Bloomberg: Trapped by $50k Degree in Low-Paying Job…

One of the reasons I’ve not spent a single word voicing my thoughts on the current Occupy Wall Street (OWS) saga is that while I agree with them on several counts (yes, Virginia, laws should apply to everyone equally, regardless of political stature or the size of one’s bank account), there are numerous “grievances” put forth by OWS which are simply ridiculous, and merit not a moment of my time nor consideration. One of these issues centers on student loans and higher-ed debt.

So Here Comes My Opinion

No, OWS, higher education is not a right, nor should it be. Student loans should not be forgiven on any sort of universal basis. I care not whether you could or couldn’t find a job suitable to make your loan payments, Ms. Occupy Protester, because I was not the one who decreed it necessary for you to attend said institution and take out big loans to do the same.

Lament that mid-five-figures debt all you want, but the reason you have it is simply this: Government made it possible for anyone able to fog a mirror to sign their name on a few dotted lines and walk away with thousands of debt bucks, easily, for the glorious purpose of “higher” education. Take away that “easy” loan ability, and the demand for college goes down … as does the ability of college administrative boards to bump tuition and fees 8 to 15 percent per year. And down will come prices. Eventually.

If anyone could step out and borrow $5k per year (or whatever) for your product, just by slapping their siggy on a form or two, then you’d be lifting your prices by double-digit percentages each year, too. The more money you make available for “something,” the more that “something’s” price goes up. (Pretty neat how well it worked for housing, too, huh?)

Sold a Bill O’ Goods

That’s exactly what happens to lots of college students, it appears. They’re being sold a bill of goods.

Because if you, like Laura Sayer in the linked article above, run out and borrow $50k to get a Masters degree at NYU’s Program for Interdisciplinary Studies in Humanities and Social Thought, and then you’re upset to find that that degree doesn’t do jack squat for you in the Real World, well, I don’t know what to say.

Hmmm. Seems to me that her advanced degree was much more of a years-long (and quite expensive) whim than any sort of career booster:

No, really. The jokes practically write themselves.

Of course they do. The masters won’t do a damn thing for them. Thus, they want to put off those student-loan payments as long as is humanly possible. Of course, that will probably require taking out more loans, but as we’ve previously established, student-loan lending isn’t exactly “restricted” to only the best credit risks. No credit? No job prospects? Already $40k in debt? No problem. There’s more where that came from.

Some salesman, this guy. You have to wonder if the people who wrote the theses below — previous NYU attendees in the “Social Thought” program — really believed that what they were studying had ANY BEARING WHATSOEVER on whether or not they’d achieve gainful employment at anything above poverty-level Mcwages:

• The Graven Image: Truth, Self, and Identity in Max Frisch’s Novel I’m Not Stiller
• The Meaning of Documentary: Narrativity, the Cartesian World View, and a Heideggerian Critique
• H.D.’s Creation of the New: Redeeming the Maternal Body in Pursuit of Feminine Language
• Why Are Gay Men So Effeminate? An Essay on Aesthetics, Affect, and White Gay Male Subjectivity
• Speaking in Tongues: Language and Creolite in the Work of Kamau Brathwaite and Junot Diaz

Readers, please tell me: Do the authors of these things actually want to WORK and create products or services of value to the rest of us, or do they just want their egos stroked and subsidized (preferably at taxpayer expense) on a regular basis?

Methinks I know the answer.

And I didn’t need to borrow $50k to achieve my “critical-thinking” skills.

Fiscal Times: This Rule Could Kill the Housing Market

The gist of the article centers on a chunk of the recently-enacted Dodd-Frank legislation — a chunk which contains the onerous requirement that lenders must maintain on their balance sheets some share of the risk of mortgages they sell off to investors.

Oh, the horror. Mortgage lenders retaining a sliver of the mortgage risk they create? Dear Lord, what legislative insanity will we birth next?

No, really. While I tend to come down against Big Government most of the time, given what happened in 2008 and 2009, I’m pretty content with mortgage lenders being required to balance-sheet some risk from the mortgages they create. To me, this sounds like a burden our esteemed megabanks worked exceptionally hard to earn during those heady years of the mid-2000s.

But get a load of this choice bit of idiocy:

Say what? A “decade of accomplishment in defining what is a responsible loan?” Can this guy be serious? Or is his definition of “accomplishment” just far, far different from mine?

I’m thinking it’s the latter.

CNN Money: The New Pup Watching Our Money

I’m sure this new agency will cast just as watchful, keen, and vigilant an eye over our money as all the other government agencies do. I mean, this was Elizabeth Warren’s brainchild, so it has to be good, right?

(If you think I’m being sarcastic, congrats! You’d win a cookie … if I had one to hand out.)

