fairly easy. But Republicans are committed to a nihilistic "starve the beast" strategy. That's the crux of the problem. Republican ideology has become so extreme that compromise is literally anathema. It's no coincidence that old-school Republicans have been bowing out left-and-right.

I see similar trends happening on the left with an insistence on single-payer healthcare, but it's early and not even remotely comparable to where Republican politics is at.

The president doesn't write legislation though, that comes from Congress.

> Pensions in this country have made unrealistic assumptions for years.

Why are you talking about pensions? The subject was social security.

> The Board of Trustees of Social Security tells us that the program is going to completely run out of money within the next 15 years. Millennials’ retirement horizon is far beyond that.

That’s not how Social Security works. For practical purposes, it’s pay-as-you-go system: http://www.heritage.org/social-security/report/misleading-th.... As boomers retire, taxes will need to go up to account for the higher ratio of retirees to workers. But when the millenials retire, unless they end up having a substantially smaller generation after them, that strain will not be there.

The best investment we could make in retirement would /honestly/ be in public owned automation and production of all basic things that don't inherently /require/ human labor.

The sooner we can have a society more like Star Trek's utopian future the better for anyone that wants to retire without being a burden on the current generation. (Even then, I don't think I'd ever want to /fully/ retire, I'd just like to focus on things I actually find fun and meaningful.)

Best investment for whom, though? Not companies. Not governments, not because it wouldn't be beneficial, but because there's no incentive – the benefits are down the road, probably beyond the time it takes for the current generation of politicians to retire.

As a Gen-X'er I was told in my twenties that Social Security was going to run out by the time I was forty. Here I am, in my forties, and it hasn't run out yet. That's not to say that it can't or won't. But in those twenty years, if I've learned anything, it's to not trust the headlines.

Since 2014 Social Security has run out of money, and the shortfall is being financed by general federal borrowing. It just isn't in the headlines these days.

Another right wing frame... Social Security was in surplus for several years, and it will be several more years before the surplus is exhausted, if ever.

The right wing frame is that the surplus "doesn't exist" or is full of "IOUs" or something. It's hogwash.

Here's how it really works. When Social Security is in surplus, more money comes in from payroll taxes than is paid out in benefits. Payroll taxes come from people who get W-2 income and pay FICA.

That surplus is then used as part of the general fund to pay for various things including thing like tax cuts for lower capital gains. In reality, the general deficit is larger, because the surplus money isn't allocated for those purposes - the surplus continues to exist to pay for social security when it goes into deficit.

If we then pretend that that surplus "isn't actually there", then it means that we've effectively used payroll taxes to fund tax cuts for people that are richer than the people who have paid their payroll taxes. It's a two-step con. It's also false.

Social Security has also transition from surplus to deficit and back to surplus in the past as well.

It doesn't matter whether or not Social Security has a nominal surplus or deficit, the important part is what that dollar of Social Security benefit will buy you. Unless there is a secular shift in the tax base such as much more immigration, much higher incomes, or many more children, demographics suggest a smaller portion of the country working to pay for a larger portion of the non working country.

Other countries are already seeing this, but there is no escape from raising the retirement age, and the best way to slash benefits, which is to keep them behind real inflation. Also, medicare is an even bigger problem as it has no upper limit on spend, which will also have to be cut somehow.

Bottom line is, the more resources you spend on the past, such as aging people and infrastructure, the less you can on the future, such as for you and your kids. That is unavoidable.

I think you're missing a step. The surpluses are invested in Treasury securities, which is where the "IOUs" tripe comes from. Figures for the national debt invariably _include_ these securities, which is worthwhile to point out lest people think the liability is somehow hidden with shell games.

I think the latest figures for the national debt are just shy of $14 trillion, of which about $3 trillion is owed to the Social Security trust funds.

Trust fund is targeted to run out in 2034.

Source: https://www.ssa.gov/policy/trust-funds-summary.html

Uh, no.

In FY2016, it ran a surplus of $23 billion. For FY2017 the surplus was $35 billion.

Stats here: https://www.ssa.gov/policy/trust-funds-summary.html

Two things to note:

1- taxes aren’t going up, even though Boomers have already begun to retire;

2- if Boomers live for a long time in retirement, everyone after them is hosed.

Maybe able-bodied Boomer should work longer.

the US government’s #1 financial asset is debt ... for university education

This isn't quite true.. In addition to the assets in the chart, the governemnt has about 8T in mortgages (out of 15T total outstanding) through several Government Sponsored Enterprises, like Freddie Mac and Ginnie Mae: https://www.federalreserve.gov/econresdata/releases/mortouts...

The only difference is that the government took over the student loan market without creating a GSE to manage it.

That's a pretty bad comparison actually. They don't "have" them. It's just another place to sell your risk when you do a mortgage deal and then they repackage them and sell the end result to investors. It's necessary (or helpful rather) so that you don't have to have a balance sheet to hammer out CRE deals. You can just do the deal and sell the risk and not keep the interest rate risk on your books.

The Fed's balance sheet on the other hand, now that makes the student debt load seem miniscule.

How successful is the risk-selling in terms of getting the risk off the federal government, in practice? I can believe there's some level of success, so sure, 100% of the debt-repayment risk in securities managed by the federal government's mortgage entities shouldn't be counted as really being the federal government's. But the way the 2007-08 mortgage mess played out suggests that in an actual mortgage crisis (which is the only time the risk exposure would be seriously tested), the US government does quasi-officially backstop a large portion of the market in mortgage-backed securities that it manages, so it's shouldering more than 0% of the risk represented by those nominally repackaged-and-sold-off debt instruments.

Maybe the only way to quantify 'moral hazard' at the present time is to count the occurrences of 'Lehman Brothers' in the investment media.

Moral hazard is just a price you pay for stability. It's impossible to avoid. You need a middle ground where if you do something really stupid you're still punished but if you're "still dancing" like everyone else (Chuck Prince, 2007) then you aren't completely hosed. When I used to be a banker, I remember plenty of times where others would make bids on a deal that we couldn't come close to as a small player without a balance sheet. That's why things always get more aggressive in bull markets because you've gotta win deals to make money. It all ebbs and flows.

Millennial here, thanks for the daily reminder of the future I have to deal with.

Failing government systems, check. Unaffordable educational system, check. Limited housing and land, check. Degrading climate, check.

Some days I believe I just may find a way out of it. But, for every day I participate in the rat race is just another lost when I should be working on building a better future for my family.

Come to Eastern Europe, your student loan money is enough for a whole new life here.

P.s. honestly, I don't understand how ppl who are so hoplessly indebted are not migrating here. Bulgaria offers very cheap life with the opportunity of doing business with the EU and the US. Why work 24/7 when you can enjoy a good life in a place where the local people and economy need a foreigner to lead them in the business and globalizing world?

It is not so easy to immigrate to Eastern Europe from outside EU/EEA. I don't know about Bulgaria in particular, but typically in order to move to another country, either permanently or temporarily, you need to show that you have a degree in an in-demand major, a job offer from a reputable employer in the country, and an official assessment showing that you will not negatively impact the labor market, e.g. by taking a job a citizen could have done. You can't just pack your bags and take a plane and expect to be allowed to work in the country of your destination.

Every election season, many people in the US say "If X is elected, I am moving to Canada." Then they check the immigration department website [1], realize it is going to take multiple years and thousands of dollars for them to navigate the immigration system, and even then there is a high likelihood of failure. So most promptly give up.

The bureaucratic difficulty of immigration is not the only issue dissuading potential immigrants. Language barrier, cultural differences, loss of one's professional network, the possibility that one's education and experience wouldn't be acceptable to the employers in the destination country, family and friends, etc. also play a role.

I am sure many consider moving to Easter Europe, but few end up going through with it.

[1] http://www.cbc.ca/news/politics/website-crash-immigration-tr...

Because 80% of people (at least Americans) live <50 miles from their birthplace. People don't like to move. There's a lot of hurdles moving. I know I moved across country (west coast to the south) and there is still a big culture shock after a few years.

tldr: There's more to the equation than finance.

