THE MORNING RANT: Student Loan Defaults and the 40-Year-Old, First-Time Home Owner

Young Americans are saddled with extraordinary amounts of the worst type of debt, student loans, and it is one of the reasons that they are delaying the most-important debt they can take on, specifically mortgage debt.

There are two debt trends that intersect at about the age of 40. This is the average age now of first-time mortgage borrowers, and it is also the average age of those defaulting on their student loans. There is correlation between these two problems. In 1990, the average age of first-time home buyers was under-30.

Home ownership, even with a mortgage payment, builds wealth. Unsecured student loan debt that discourages home ownership impedes wealth-building.

According to the Liberty Street Economics website published by the Federal Reserve Bank of New York, the average age of those defaulting on student loans is now 39-years old. But unlike traditional bankruptcies which relieve the debt burden, student loan debt is never relieved. Its default is subject to garnishment of wages, social security payments, and tax refunds. It also soils the credit rating of those defaulting, making it extremely difficult to ever obtain a mortgage.

There are so many variables at play in this mess, including the suspension of student loan repayments during the Covid panic and President Biden’s campaign promise ”to forgive all undergraduate tuition-related federal student debt from two-and four-year public colleges and universities.”

How to fix the student loan debacle is complicated, but one place to start is to immediately stop fueling the problem. Let’s stop loading up today’s 18-year-olds with crushing debt that enriches bloated colleges, many of which are left-wing indoctrination factories.

If universities had to provide guaranies for the student loans from which flow the tuition and fees the universities collect, they’d necessarily become more interested in limiting their dollar exposure. Even more important, they’d want to ensure that their students are getting degrees that lead to income-producing careers that will make possible repayment of their debt.

If the universities were to choose to start restricting credit-access to incoming students, that would then incentivize cost competition among colleges, and possibly even steer higher-education toward other models than the brick-and-ivy campus. If we’re honest, the traditional university model isn’t even about education, it’s about “the college experience,” making contacts, and obtaining an increasingly irrelevant credential. The actual education can inexpensively be obtained online for most areas of study.

Way too many young adults are starting their working careers with a “mortgage payment” worth of student loan debt, but the beneficiary is the university industrial complex. Student loan debt is destructive. Mortgage loan debt is beneficial. Let’s stop incentivizing the former at the expense of the latter.

Throckmorton’s First Law of Live Music: “If there’s an upright bass in the band, it’s probably going to be good”

Today is Memorial Day, a sacred day in which we honor those who gave their lives in service to our country. There is no need to implore the readers of this blog to remember the purpose of this holiday, because you don’t need reminding. You are already patriots who revere those who made the ultimate sacrifice on behalf of the United States.

My childhood best friend lost an uncle in Vietnam. 59 years later Uncle Jack is still remembered and revered in the family. Jack’s sister, my best friend’s mother, still grieves the loss of her only brother.

Here is Kathy Matea singing a sweet, sad song from the Civil War era titled “The Vacant Chair” about a family’s first Thanksgiving after their beloved Willie was killed in the fighting.

We shall meet but we shall miss him.
There will be one vacant chair.
We shall linger to caress him
While we breathe our evening prayer.
When a year ago we gathered,
Joy was in his mild blue eye.
But the golden cord is severed,
And our hopes in ruin lie.

Chorus:
We shall meet, but we shall miss him.
There will be one vacant chair.
We shall linger to caress him
When we breathe our evening prayer.

At our fireside, sad and lonely,
Often will the bosom swell
At remembrance of the story
How our noble Willie fell.
How he strove to bear our banner
Through the thickest of the fight
And uphold our country’s honor
In the strength of manhood’s might.

[buck.throckmorton at protonmail dot com]

posted by Buck Throckmorton at 11:00 AM

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