And, in what has got to be one of the most pathetic “Reasons We Need This New Government Agency” passages I’ve yet seen, I encourage readers to mouse-over the red “16,109″ circle in the “Mortgage Brokers” section of the CNN presentation. Read what Mr. Carlo Panno has to say about the “sack of money” the evil bank all but forced him to take to buy a house.

Always the studious type, Mr. Panno carefully read his mortgage docs before signing them … noticed that his payments would balloon from $300/biweekly to $1000/biweekly after two years … and then STILL SIGNED THE NOTE because the broker “assured him” he could refinance before the two-year SAVINGS EXTRAVAGANZA expired. (Heard that one before? Yeah, me too. About a million times.)

You know what I think? I am quite certain that there is not, and never will be, a government agency capable of protecting glasslickers like this from themselves. (Much less those dastardly banks and mortgage brokers — for whom, I should point out, I harbor scarce love.)

Note to Mr. Panno: Next time you leave the house, don’t forget your helmet.

OSU: Young Adults Get Self-Esteem Boost From Debt

From the article:

If anyone wondered just why it is that lending institutions make such an effort to get young adults into debt, well, wonder no more. You can build up an immense pile of debt between the ages of 18 and 28. By the time the invincibility of youth has worn off and reality has set in, your next 20 or 30 years of payments are already set in stone.

Then, when that “expected future income” thing doesn’t pan out, you get a host of nasty little outcomes — like one in five student loans being in default.

More from the study:

Whoopee. And the debt-induced beat goes on … so long as you get ‘em hooked young!

See the glaring disconnect in the first two items? If fifty-six percent of Americans think the government should stay “altogether” out of the mortgage market, but seventy-nine percent want the mortgage-interest deduction to continue, then an awful lot of people have an awfully shallow view of what “government participation” means.

If you don’t think that the mortgage-interest deduction amounts to a subsidy for homeowners, and therefore, is the very essence of “government participation” in the market, then you’re nuts. Take away that deduction, and see what happens to home prices. Mortgage qualification standards are based upon that federal tax deduction being there, effectively “helping” people make their house payments. If the deduction were to go away, qualification standards would necessarily tighten. Joe and Jane Sixpack wouldn’t be able to qualify for as high a mortgage payment as they could previously, as more of their gross income would now be going to taxes. Thus, over time, home prices would decline.

For this survey to mean much, someone really ought to define “altogether.” Because to me, that’d mean the dissolution of Fannie, Freddie, and the FHA, as well as the removal of the mortgage-interest tax deduction. But that wasn’t what the Rasmussen respondents inferred, or were told. Obviously.

What an idea, huh? Get rid of Fannie, Freddie, the FHA — who between them control 90 percent of the mortgage market these days — and the sacrosanct mortgage-interest deduction. You want to talk about a full-on house price collapse? That’d do it!

Thanks to cottony-soft (and FedGov encouraged) accounting standards, banks are loathe to foreclose on underwater properties. As a bank, realizing five- and six-digit losses is no fun. It tends to leave ouchies on your balance sheet, and more importantly, has a negative effect on management bonuses.

Cause, meet effect:

Four hundred days with no house payment? A fellow could save up quite a stash in his piggy bank, going that long without sending a check to the mortgage company.

In any case, that tantalizing little snippet comes from an article at AmericanBanker.com.

And speaking of homeowner savings, just imagine all the dutiful home care and maintenance being performed by all these “living free for now” borrowers — borrowers who know that one day the bank will be coming to throw their La-Z-Boy on the lawn and Master Lock all the doors. The question isn’t if, but when.

Oh, I’m sure that leaky roof will get fixed. Any day now.

Yes, indeed. Delaying foreclosures (most econ-types refer to it as “extend and pretend”) with schemes like relaxed accounting standards and FedGov-initiated can-kickings (HAMP much?) should work out just fine.

Still, I keep up with HAMP results (or lack thereof) because train wrecks this large are just hard to ignore. And also because watching FedGov throw piles of good money after bad is better entertainment than most primetime TV (which isn’t saying much).

So here we go with the July batch of HAMP results:

Financialstability.gov: HAMP Servicer Report — July 2010

In particular, I’d like to call reader attention to a chart on page three:

Aside from the inherent irony in finding numbers like this at a site called “financialstability.gov,” and ignoring the brazen injustice done by allowing any U.S. dot-gov entity to even use said domain, you have to be amazed — really amazed — at the financial condition of HAMPsters at large.

With Numbers This Bad…

What we see here is that for folks who’ve had their mortgages modified via HAMP, the median debt-to-income (DTI) ratios are downright scary.