I'm considering moving to the east-coast near a mentor of mine. Land is cheaper (when compared to the Northwest) and it's in Zone 5/6 which is pretty good for growing.

From my experience, having some sort of a support structure to move into greatly lessens some of the problems. One of the biggest challenges in moving is finding that new support structure. And I guess this also is highly dependent on how social you are to begin with.

What stuff has led to culture shock? What's stood out to you?

There's a lot. But to sum up a few:

- The overwhelming political nature of everything here. It is "free-market is the solution to everything or you're a socialist" mentality. The Moore race is a good example of this. The only thing worse than a Dem is a pedo. I'm moderate right, for reference. (maybe some of this is just the political climate of the times)

- Bible belt and churches around every corner. Religion is much more common place, and I definitely get weird looks if I mention that I don't go to church.

- Everyone is big. I mean the obesity thing here is common and I'm shocked at the amount of fast food and all meat diets people do. This can lead to some bland food, though there is also some really good food. Great BBQ here.

- There is much more casual racism here (I'm white, but it is enough that I notice it when I'm not looking for it). Lots of confederate war flags and for some reason people keep telling me that the civil war had nothing to do with slaves. I don't know why people keep bringing that up in discussions that it isn't related to. These things also pop up in the frequent political discussions that I can't seem to avoid.

- Finding friends is hard. Part of this is just moving to a new area, part of it is cultural differences. I expect this to be a challenge for anyone that is moving not into a big area or into a job/school that you have a lot of peers. You'd be surprised how many friends you have because you sit next to them for hours a day.

- Everyone is extremely nice. This isn't really a bad thing, but it is surprising. People will go out of their way to help you.

And there are just cultural norms and vernacular that are strange to me. I'm also in a small town, so that definitely plays a factor. But it isn't a hick town either. I can't escape the feeling that I'm a foreigner. And I think that feeling of being a foreigner is off-putting for a lot of people.

This. I "retired" to Bulgaria last year for 6 months and lived lavishly: restaurants, beach/mountain vacations, travel, shows, massive apartment, etc and found that my cost of living was 1/10th what I paid in San Francisco for less than half the luxury.

I'm only back in the US now for a limited time. I've done the math and found that I need a few more years of work to live in Bulgaria full-time for the rest of my life.

Curious about how it's worked for you. Why did you pick Bulgaria? How serious have you found language and cultural barriers to be? As an American (my assumption), how hard was it to open a bank account? Etc. Tnx.

Wife is Bulgarian. I discovered how great it was by accident, I guess you could say.

I speak broken Bulgarian.

Everyone I know and care about is here. That isn't inconsequential.

What happens if Mr. Putin (or one of his successors) suddenly decides that he wants Bulgaria back under Russian control?

Russian troops need to cross Ukraine and Romania first ?

Halfway there, then.

Bulgaria is a NATO member and hosts 4 joint military facilities with NATO forces (https://en.wikipedia.org/wiki/Bulgarian%E2%80%93American_Joi...). The NATO pact treats a military attack on one of its members as an attack on all of them (including the US).

not sure it is realistic that Vova can decide he wants part of the EU under his control

Only a small percentage would have jobs they could take with them / work remote. What would they actually do in Bulgaria or for it? And this is looking past language barriers.

I say this as someone that had a wonderful trip there and like the country and people quite a lot.

I've seriously considered it, but my family is the primary reason why I haven't pulled the trigger. I have Scandinavian roots on my Dad's side and would most likely try to utilize that.

Because they don't understand. A common refrain about the story in the U.S. of LaVar Ball, the impetuously famous basketball dad, is that it was a huge mistake to send his kids to play in Lithuania.

It's a classic example of "worldly" Americans going to the Louvre and being "cultured" but not having the depth of understanding that Eastern Europe is a wonderful, beautiful place. It's just not as well-kept and poorer so they turn up their nose.

I think there's plenty of room to critique LaVars choices while staying purely within the confines of basketball. The difference between skill level, exposure, and compensation is quite stark between the US and anywhere else. He could send his kids to go live at the Louvre and it's still be a dumb basketball move.

Actually, Lithuania fields a very good national team. When highschool kids (in Melo's case) are now having to adapt to the pro level, it can only benefit him.

You could definitely say they can learn more in the States as the quality of basketball is higher, but they won't be paid until they're in the league.

That's quite a sweeping, derogatory generalization

The horrible thing about generalizations is that they are so painstakingly accurate sometimes, and they hit so close to home that people hate them. Americans are hilariously uncultured. Do software engineers tend to be socially awkward? Yes. Try to understand the world for what it is or live in perpetual cognitive dissonance, your choice.

Millenial here. I think things are better then you think.

Failing government systems? Have always existed. Unaffordable education? Never went, no idea. Online education still free. Limited Housing and Land? Flyover country, tons of cheap housing and land. Degrading Climate? Yes. But even the most pessimistic projections are unlikely to effect my life.

Its a great time to be alive. Country not at war, unemployment is low, stock market doing amazing, crime is low, tons of new fields are emerging, sex is significantly easier to find then past generations, and the internet is still pretty great.

Only slightly pedantic: The United States has been at war for just over 16 years now.

Even more pedantic: The United States has been at war with North Korea since June 27, 1950. The war has been in a ceasefire state for a long time, but there has never been a formal peace treaty.

Although a still more pedantic person might point out that there was no formal declaration of war in Korea, so technically it's not a "war" (it was called a "police action").

An even more pedantic person might point out that while various norms (international or internal) might obligate a country to declare war before prosecuting it, the fsct of armed international hostilities is war in international law (though it may not trigger all the effects triggered by a declared war in a states internal law) even if there is no declaration.

Kind of a red herring IMO. Anecdotes only get you so far—when we look at the vast majority of millenials, most of their prospects are not so great. And this is especially true in comparison to the prospects of earlier generations.

Come to Colorado. Formerly the apex of flyover real estate. Now the location of million dollar 2000sqft houses. I see maps from as late as a decade ago with nothing on them where whole cities now exist.

"But even the most pessimistic projections are unlikely to effect my life." I applaud the optimism, but let's not minimize the gravity of climate change: the most pessimistic projections involve a runaway release of methane gas which makes life inhospitable on all of earth.

I don’t think flyover country is as cheap as it used to be. I’m willing to move anywhere, but after much house searching, the only places I consider affordable now are Idaho and the deep rural south.

I’m with that other commenter who suggested Eastern Europe is much more interesting.

Thanks for the encouragement. I'm probably just being extra hard on myself today.

Take the weekend off from the news, or longer. Find a good, non-political book and dive in.

I've found it pretty easy to get into a negative spiral when reading about all the shit going on. Our awareness of the myriad problems and the seeming political and cultural insurmountability of them don't do our minds any favors.

Agreed. I have several books on timber framing that I need to finish.

If you want to be serious about saving our future, you need to stop standing on the sidelines and echoing the defeatist attitude that the situation we're in cannot be fixed. We need to stop worrying about offending a minority of people who have power and focus on ending their political power, because a lot of the fixes will be political and must be.

EDIT: being a little presumptive here, see below.

Currently, I serve on two committees with my local City government. I work-trade with local farmers and volunteer with numerous non-profit organizations. I've converted my backyard into an urban farm and have started a composting program with my neighbors. I regularly meet with the Mayor to discuss ideas that could benefit the local community.

All of this is in addition to my 9-5.

What else should I be doing?

Also, I don't appreciate your presumption that I have a "defeatist" attitude just because I shared some of my honest thoughts. Next time ask.

You're definitely doing a lot more than a lot of people are doing. I read your last line as defeatist, and probably misjudged you.

I will say however that a lot of the issues you talk about are systemic and larger than what can be affected by local politics. Compositing programs won't address there are still large corporate farms out there that contribute the most to climate change. The same is true of recycling, being vegan or eating local, etc. A lot of change that needs to occur involves regulating large corporations.

It sounds like you're aware of this, but that's how you address the future. I think you agree.

EDIT: leaving my presumptive comment above unchanged so people reading won't be confused.

Thanks. I agree with you about the fact that what I'm doing isn't a direct influence on the bigger issues. However, consumers play a major role in these larger issues.

