Posted on 03/27/2021 8:30:34 AM PDT by Brian Griffin
I will compare the several years after graduation debt burden of a college graduate of 1979, myself, with that of a fairly recent college graduate, each recently having purchased a house a few years after graduation using a mortgage.
I left college owing $1,500 on a 5-year 7% bank-issued student loan. This would have had a monthly payment of about $29.70.
I also took out a total of $3,500 in National Defense Student Loans at 3%. These would have had a combined monthly payment of $33.80.
In 1982, I bought a house with a $72,500 FHA mortgage for 30 years at 12%. The principal and interest (P&I) were about $745.74 per month in total. Recent college graduate salaries in 2021 would be about three times more than in 1982, so the 2021 salary inflation adjusted P&I would be about $2,237.23.
In 2021, a house comparable to that I bought in 1982 would cost about four times as much, giving about a 2021 mortgage amount of $290,000=4*$72,500.
The principal and interest on a $290,000 3.2% 30-year mortgage would be about $1,254.16 per month in total.
The salary/house price inflation adjusted monthly mortgage savings a recent college graduate gets when compared to myself would be the difference between $2,237.23 and $1,254.16, or $983.07.
If my $29.70 bank student loan payment was adjusted three-fold for 1982-2021 salary inflation, it would be about $89.10 in 2021 dollars.
If my $33.80 federal student loan payment was adjusted three-fold for 1982-2021 salary inflation, it would be about $101.40 in 2021 dollars.
The debt burdens of my two student loans, $89.10 and $101.40 monthly in 2021 dollars, would come to $190.50 monthly in 2021 dollars, approximately.
The recent college graduate/mortgagor might have to be paying $190.50[my 2021 dollar student loan burden] plus $983.07[recent college graduate's mortgage savings in 2021 dollars]in student loan payments alone, for a total of $1,137.57, monthly, to have a student loan + mortgage P&I debt burden equivalent to that which I had in 1982.
The most typical federal student loan has I believe a term of ten years and an interest rate of 4%. The monthly P&I on a $10,000 ten-year 4% student loan would be $101.25. Therefore, a typical recent college graduate/mortgagor would have to have about $10,000*($1,137.57/$101.25)=$112,352.59 of 4%/10-year federal student loans to have the modern equal of my total 1982 student loan/mortgage P&I debt burden.
Inflation adjustments for salaries and housing prices will vary by field of expertise and area, so the multiples of three and four I used are merely representative.
Bear in mind that the federal minimum wage was $2.30/hour when I was in college. When I bought my house, the federal minimum wage was $3.35/hour. I believe the Florida minimum wage is now $11/hour, or 3.28 times the federal minimum wage back in 1982. My nearest non-unionized grocery store pays over $14/hour as a minimum. The $15/hour minimum wage in some major cities that will probably become federal law in most of the US in 2022 is 6.52 times the federal minimum wage of $2.30/hour I "enjoyed" my college years. My college debt of $5,000 multiplied by 6.52 is $32,600.
College graduates may feel that they are somehow especially burdened by debt, but tradespeople typically pay far more for a new pick-up truck in 2021 (often over $40,000 new) than in 1982, or 1975 (roughly $4,000 new). And tradespeople will typically have to buy several expensive pickup trucks in their career years as opposed to a one-time college education. A tradesperson can't carry a cement mixer or a professional lawnmower on a bus or subway car.
I think that’s going to propping up the existing galleries, etc. And, I’m betting some nice upgrades and bonuses to the folks already there.
My daughter took a National Merit Scholarship for a full ride. She met her husband at college who was also on the scholarship. Together, they had $23,000 in loans for grad school. They paid those in less than 3 years.
There are schools that will throw money at kids if they have good grades and test scores. National Merit comes from PSAT score in Junior year. If your kid didn’t get to take it, google Alternate Entry. If your kid is a sophomore have him study for the SAT this summer. Some colleges will give full rides, others full tuition for a National Merit kid. Even without national merit, your kid can get big money from colleges for high test scores and grades.
bookmark
In-state schools are running between $20-30,000 a year. Room and Board can be $8-18,000 a year depending on the college and area of the country. Some privates have hit $80,000 this year, with the expectation that in a decade it will top $100,000. That’s crazy.
If you kid has good grades and decent test scores there are some schools that will give scholarships for that. But test optional may kill that golden goose in the next few years.
But my medical school was $1600/year and it's now $100 000/year, so a summer job is just not going to get it done.
Well, if they can't get married and form families, it's too bad for everyone, you included, unless you are lucky and catch cancer before everything collapses.
The reason college costs rose at an order of magnitude greater than rate of inflation is precisely because the government took over student loans and handed them out like candy.
The universities could charge anything they wanted because the dumb 18-year olds they were exploiting would borrow whatever it took and hand it over to them.
I am all for student loan forgiveness if it comes out of the endowments of the universities who exploited them.
It's worse than that.
My fourth kid is graduating this May, I'm 0/4 with student "loans" so far (but I have 3 more to go). My third child, however, was "granted" a $5000 loan she/we never applied for or requested, it took almost a year to get it off the books, the college office looked at me like I was insane because no one had ever refused the "grant" before, and, after all, "no payments for four years!"
There's a lot of talk around here about lazy kids, irresponsible kids, stupid kids, etc., and they exist for sure, but the FedGov to college money pipeline has become very slick, totally non-transparent, you can walk into orientation and walk out with a loan that you've been told is a scholarship. All in all, this has turned into a FedGov subsidy for political indoctrination that winds up tagging the people least prepared to deal with the scam with huge bills they are not prepared to pay.
I agree that ending Federally guaranteed student loans which are not dischargeable in bankruptcy is an important first step - but the massive money tide is flowing the other way and I don't see a reversal any time soon.
You’re all a bunch of suckers. .........The above joke was in jest....
And we all love you for it. /sarc
And Thank You for your service./ for real
My son was at the hihh school skill center, the electrical contracter went there and recruited. Anyone should be able to contact an electrical contracter in your area and they will help get started.
I completed my BS & MBA in 80s via student loans, scholarships & part-time positions as undergrad teacher/tutor...all while being a single parent with two pre-teen daughters.
Somehow I managed to earn national academic honors and eventually repaid the loans in full + a whole lotta interest.
That said...
I truly despise the movement to forgive student loans as the “students” were old enough to grasp the economic impact when they received their loans. It was not a gift from taxpayers.
Thank you for the info. I will let him know.
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