Think about this: The median back-end DTI for successful HAMP applicants, before their mortgages were modified, was almost 80 percent.

After mod, the median back-end DTI is still almost 64 percent.

So, at the median, having 64 percent of their pre-tax income going to debt payments is an improvement.

And since part of HAMP qualification is supposed to focus on whether or not the borrower actually has a shot at staying in the house, presumably making payments to the bank from now until pigs fly, then you have to wonder just how bad the non-approved applicants’ DTIs are. (Almost half of the people who’ve applied to HAMP have been bounced from the program, for various reasons.)

If having a 60+ percent back-end DTI after a modification is seen as “affordable,” then I probably don’t want to what “unaffordable” is.

Yeah. Mortgage modifications or not, these are still defaults looking for a place to happen.

Get Ya Some

I’d step up to the trough and request a modification for myself — hey, who doesn’t want a “more affordable” mortgage PLUS the opportunity to stick somebody else with the bill? — but somehow I doubt that my front- and back-end DTIs of roughly ten percent would allow me to qualify for any sweet HAMP action. (Since I have no non-mortgage debt, both of my DTIs are equal.)

Darn the bad luck, anyway. Savers and responsible folk? Shut out from reaping taxpayer largesse once again.

Instead, we just get to pay for it.

WSJ: Student Loan Debt Surpasses Credit Cards

As of June, there was roughly $830 billion outstanding in student loans, compared to $826 billion in credit-card debt.

Swell, ain’t it? I tell you, this country can strap on the anchors and leg chains of debt like nobody’s business.

Yahoo: 20 Worst-Paying Degrees of 2010

I get a kick out of lists like this — especially ones that reinforce my own views on the relative value (or lack thereof) of higher education. Which is that “higher education,” in and of itself, is very rarely the Ticket to Financial Success which society makes it out to be. (Check out this article in the Harvard Business Review; the difference between “knowledge” and “skills” is immense. The higher-ed conglomerate may disperse knowledge, but usually, what employers want are skills.)

And oh yeah — if you take on lots of debt to get that higher ed, you can easily end up worse off — far worse off — than if you had no degree at all.

Because I’m lazy, I won’t reprint the whole list here. However, the top five worst-paying degrees…

… are pretty much what I’d expect. (Wait — where is Underwater Basket Weaving?)

I do, though, have to take issue with how the author finishes out her missive:

I’m not so sure about that. I mean, politicians seem to do pretty well financially. And it’s obvious that math was never a core requisite at any point in their lives.

One of Keeffe’s particularly egregious recommendations — and this is just kerfuffle waiting to happen — is for folks to make minimum payments on all their bills and credit cards until they’ve saved up six months’ worth of salary as an emergency fund. To me, such a plan would almost guarantee failure. How many folks do you know with the financial (and disciplinary) ability to pull that off?

Not many, is my guess.

I much prefer Dave Ramsey’s Baby Steps plan, and its suggestion to make “minimum payments only” until one saves $1,000 (or $500, if you’re a low-income household) … and THEN to attack the debts full-force and head-on.

However, as I was finger-flipping through How to Get What You Want a little more, I managed to find a few paragraphs that stood out — in a good way! Actually, I found this to be quite insightful, and a bit Suze-Orman-esque:

Well, I’m not so sure about the “making dreams come true” part, but I’ll vouch for the utter goodness of financial security. Having money available for emergencies changes everything. Life looks far different when you’re ready for the speedbumps and potholes.

Keeffe continues:

You know what? I agree with this. One. Hundred. Percent.

As a guy who’s made it through Step 3 of Ramsey’s Baby Steps (no debt except for the mortgage; fully-funded emergency fund is in place), I found that for me, while paying off that last debt felt great, hitting my savings mark felt even better.

As Keeffe notes, “Eliminating a bill creates only a temporary feeling of relief, compared with the deep and lasting feelings of power and security that money in hand creates.” To this I say: AMEN.

Debt-free is sweet, but there is no substitute for savings.

But We Gotta Qualify This…

As much as I love what Keeffe says here, she is still presenting it in the context of “You need to have a bunch of money saved BEFORE you begin seriously paying off your debts.” The logic of this baffles me entirely. While it sounds silly, I want to scream at her, “Hey! The longer your readers stay in debt, the less likely they’re ever going to get out of it!”

Though of course I have no quantifiable evidence to support this, everything I’ve learned to date, and everything I’ve seen, points toward the assertion that the more you muddle through life, simply “living with” your bills and debts, the less likely you are to ever get out from under them. Let’s face it: Banks and other lending institutions endeavor to make it so.

At some point the lack of progress, the years of frustration and stress — all of it accumulates into the deadly “This is just how everyone lives!” attitude.

At which point, you’re sunk.