For example, If we as a society would stop buying cheap food, it would force the hand of these industrial operations to change their behavior.

So I'm taking the time I have now to learn and improve my mentoring and educational skills when working with the local community. In addition to regulation, I also think it's critical that sustainable change occurs from our within society.

"limited housing and land"?

I don't agree. The Midwest is very affordable. Plenty of land. Remote work is a definite possibility.

You don't have to agree, but that fact is still true. I also have hesitations with buying land in the Midwest, mostly due to climate change factors.

That’s an interesting perspective. What climate change factors worry you? The Midwest is one of the few regions in the US that stand to benefit from climate change. Easy/West will be worst hit.

My biggest concern with the Midwest is the erosion of healthy living top soil.


If you think the midwest is safe, I think you should spend a bit of time reading about the Ogalla aquifer.

Earning arbitrage through working remotely is something many folks have done for the last 15-20 years.

It provide a healthy ability to save and access lasting economic mobility if that's the goal.

At the end of the day what you make doesn't matter, it's what you're able to keep and move forward (or stabilize with).

Convince the capitalist/managerial class this is a good idea. The other option is to replace them.

There's still a chance for you if you can get adopted by someone rich!

But that's the last thing I want. I want to work hard and I'm willing to make sacrifices to reach my goals.

leave the US

And that's _exactly_ why I will likely never have kids. I'm a millennial myself, caught up in all that (doubly so, if they remove the student loan forgiveness for public workers), and I don't want to make any child of mine grow up in the world it seems we're heading to (especially degrading climate).

> "I don't want to make any child of mine grow up in the world it seems we're heading to"

This is utterly short-sighted thinking.

We in Western nations are utterly privileged and blessed to live in today's world. Abundance of clothing! Abundance of food! Free and accessible plumbing! Clean drinking water! Travel anywhere you like for relatively cheap! You probably own a large climate-controlled contraption that can transport you long distances in a short amount of time! No epidemic diseases/plagues of yesteryear! No famines! The average lifespan is already 80+ years old and that number continues to increase.

The world we are heading to will likely continue to see advances in technology and medicine, leading to less suffering and healthier, longer lifespans. More resources too - there are fewer destitute poor today than at any other time in history.

Warren Buffet said that the moment one was born in the United States or another Western country, that person has essentially won a lottery. Puzhong Yao, a Chinese immigrant to the US put[0] it this way:

"If someone is born a U.S. citizen, he or she enjoys a huge advantage in almost every aspect of life, including expected wealth, education, health care, environment, safety, etc., when compared to someone born in developing countries. For someone foreign to “purchase” these privileges, the price tag at the moment is $1 million dollars (the rough value of the EB-5 investment visa). Even at this price level, the demand from certain countries routinely exceeds the annual allocated quota, resulting in long waiting times. In that sense, American citizens were born millionaires!"

Jeff Atwood of Coding Horror blog expounded further[1]: "Being born today, rather than 50, 100, 200, 500 years ago is also effectively winning a lottery."

If you don't wish to have children for some reason, fine. But don't give us the foolish nonsense about refusing to bring up children in a terrible world. The world is the best it has ever been -- technologically, socially, medically, and probably morally -- and that trend is pointing in the right direction.

[0]: https://americanaffairsjournal.org/2017/11/western-elite-chi...

[1]: https://twitter.com/codinghorror/status/951212445426622464

I am one who has decided not to have children, in part because I don't want to bring people I [would] love into this world in the state it's in.

You are right that we (at least in the First World) are standing at the pinnacle of human civilization. We have access to the knowledge of the whole world, going back throughout much of world history. We have science, medicine, technology that would dazzle our ancestors. All of the great things you talked about are true.

And yet...

I've seen the migration of the Monarch Butterfly. It's glorious, absolutely magical. Uncountable numbers of these gorgeous orange and black beauties fill the air, all fluttering together, all wobbling along in the same direction. It's impossible to describe the feeling of witnessing it, of being surrounded by an aerial sea of these soft gentle beautiful beings.

It doesn't happen anymore.

The Monarch population tanked a couple of years ago. Not enough milkweed for the caterpillars to eat. Too much land has been given over to human food production. People are planting milkweed in their gardens now, but who can say if the Monarchs will rebound?

Our food animals outweigh all other land mammals combined, by more than twenty times.[1]

All the glories of our Western civilization come from an extraordinarily wasteful system that is converting oil and natural biomass into humans and meat animals and trash. There are always trade-offs, and we may well be about to become victims of our own success.

I don't want to have to explain to my children what Monarch Butterflies were, what tigers and elephants were, what coral reefs were.

When the waters rise and billions of people have to move or die, I don't want my kids to have to deal with that.

I don't want them to suffer when the first genegineered virus sweeps through our cities.

I don't want them to be embedded in a technological panopticon that indelibly records their every movement and communication.

There are some serious problems that humanity is facing and I don't have the faith to create a new human being in light of them. And that's what it is: faith.

Dismissing these concerns as "foolish nonsense" is the "utterly short-sighted thinking" in my view.

No sir, I'll keep my kids safe in the Uncreate, at least until such time as things have settled.

"May you live in interesting times" is a curse, and I won't pronounce it on my own unborn offspring, thank you.

[1] > Our phytomass harvests go beyond the metabolic needs to secure raw materials (wood, fibers, pulp) and energy (fuelwood, charcoal, straw) whose inputs remain indispensable even in the age of metals, concrete, synthetics, and fossil fuels. The biosphere has paid a considerable price for these human gains as both its total stock of standing phytomass and its overall productivity have declined by significant margins. And because we are an omnivorous species we have also been harvesting a wide variety of zoomass by collecting and hunting animals as foragers and eventually also deliberately raising them as pastoralists and farmers. These actions have reduced the stocks of wild terrestrial and marine animals while massively expanding the stocks of cattle, water buffaloes, horses, camels, sheep, pigs, and poultry.

"Harvesting the Biosphere: The Human Impact" ~ Vaclav Smil http://www.vaclavsmil.com/wp-content/uploads/PDR37-4.Smil_.p...

Sure, there are scary and potentially troubling things going on in the world.

If you are waiting for scary things to pass, you'll wait forever.

There will never be a perfect utopian time when the economy is running 100% efficiently, when humanity is in perfect harmony with nature, when there are zero threats of war, etc.

Your argument doesn't address this simple truth: there has never been a better time and place for humanity as now in first-world nations. It isn't perfect -- as you point out there are serious problems to tackle -- and yet, it's never been better.

I have a similar position on child creation, but I've decided that if I do want kids (don't at the moment, but seems likely) and can afford to, that I'll look strongly into adoption. Seems like a pretty good solution all-around to me.

dont worry. put your funds into 'good money' like sensible cryptocurrencies and watch your savings multiply. that is how we will fight the crooked boomer system.

This is really dangerous advice, especially for the poor. Crypto "investments" only multiply by convincing the next person down the line to buy your <coin of choice> at a higher price than you did. Add to this that there are no consumer protections around it, and it's an absolute honeypot for scammers.

99% of the key to wealth is to live beneath your means. It's unglamorous advice, but it's absolutely effective.

I'm pretty sure the parent was being sarcastic.

"The Millionaire Next Door" should be required reading in high school. It has all you need to know about living below your means, building wealth slowly and consistently.

Ahh! I've been Poe's Law'd I guess!

I may be wrong, but I read their advice as sarcasm.

"sensible cryptocurrencies" is the oxymoron for this generation

" The Board of Trustees of Social Security tells us that the program is going to completely run out of money within the next 15 years. " Is very misleading. Social Security is not a bank account, it is an insurance (you can get it at any time, and you get it simply because you paid in) where people are constantly paying in and out.

In 17 years* the Social Security system will probably have to cut benefits by 23% unless we either raise the retirement rate or raise the maximum salary at which you have to pay social security tax. The latter is a pretty painless thing to the average tax payer, who already has all their salary subject to social security tax.

The social security system was in much greater danger in the Reagan era, when they decided to make benefits taxable, which was ultimately a progressive way to reduce benefits.


