3/30/2005

Debt and Young Americans

This article, "Why young Americans are drowning in debt," was very insightful. It discussed three major factors that are contributing to the enormous debt that young americans are being faced currently with. The number one listed was the amount owed, on average, in college loans. They have reached record heights recently and look to continue to soar. One of the other major factors is credit card debts. The last major factor is how tight the job market is at this time. With all of these factors going on that are real-to-life for most young adults in the U.S., many think that they (we) may be the most indebted generation of young americans ever. Perhaps there should be a class or two required in high school that would help rising college students and even those who don't plan on attending school to see this reality before being hit by the train. If it is really this big of an issue, why don't we do something about it? If not, this trend will just continue to grow.

9 comments:

sandy said...

I appreciate this post by Fred and the link contained within it. This issue with young adults in debt is something I have been concerned with. People have become too casual about being in debt.

salty said...

The only way a person should go into debt is if they can manage the debt. Too many people get credit cards and spend their lives away due to the fact they do not know how to manage the debt they have accumulated. Fred is right, this is a problem for college students.

sierra said...

This is a very interesting topic. So many young americans are in debt, and it is sad. I do believe we need to have a class in high school about this topic. I also believe this problem is going to continue to rise because college tuition keeps rising every year, and students just coming out of high school can't afford it. People think that the one's who can't afford it, will be able to get the money from the government, but that is also false. I don't get any money from the government because my parents supposedly makes enough money, but believe me they don't. I am stuck with student loans, and always working while attending full time classes to pay for all of this. It is a problem, and I hope their will be some sort of resolution in the future.

Rex said...

I think that debt, managed wisely, can be an asset. I meant that by deferring things such as student loans, it allows us to get through school when we are not making any money. The thing is to manage our debt, only get into as little as need to get us by.

Keston said...

This was a very interesting article, and I find it very true. However, I was surprised that credit card debt was not in the number one spot. I do agree with Rex a little that if managed wisely, debt can be an asset, but the problem is people don’t know how to manage it wisely. Having some kind of class is definitely something the schools should look into.

homer said...

It's worth going into debt with a student loan. Maxing out credit cards for clothes is the stupid part. What do you expect when their parents have raised them in a world of fantasy credit money and bankruptcy.

Dale said...

I think that often times college students have a hard time knowing what to go into debt for. Usually business students understand this principle better than most, because we tend to like debt if there is a future payback. There are some things that are worth going into debt for, like college. However, some students take out loans and spend it foolishly, and think that the debt will go away upon graduating from college. What they miss is that more expenses come in addition to the student loans.

Dr. Tufte said...

I'd be in favor of a required personal finance class in college, and SUU like other universities is actually moving in this direction.

I am very dubious about this sort of article. There is very little mention of assets - yet the whole point of incurring liabilities is to acquire assets. If you don't discuss both, then I think there is something fundamentally biased about the discussion. There really is no reasonable reason why the society in which households have the most assets is also the one in which they have the most debt.

If I can take this in a different direction, the problem isn't debt, it's liquidity. Liquidity is the ability to turn non-money assets into money quickly and at will. The problem with the debt of consumers is that so much of it is spent on assets that are not liquid. Even something like clothing is an asset, but it isn't a very good or liquid one. To my mind the problem is that people are not using their debt to buy enough things with a reasonable rate of return (like education), or with a low rate of depreciation (like financial assets).

sam said...

Debt is something that definitely needs to be addressed. Not only for high school students but for the general American public. As a whole I think that we spend more than we earn. Plans are made but never readjusted.We have witnessed this with the Social Security issue. Plans are made on data that are correct at the time but then there are externalities that ruin the original plan. This would not be a problem if the plan was reconstructed, but it isn't.