I don't understand why there is a max income threshold for social security tax.

Can anyone explain this to me?

It was conceptualized as a universal safety net pension program, not a welfare program or progressive redistribution program.

Presumably because over a certain threshold, you're paying far more than you'd ever expect to receive back from the program in retirement?

Not saying I agree with it but that's my guess as to the reason.

I assume you actually mean "raise the retirement age"? Raising the retirement rate would mean paying out more money, not less.

Right sorry, raise the retirement age. Which is not good for people, but fits with the idea that people are living and working longer in general.

> The Board of Trustees of Social Security tells us that the program is going to completely run out of money within the next 15 years

Can you cite any sources on this? Im fairly certain it will not be completely out of money, but will be to a point where more money is going out than coming in.

The Social Security Trust Fund does exhaust it's surplus (if no additional changes are made to the system), but that reduces benefits to ~3/4 of those promised; benefit payments do not disappear entirely.

"In the annual Trustees Report, projections are made under three alternative sets of economic and demographic assumptions. Under one of these sets (labeled "Low Cost") the trust funds remain solvent for the next 75 years. Under the other two sets (the "Intermediate" and "High Cost"), the trust funds become depleted within the next 20 years. The intermediate assumptions reflect the Trustees' best estimate of future experience.

Some benefits could be paid even if the trust funds are depleted. For example, under the intermediate assumptions, annual income to the trust funds is projected to equal about seventy-nine percent of program cost once the trust funds become depleted. If no legislation has been enacted to restore long-term solvency by that time, about three-quarters of scheduled benefits could be paid in each year."

As long as the government continues to exist and has the ability to tax, Social Security will be around.



The problem with the US Social Security trust fund is that it's misnamed. It should be called the giant equity stash that the US Government can convert to bonds and borrow against. The fund should be flush with cash, however, that'd be fibbing. It would be flush with cash, if it weren't borrowed against for other things in one form or another. For example, the GW, Reagan, and Clinton used this to their benefit. src: http://www.nytimes.com/2005/03/08/politics/at-heart-of-socia... Given that these were bonds, the payments will come due back to the trust fund in one form or another....I'd suspect financed with more debt.

> the company will make a payment to a buyer’s student loans of as much as 3% of the purchase price, up to $13,000.

How does this make economic sense? It reminds me of the deals home sellers would make to prop up their numbers in '06/'07.

As a debtor, I would rather debt that can be discharged through bankruptcy, so there is incentive there to prefer this offer to that of another similar offer that doesn't include the debt transfer. In other words, there is benefit to both the borrower (a 'better' kind of debt) and lender (we sell something we might otherwise not).

Presumably because it allows buyers who would not qualify for home loans based on cash flow (impeded by student loans) to be eligible.

Or at least, that's my guess.

I know home loan standards are pretty static, so I'd guess it's to allow indebted students to qualify.

For the building company it's a 3% discount wrapped up in marketing.

Time spent being educated is not necessarily related to being educated.

> Millennials are the most educated generation in history. Yet there are record numbers of them working off student debts as waiters and bartenders, and supplementing their income on the side with ‘gigs’ (like being an Uber driver)

We're the most educated in history, but many people decided to use that education to learn topics that aren't lucrative/in demand. Personal responsibility plays in a ton here, and some people made bad decisions. It's still simple/easy to get a good education at a state school, entirely paid for by loans, and come out with a degree that will allow you to pay those loans back in a few years. People who plan accordingly benefit in a HUGE way from the availability/accessibility of student loans, the barrier to entry is that much lower.

As far as SS goes, I'd be happy to see it fail but I'm also happy to keep paying into it without a guarantee of return in order to ensure my parents generation doesn't find themselves destitute. There are so many ways to plan for your future, having the government come in and force you to participate in SS is far from ideal. Not sure how my fellow Millennials feel about that, though...

Law degrees used to be in demand. Then everyone went to law school. Now it's not in demand, because there are too many people with law degrees. Now you have people with massive law school debt making peanuts and all fighting for very limited amount of positions.

If everyone studied computer science, every single one of our salaries (save for maybe the top 5% of us, in terms of skills and experience) would drop significantly.

I know the absurd stereotype is that millennials are going to college and studying feminist underwater basket weaving, but there are many, many students who are chasing the "hot" new fields, only to find that they weren't the only ones who had that brilliant idea at 18 years old.

Many of my childhood friends did that with Biotech. When I was growing up, Biotech was The Hot Thing (TM), and it was going to change the world. Now the ones that didn't like it enough to pursue a Masters/PhD in it are struggling to make ends meet with a cocktail of multiple jobs. The happiest ones mostly ended up leaving to lower cost-of-living parts of the US where it's easier to find lower-middle-class employment.

P.S. Most of my friends grew up in families around the poverty line, so that'll affect my story.

So you call a millennial getting a degree not ‘personally responsible’? Disclaimer: anecdotes ahead, but I know many, many millennials who grew up hearing ‘Just get a college degree and you’ll be in good shape’ who did and aren’t, respectively. Not everyone is geared toward being an engineer or mathematician or scientist. For those who aren’t, and followed the resounding conventional wisdom to get a degree, largely got screwed. Full stop. Personal responsibility would hold water in a world where millennials gave up on the system and got screwed. This isn’t that world.

“Just get a college degree” means they weren’t listening closely. I heard to get a marketable degree.

I have friends with English degrees with no student loans that are happy. I have friends with English degrees with $150k in debt, not happy.

It depends on the degree. I'm a Millennial and got my CS degree for $15k, which was a smart investment (and make no mistakes, degrees ARE investments). At the same time I have a friend who is going into a few hundred thousand dollars worth of debt to get a PHD in History. That's not a good investment, when you look at time + money vs return.

"Just get a degree" is bad advice. I know electricians that make more money than me, and work shorter hours. "Get a skill" is good advice, and college is only one way of doing that. But you can't dismiss personal responsibility when it comes to decision making, both good and bad.

> I know electricians that make more money than me, and work shorter hours.

I don't know what you do for a living, but I'm guessing it doesn't involve contorting yourself into a pretzel inside a hot attic and twisting wires together all day. Electricians work hard and come home sore.

I sit at a desk getting carpal tunnel and fat. I've got respect for my buddies doing what they do, and being successful without a college degree. That's more or less my point, college isn't a good investment for everyone.

>Personal responsibility plays in a ton here

Except everyone is constantly told they need to go to college by authority figures as they go through the education system. There's also responsibility that falls on employers demanding college degrees for jobs that in no way need them, e.g., secretary.

STEM grads are only mildly better off. Turns out the sem parts of stem haven't experienced the same jobs boom:


> As far as SS goes, I'd be happy to see it fail

I wouldn't. If SS fails, there will be riots, if not armed uprisings in the streets.

>We're the most educated in history, but many people decided to use that education to learn topics that aren't lucrative/in demand,

People keep saying this as if it's true without citing anything regarding it. Is there any hard evidence this is true?

What's SS ?

Social Security ?

Social Security

social security

Welcome to Soviet Russia where you will meet engineers, doctors, and generally college level educated populous, as your waiters and cabbies.

How we learned from history.

This ignores $2.466 trillion of US treasuries and $1.771 trillion of Fannie Mae, Freddie Mac, and Ginnie Mae mortgage-backed securities owned by the Federal Reserve.[a] Although the Fed, as the US's central bank, operates independently of the federal government, its balance sheet should properly be consolidated. The largest financial assets owned by the US federal government are therefore US treasuries and government-sponsored-entity mortgage securities, not student debt.[b]


[a] Figures are as of November 2017. See page 12 here: https://www.federalreserve.gov/monetarypolicy/files/quarterl...

[b] Many people don't realize or understand that the largest creditor of the US federal government is the US federal government, through the Federal reserve. The US federal government currently pays interest on $2.466 trillion of treasuries to the Federal Reserve, which, at the end of each year, sends all that interest back to the US Treasury.

Anytime the US wants the world to be a certain way but just can't quite get reality to conform debt is our answer. Everyone should be a homeowner but for some reason isn't? Simple, just give them cheap loans for houses. Everyone should be educated but it doesn't seem to be happening? Debt time. Why do we do this? Because it allows us to pretend that complicated long-term structural problems are simple short-term capital problems. People just need some activation energy to get over the hump, that's all. We're addicted to debt, if we ever admitted that it's not solving these problems for us we'd have to contend with reality, and who wants to do that? Especially a reality as dismal as that of public education.

Not disagreeing with you, just adding: Debt is not inherently bad. If the concept of debt didn't exist our society would hardly have advanced in the last 2000 years. We owe a ton of our society's development to the fact that bankers exist, otherwise only a handful of people throughout history would have had the resources to build ships, open new businesses, build factories, new technologies, etc, and there would be zero competition.

Student loan debt has ballooned. That's because there are a lot of people going to college that really shouldn't be going to college. And yes, there's some greed involved too: people are willing to take out loans and pay for school, so the schools charge as much as they can get away with. But most schools (believe it or not) reinvest that money into better facilities in order to attract more and higher quality students.

The problem here isn't debt. There are people who want to go to college and who should go to college that need debt to get there. The problem is in the fact that people who should have learned how to weld in high school are pressured to go to college and find an office job, because we've told ourselves (or our parents have told us) that learning a trade is beneath us and that not going to college is awful (it's not).

The problem is that we have been running trade deficits for decades now, mean that most of the debt is spent on imported goods. This led to businesses with high profit margins that are designed to exploit debt, and the economy ended up being based on stocks going up for things like retirement (partly because other governments ended up buying US bonds). This is the main cause of things like Corinthian Colleges and ITT Tech going bad.

the article you're commenting on (this very article) makes the point that much of the debt has actually been spent on education so...

Well, it does actually solve the problem in the sense that it actually causes houses to be built and students to go to college. Probably this indicates the real problem is more about bad monetary policy and bad tax policy, not a fundamental shortage of resources.

Of course, it would be better to improve monetary policy rather than just making a bunch of dumb, risky loans leading to a dramatic boom and bust.

But that would require policymakers understanding basic macroeconomics, so don't hold your breath...

Is that really solving the problem though, or does it just give us houses no one wants to own and college graduates no one wants to employ? That's what it looks like to me at least. I don't think it's bad monetary or tax policy per-say, although those are bad, but just bad policy in general. But the badness of the policy comes from a fundamental over estimation of what the government is capable of doing for a society.

Well, to some degree, people probably do want to live in big, new houses. There's also probably some "real" underlying demand for an education, outside of people needing it (or believing that they need it) to get a good job.

But the point is, regardless of how much people "actually" want them, it is in fact technologically and ecologically possible to provide most people in the U.S. with these goods. (The evidence is that a lot of people do in fact have these things, even if on paper they are underwater on a mortgage or saddled with a big student loan.)

The bad policy is that by subsidizing and insuring these loans / mortgages far too cheaply, the government is driving up demand, and as a result people buy a bigger house than they need, or get an education that isn't useful for getting a high-paying job.

If the government stops subsidizing mortgages and student loans with bailouts, insurance, laws preventing default, etc. the result will probably be

1) the cost of a college education goes down and also that less people actually go to college 2) people don't buy as many homes and buy smaller houses than they otherwise would have

If you then want more people to have houses, education, healthcare, food, etc., whether or not they are able / willing to sell enough of their labor to pay for these things themselves, the next step is to solve wealth inequality.

We could probably fix wealth inequality with good monetary policy (e.g. NGDP targeting) and "taxing the rich" in a sane way, e.g. with land value taxes, luxury consumption, VAT taxes, etc. After that, you're probably done, but for the remaining poor, the government can just give them cash, e.g. basic income, instead of trying to subsidize a million different services like healthcare and education and homes, in which case the subsidies end up in the pockets of doctors and administrators and landlords.

Okay you piqued my interest... "bad monetary policy" usually means we should be on the gold standard, but I've never heard that before as a solution for student loans. What are you proposing is the monetary fix?

A gold standard is terrible monetary policy, even worse than the status quo.

Good monetary policy would be the fed doing NGDP level targeting a la Scott Sumner: https://www.mercatus.org/system/files/NGDP_Sumner_v-10%20cop...

Monetary policy only goes so far though, if you actually want to distribute resources in an equitable way, you probably also need good tax policy.

Good tax policy would be taxes which decrease wealth inequality (e.g. luxury consumption taxes, land value taxes).

I don't think the Mercatus Center is the best place to look for good or sincere ideas on how to distribute resources in an equitable way

Rampant inflation would fix those student loans real quick. Ditto for discharging the crippling mortgage payments and credit card debt.

Not suggesting I recommended it but it is an option for an across the board sweep.

not OP, but taking a stab, since I agree with their assessment:

bad monetary policy, in regards to student loans, means subsidizing them in two ways (at least):

1. paying the difference in interest rate compared to going to a regular bank. I can get student loans w/3% interest, but a bank wouldn't give me that money for less than 7%.

2. Making it illegal to disperse student loans in bankruptcy.

Both of these are monetary policy decisions that "hide" risk.

The higher interest rate is to compensate for the riskiness of the loan, while making loans illegal to disperse is the gov't response to the risk.

both of these will hide increasingly large amount of risks, where everything looks like its going fine, until it will all fail, catastrophically.

The politicians will claim no one could have seen it coming, but if they'd not allowed the risk to be so hidden, they'd have seen the institution crumbling decades before.

edit: formatting

> Why do we do this? Also an issue of framing. Wrong metrics.

With your framing above, it was "everyone should be a homeowner" and "everyone should be educated"... well we did that. Reality conformed. Just at tremendous cost and risk.

The issues are of course way more complex than "# of ppl who own a home" and "# of ppl with a degree"

So the question, then, is how do we use instruments of governance to move complex systems in the direction we think we want.

This is complicated by, among other things: 1.) the fact that politicians are really just optimizing for "signaling" that they are fixing things rather than tangible results. 2.) long time horizons on these issues clashing with shorter time-horizons of political attention spans and our capacity to even reason about long-term things. etc...

If reality had conformed the rate of homeownership in The US wouldn't have been declining since 2008: https://imgur.com/a/O2uF8

This isn't a moral fault of Americans as much as it is effective lobbying and marketing by the financial industry. The government subsidies student debt and mortgages, which the financial industry trades and collects fees for servicing.

Corporate debt is tax deductible, for terrible economic reasons. Why should raising money through debt be tax deductible, but not through selling equity? My finance prof. told me these were ultimately the same thing. One kind of transaction has a strong lobby behind it. This causes all kinds of problems of excessive leverage in our system.

You forgot to mention the cops. Cops and debt together are the United States solutions to all problems.

US government backed student loans were a huge mistake.

We needed something like rent control enforced on public universities, for government backed loans. But we didn't.

So it created a situation that caused an enormous amount of millennials to be taken advantage of by universities and colleges. Those universities and colleges pumped full of government loan cash became increasingly predatory. They increased their administrative costs, they increased their tuition costs, and they lured unsuspecting teenagers into taking enormous debt for worthless degrees like gender studies over engineering.

This has been a catastrophe, that will be used as a case study of unintended consequences.

The extreme amount of student loans has lead to extreme unrest, unless action is taken quickly it will only get worse. We see it in the rise of the alt-left and alt-right fueled by extreme fanatics in desperate and angry situations.

Well, rent control isn't exactly the correct option.

Econ 101: if you want the price of a 'product' to go down, increase supply.

The correct thing to do is to provide more supply (full ride public institution, paid for by taxpayers at government run community colleges) and focus production on fields valued by society.

College degrees are largely positional goods. A good chunk of the value of a college degree is that you get hired preferentially over an otherwise equally qualified candidate without a degree, or with a less prestigious degree.

The US higher education system is an excellent example as to what happens when you subsidize positional goods. Daycare workers and firefighters are starting to be a college-degree-required position. They're not there yet, fortunately, but it's absolutely ridiculous.

The solution has three parts:

1. Expand the examination system used in places like actuarial work and civil service to encompass a broader range of skills.

2. Declare a student loan debt jubilee.

3. Add a "don't ask, don't tell" policy for college degrees, or otherwise shut down the ability for college degrees to matter in resumes. Banning colleges and other organizations from confirming whether or not a student actually got a degree is a good start.

>worthless degrees like gender studies

Worthless eh? I bet if companies Uber hired some of these gender studies majors they might not have fucked up?

I can't tell if you are joking, so I'm taking it seriously.

Uber's human resources and or lawyers should have caught many of its missteps. Common undergrad degrees for HR being in management, business administration, and related business degrees. Lawyers are well lawyers.

Gender Studies doesn't prepare you for business as well as an actual business related degree, it prepares you for a mostly academic career which has limited spots.

That being said, even STEM and business degrees are worth less and less as competition increases. You now need a degree and often years of experience for jobs.

The only thing that really angers me is charging 60,000 dollars for a gender studies degree, and having a student take loans for it. 1/100 might get lucky and work at a big tech company as a tech evangelist, but it's not sustainable.

We need universities to be far more accountable about what degrees actually lead to jobs.

I feel like you're missing their point. You can make the case that a gender studies degree prepares you for a mostly academic career only insofar as companies aren't creative enough to find a way to use the unique skills that someone with a gender studies degree has developed.

Maybe Uber wouldn't have had the toxic culture they ended up with if they had hired conscientious people who have spent time studying things like how gender power dynamics play out in the small - and empowered them to speak - instead of relying solely on business graduates.

Go speak to a gender studies major and you'll find out.

I'm very glad I'm not a student in the USA. In Germany, almost all universities are owned by the state, which means study fees are about 700€ per year - transportation ticket already being covered. And if your parents have low income, the state will give you a grant of which you'll have to pay back only by half. I know that this might be a unpopular opinion over here, but there are a lot of fields which are important for a society while offering a relatively low income. In USA's system, these become luxury goods. Fields like Ecology, philosophy, history, education or cultural studies suffer. I find the idea "it doesn't yield a lot of money, thus it's useless" weird, but that might be a cultural difference.

To be fair to universities, at the same time that happened, states have been decreasing funding. Also, topheavy administration is everywhere, not just education, part of the unnecessary MBA-ification of everything. And there would be no demand for loans if corporations weren't trying to offload all their employee financial responsibilities in every way possible: just as companies are reclassifying everyone as consultants and freelancers, and decreasing everything to part-time, they stopped seeing themselves as providing career training to anyone, expecting people to do that themselves at universities and through unpaid internships.

So I wouldn't blame much on US backed government loans. The US government could offer free loans for people wanting to get Justin Bieber tattoos, and it would increase tattooing I'm sure, but wouldn't cause a generational economic crisis.

Notwithstanding entirely valid concerns about student loans, this is pure clickbait. The feds also own 30% of the nation's land (640M acres), and have the exclusive right to collect $3T+ per year in taxes (not to mention they can literally print dollars).

AFAIK land is not used for collateral to estimate credit worthiness. Taxes are, but it's understood that the figure is ballpark and subject to economic fluctuations.

A portfolio of loans, however, can impact the credit worthiness of the borrower if the default rate exceeds historic expectations, which is what US experienced in 2008 with mortgage-backed loans.

What is the impact to the American economy when the Federal government has to write down the value of over half its assets as the average lendee dies without paying?

Nothing? That person was also collecting social security and medicare if they were old enough.

And if they weren’t they don’t have to account for that unfunded mandate.

One thing to keep in mind is that "assets" are far from "spending". Governments generally do not accumulate assets, everything they collect is reserved for spending (besides some operational accounts and things like foreign reserves). The student loan program is an exception and so figures heavily in this stat.

Yes, the title makes it sound like the US government is in a dire situation because it has its solvency tied to students paying back their loans...

But mostly the government is a borrower of cash and not a lender.

Here the government is indirectly financing people's education by offering cheaper loans than the market would give. There is not much to talk about...

The rate that the government can borrow at is determined by the quality of underlying assets.

US 10-year note is 2.58% at the moment, but Argentina's is 7%.

Well the US is somewhat special in that the dollar (or currencies tied to it) is used by 70% of all global transactions.

The other day a minister in China floated the idea of buying less US Treasuries. It became apparent that there just weren't a lot of other instruments available with which to invest that sheer volume of money.

Government owns a lot of land, and land is most certainly an asset. Does it figure into these stats?

It would be rather deceptive to craft your definition of asset to exclude the most important one.

These are so-called "financial assets" (which I'm guessing are a relatively small portion of the US government's total assets).

Healthcare is a much bigger problem for the government than student loans. The federal government spends about 1 trillion per year on healthcare, while the total of all student debt in the U.S. is around 1 trillion. This is true on a societal level too. U.S. healthcare spending is 17% of GDP, up from 5% in the 1960s. The problem with student loans is that the burden falls mostly on the least financially secure people. This is as opposed to Medicare/Medicaid where the government tries to foot the bill rather than allow people to get in massive debt.

Thanks to baby boomers for depleting resources of this nation and now younger generations are stuck in this financial mess. Had they been more visionary with better overlook then today there would have been better opportunities for younger generation to earn and pay back those loans.


Baby boomers were kind of stuck with a pretty rough demographic problem. Workers-per-retiree is an incredibly important number, and it's been dropping steadily due to declining birth rates and extended longevity in the West.

And roughly speaking, there are two ways society can turn current productivity into future support for retirees. The first is to forgo consumption of current production in exchange for a promise of future consumption of others production - this can either be implicit through a tax-and-distribute scheme, or directly implemented through debt. Retirement saving in general is the latter, and increased savings rate leads to savings gluts which cause cheap debt which forces the price of debt-financed goods up to make the market clear. This, in short, is why college is so expensive: every creditor needs to find a debtor, and Grandma bought up fixed-income products.

The second way to use current production is to leave easy-to-collect natural resources like oil in the ground, use current productivity to fund current consumption instead, and collect those resources later. Everything else is impractical on a society-wide scale.

Let's not be too harsh on the baby boomers, they were trying to create a better world for the next generation, they chose chose to do it via an unsustainable system that relies on top-down direction of the economy using inappropriate tools. Can you blame them for that? Top down worked great at things like rebuilding europe after a war (admittedly an eminently unfalsifiable task)...

True, there were minority voices clamoring that this would result in ruin, but to be fair there are still well regarded "smart" people who argue that the problem for millennials is that those people in charge just didn't do it ENOUGH.

> they were trying to create a better world for the next generation

I don't see a lot of evidence for this, except perhaps Reagan's program of deficit spending on an arms race to bankrupt the 'evil empire'. Maybe people should be forgiven for believing in the trickle-down lie once, but it's now simply a transfer of wealth scam.

Well the current neoliberal program of low or negative interest rates to stimulate economic growth and 'reinvestment' is basically trickle-down, too, just in a less direct fashion plus actively impoverishing the poor (instead of merely taking less from the rich). So it's basically still believed - just as a more obfuscated scam.

So here's the US financial accounts report from the Fed (the source listed): https://www.federalreserve.gov/releases/z1/current/html/defa...

I don't see anything in that report that confirms this.. did I just miss it? where did the data come from?

Would it be better if banks owned all the debt? I think the really bad statistic is just how much student debt there is.

Progressives in Oakland want the city to create a municipal bank. If they do, maybe progressives will then complain "Y% of Oakland's assets are mortgages and small business loans."

For any level of student debt, I think it is obviously better that the government own a lot of it, as the payments the government receives can be used for spending. The payments banks receive go to shareholders. In fact, given the government can borrow money at 2% while student loan rates are like 4-8%, it might not even be a bad idea to have the government issue treasuries and buy more student loans. Administratively, perhaps this would be bad for reasons I can't guess ex ante, but off the cuff I can't see why it's bad for the government to own lots of student debt, especially when government is what enforces the debt contracts (siphoning off your wages in the event of default, etc).

One could argue that the government should just cancel all or most of that student debt. Maybe so, but if that would cause the government to forgo $X billion in revenue every year, I think it would be better to just have another $X billion in spending. However, if the $X billion would just go to more tax cuts for the super-wealthy then perhaps it would be a good idea.

>In fact, given the government can borrow money at 2% while student loan rates are like 4-8%, it might not even be a bad idea to have the government issue treasuries and buy more student loans.

If 40% of the loans are in default and/or the borrowers aren't making payments for some other reason (which is the actual case) it would be a very bad idea.

It is possible to choose the loans. The default rate for for profit colleges is high, but you don’t need to buy those loans. https://www.brookings.edu/research/the-looming-student-loan-...

This is such a huge problem and it's so easy to see the collapse over the horizon.

There are just a few small differences between education today and education 30 years ago. Off the top of my head, you can go online today and see lectures for upper level MIT courses for free... Literally, the best university in the world has lectures available for free. And instead of learning the dewey decmial system and taking 10 books and flipping through looking for a specific answer, you can google any specific topic and immediately get relevant information. And you can go on reddit.com/r/askscience and ask questions to experts in any field. Just a few small differences.

What the hell are people paying for, then? The "college experience"? Does it really cost tens of thousands of dollars to validate that someone has adequately learned from consuming educational material? Schools today have dorms that look like luxury hotels and the best gyms in the country; what the fuck is going on?

Meanwhile, primary education hasn't fundamentally changed in 100 years, outside of a select few schoolboards adding iPads to the classroom and thinking to themselves, "Yes, now we're modern." Nevermind that we still exclusively group children by their age group rather than their educational progress until they're 18. Nevermind that we have never questioned the idea of teaching children 7 different topics every single day, wasting extraordinary amounts of time with context switching, instead of focusing on a topic for longer periods (as it works in the real world.)

I just do not understand how this debt is going to be managed when (not "if") the education system is fundamentally disrupted. Economists more or less universally agree that federally guaranteed student loans are unsustainable and make education more expensive. So what's taking so long?

Position Requirements

* Bachelor's degree in CS

As someone without a degree, there are quite a few positions unavailable to me. Some positions state a degree is required even though they would take an exceptional developer, but many others are very strict and require the degree. The pedigree of the employees can be important when the company is in the market to be bought or sold.

The bachelors isn't important for it's inherent value, only as an arbitrary way of ranking people in a rat race.

The bachelors isn't important for its inherent value, only as an arbitrary way of ranking people in a rat race.

Debt is the American way, it has been since the very beginning. When George Washington was elected President he was so broke he need a loan to get from Mount Vernon to NYC for his own inauguration.

Oof. What happens when a huge chunk of these default because educating everyone doesn't magically create jobs for everyone?

They're protected from defaulting by law, because they can't be divested by bankruptcy.

... which merely means you need to calculate where the knee in the curve of issuing them was, extrapolate to life expectancy, and know when to cash out. Convenient!

Most of the student loan debt is owed to private creditors and it is the federal government that insures these loans. If a student doesn't make payments, the lender gets a guaranteed bailout by the government (no need for congress to step in like they did for the banks and auto companies). Basically, all the lenders are incentivized to give out as much money as possible, which incentivizes universities to raise tuitions, all because the US government decided to give lenders free money to play with at the cost of those who take on the debt and the ones footing the bill, which are usually the same people.

How is that bailout guarantee structured? Fixed pool, or the money will just come from "somewhere?"


> They're protected from defaulting by law, because they can't be divested by bankruptcy.

True. I think most people don't realize this. Government programs push young, naive people to borrow to pay for degrees that are unlikely to have positive ROI, and then if life doesn't go as planned there is effectively no bankruptcy protection.

> you need to calculate where the knee in the curve of issuing them was, extrapolate to life expectancy, and know when to cash out.

Sorry, what does that mean?

Debt doesn't pass on to kin, any that can be is paid off by your estate and what is left is written off.

You could theoretically calculate when the bubble is going to pop but figuring out when the majority of loans was issued, life expectancy and some financial details on student loan recipients. With details along these lines you can theoretically calculate an approximate picture of how much student loan debt will be written off and when.

I believe what they were implying was that such a bubble can only "pop" if a bunch of the debt is discharged at once, which in this case means a bunch of people who still owe student loans on their deathbed die with more debt than assets. The commenter suggested trying to figure out when this would happen, and making sure one is ahead of it.

Correct. The question is what, precisely, you'd use to bet against the student loan market. Since of the people who "successfully" shorted real estate found themselves running into trouble cashing out because the same institutions they'd bet against got hammered when housing popped and themselves defaulted. How do you successfully bet against the stability of the world-stabilizing fiat currency---the one other countries jam under their mattresses to back-stop against domestic economic turmoil?

> and making sure one is ahead of it.

I was with you till the last bit. How does one "keep ahead" with that timescale?

Calculate where, approximately, we get to the point where the average issuee will not be paying the value of the loan back in their lifetime. That's the point where the average loan is not worth is face value and a housing-style mass write-down is imminent.

Well, given the only way to escape student loans is death... good luck defaulting?

You can't get blood from a stone. If they don't have the money, they don't have it.

Right, and the gov't isn't exactly waiting on this money for solvency. This debt is just going to stick around for decades until people start to die.


The banks that loaned out all that money will need massive bailouts or else shut down.

Let’s be clear, students will NEVER be allowed to default these loans, nor should they. They must either pay it or take their debt to the grave and pass it down to their heirs.

Please don't post ranty flamebait to Hacker News. Divisive threads are low-quality enough as it is.


Wait, what? Since when is debt passed on to heirs? If I die with credit card debt, that debt dies with me. My kids don't have to pay my debt. Any assets I own will be sold to help pay off my debts, but if the sale of my assets isn't equal to or greater than my debts, the debt holders have to write off that debt.

It isn't, student debt dies with you too, or at least federal debt does.

> Let’s be clear, students will NEVER be allowed to default these loans, nor should they. They must either pay it or take their debt to the grave and pass it down to their heirs.

You wanna try that again with a little empathy?

I have no empathy for bad short term thinking.

I could not afford to go to the college I wanted to go to, so I went to a cheaper one I could afford but no one really gives a fuck about. However, it left me with no debt, straight after graduating.

Today, as people struggle to pay off loans for universities they once boasted proudly about, it’s clear I made the right choice.

I did the same thing most of a decade ago. That pathway has unfortunately closed since the cheap college i went to tripled their tuition.

>pass it down to their heirs.

AFAIK, (and I'm a pretty ignorant fellow) debt in America isn't passed down, the creditors just take what they're owed out of a dead person's estate before its divied up by a will. So there could be a big "pop" if a bunch of people with lots of student loan debt and no assets die.

the creditors just take what they're owed out of a dead person's estate

You mean the estate that contains value I would otherwise get the full value of were it not for the student loan debt that was taken out? The debt is most certainly passed down, it's just abstracted away a bit. The only way the debt doesn't get passed down is if the debtor dies penniless.

Another way to put it is if the creditor extracts anything to pay that debt after the debtor dies, then the debt is most certainly passed on to someone because that money didn't materialize out of nowhere.

No, the money materialized from the lender when the loan was taken out. Some of the money might be recouped before or upon the death of the borrower - some might never be recouped.

> Let’s be clear, students will NEVER be allowed to default these loans, nor should they.

I think you mean “discharge in bankruptcy”, not “default”; default is what happens when you miss a scheduled payment; lots of students do default.

Also, they are dischargeable in bankruptcy, though the standard is harder than with other debt.

> Let’s be clear, students will NEVER be allowed to default these loans, nor should they.

Why not?

Because most of these students will likely default. And once the tax base drops, other government budgets are impacted resulting in a net loss for society. The alternative is the government only offers loans to students majoring in fields that lead to jobs capable of repaying.

Because that was the deal.

It is, of course, possible for the federal government to craft a deal that's actually bad for the American people.

When discovered to be so, it's also possible to alter the deal.

I agreed to this deal and I feel like I do need to pay off the debt, but I'm lucky in that I have a job that will allow me to do it the normal way if the crypto market crashes (heaven forbid, plz). What about the 18 year olds whose helicopter parents never allowed them to imagine a filthy reality like failing to go to college?

Regardless of whether that kid should have been free-thinking enough to see outside their existence's bubble, it's irresponsible to exploit their ignorance for profit. Most of these kids haven't ever seen a debt-ridden life like they're signing up for. I grew up with parents who ranted and raged about debt, and I still did it. Are you sure the problem lies with the kids signing the papers (I guess clicking the "Get your loan here!" button these days)?

The deal is that student loans in chapter 7 bankruptcy can only be discharged for undue hardship. Chapter 13 can't discharge student loans according to my understanding.

Last time I checked, "the deal" as it were indicates, in writing, that student loan debt from the federal government is forgiven on death.

1) The loans that are being discussed are not owned by private banks, so even if 100% were defaulted there would be no bailout of banks needed.

2) There are no blood debts in the US. Debts are NOT passed on to heirs like property.

>2) There are no blood debts in the US. Debts are NOT passed on to heirs like property.

Not yet, but given the steady rightward shift of American politics I can see it happening in the future.

The number one asset is the ability to tax an economy of $20 trillion(ie. 320 million Americans) to extract $3.7 trillion annually(2016). Holding the equivalent in 3% 30yr US bonds to give you that income would be about $125 trillion dollars. So this asset is 100 times the student debt one.

is this for real? does anyone have any info that proves this right/wrong?

Almost assuredly false. The Federal Reserve balance sheet is US treasuries and mortgages, and Fannie Mae/Freddie Mac are mortgages as well. Probably not a complete data set.

If that's the case, shouldn't this be flagged?

Also, you mentioned the Fed, which isn't the same thing as the US gov't, right?

I don't really want to go down the conspiracy theory rabbit hole of who does what at the Fed but it's main decision makers are government appointees, it was established by an act of Congress, and it remits its profits to the Treasury.

Ginnie Mae is part of the government as well (also mortgages). Fannie/Freddie are GSE's but currently under directly government control since the financial crisis.

I'm not sure how the accounting works, but they are somewhat autonomous and have their own balance sheets.

It's fascinating accounting-wise. Matt Levine has a good write-up here: https://www.bloomberg.com/view/articles/2016-08-08/fannie-an...

The interaction of the accounting rules and the new tax plan was fascinating too because the value of their deferred tax asset changed:

> “A reduction in corporate tax rates would require us to measure our net deferred tax asset using the new rate in the period in which the rate change is enacted, resulting in a one-time charge through the tax provision in the period the tax rate was changed, ...”

More here: https://www.housingwire.com/articles/42130-trump-to-sign-tax...

US treasuries and mortgages are liabilities, though, right? This is the asset side of the balance sheet.

Treasuries are liabilities when the government issues them and assets when the Fed holds them. One person's liability is another person's asset.

Right, and the graph was about the assets of "the US government", not about the Fed.

This might be a bit idealistic and not align with US principles - but doesn't this actually show it would be much smarter to keep education free for everyone and just straight up pay for it with a higher taxation?

These numbers look to me a bit as if gov is paying anyway, but with the current model it gets the money back only (eventually) after the citizens education, and pushes a lot of people into debt.

All of that for essentially avoiding that one person might add a few $$$ to the pot that could benefit another...

I know US policy sees the self-responsibility of the individual completely differently, but having grown up in Austria and profited from top education that is _naturally_ free for everyone, all of this student debt stuff looks like madness to me.

Trivially solved by magically declaring it off the books as was done with mortgages.

This isn’t actually a meaningful number, The far more important number is the converse: what percentage of total student debt (and total residential mortgage debt) is held by the US government? Almost all of it.

Those “markets” only exist because the government is the industry, and everybody would save money if the govt cut out the intermediaries (banks) who are collecting huge fees for nothing.

I have been skeptical of the real "value" of cryptocurrencies (outside the technical ability to allow for value transfer, which does not necessitate the coins having value inthemselves), but assuming this is true I have a lot less faith in dollar bills and the fact that they are backed by the "full faith and credit" of the US government. If the student debt bubble really does pop, the government (and thus all of us tax payers) are going to be the ones holding the bag.

In what sense is it a bubble? What assets are being bid up by enthusiastic investors and could suddenly collapse in value?

The fact that private lenders are incentivized to give out more and more leads to universities charging more and more. Even with all the money being spent, the same (or in some cases less) level of education is being provided. On top of that, how do you repossess someones education in the case of default? You can't, so the government can do one of three things:

1.Pay off the loan holders (by printing money, huge inflation) 2.Allowing indentured servitude 3.Debt forgiveness (now all the lenders are out of money)

Sadly, I think the 3rd option is the best one, but is by no means actually a good one.

Private lenders are tiny part of the market in student loan originations, even a smaller part in undergradatute loans.

The federal government is the overwhelmingly dominant player and they set the terms by fiat rather than any kind of market.

The “lenders” are the USG, and the cost of capital is only the imputed inflationary effect of transforming a loan into spending. Given the experience of the last decade those inflationary pressures may well be smaller than we had thought.

In the same sense that the mortgage industry was a bubble. For mortgages, the investor lent money to home buyers and expected a long-term payment schedule. The houses were being bid up.

If you assume student loans are a bubble: the long-term earnings potential of students is being bid up (and will collapse, leaving the government with lower worth/worthless assets.)

This usd has entered the economy via universities. The inflation is already out there. The issue comes when the loss is chrystalized. As in 2008 the state is filling in a hole not building a hill.

Aren't they always the ones holding the bag? Auto industry bail out, bank bail out, insurance agency bail out from Katrina. This responsibility is what stabilizes the world's currencies I suppose.

In all of those cases there was legislation passed after the crises... in this case, the US government has already guaranteed all of the loans and has no way of getting out of the without the US government defaulting. That only leaves room for printing money, which hurts all holders of US dollars.

> the US government has already guaranteed all of the loans and has no way of getting out of the without the US government defaulting. That only leaves room for printing money, which hurts all holders of US dollars

If college students are defaulting on their student loans en masse that means we’re in a recession. Recessions are deflationary. Monetising the debt would just take the place of central bank bond buying, except in a more egalitarian way.

I don't think that changes the premise of my point which is the government supports all situations where a bail out is needed.

That looks like just intangible assets. It doesn't seem to include land, buildings, vehicles, vessels, etc. The US Government is the largest landholder in the Western states. A single aircraft carrier is worth billions. Also, back when I took out a student loan, the government was merely a guarantor, which would be a liability. I wonder if they offset that. I think they need a more precise source citation.

This chart is very informative. It looked a bit familiar to me and it reminded me of this link: https://www.advisorperspectives.com/dshort/commentaries/2017...

The charts look a bit too similar...

Seems like a fairly safe investment since even bankruptcy doesn't take care of them... Until the Government will have to forgive all of those loans...

how does this bubble pop? isn't this debt something you can't default on?

Just because someone can’t default on their loan doesn’t mean they can pay it.

It’s also not hard for me to imagine, in the near future, a social media movement like “don’t pay back your loans.”

ya, I had this thought as well, but then the IRS garnishes your wages until you die. So how does it pop? Seems like a lot of people would have to go to jail or something along those lines for it to actually happen?

They can only garnish your wages if you’re a W2 employee, or use the banking system. Contractors need to pay their own taxes, and the IRS can’t garnish what it can’t see.

Gig economy + cryptocurrency + social media + student loan debt could lead to some very interesting times.

“Interesting time” as in jail time for money laundering and wilful tax fraud?

If 80% of millennials collectively decided not to repay their student loans, there would not be enough space in prison for all of them.

You can die without enough assets to pay off your creditors, debt doesn't pass to kin so anything remaining is written off.

Assuming people have to repay it, it'll be a huge drag on the economy, for the entire lifetime of those millenials. Just think, for the next 70 or so years, those millenials will be spending what 10 to 20% or more of their paycheck on those loans. So, it won't pop, it's more like a big slow deflation. It's the same for the gov't debt too.

Even if they millenials can get out of paying for it, it'll still be passed on to tax payers, so the effect will be the same, a very long period of reduced consumer spending, leading to less economic growth.

You can still default on student loans, you can't discharge them.

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