We've had a couple of recent stories about the financial circumstances in which young people find themselves after graduating from college - they have high student load debt, and, apparently, something of an aversion of accumulating other kinds of debt - with mortgages, car loans, credit cards - that will put them further underwater. This, of course, has the potential of creating problems for retail businesses down the road.
MNB reader Robert M. Fawcett wrote:
I think they aren’t buying products because they simply don’t have the money, whether its bought with a credit card or not? They come out of college with a mortgage.
From another reader:
It's my observation that this generation is more focused on experiences than the accumulation of "things" i.e. renting(then traveling) over home purchase. And when they do purchase, they will do so online. This will drive a fundamental change to the retail world.
And about that mortgage...
MNB reader Monte Stowell wrote:
There is no easy answer to resolving the student debt crisis in this country, but I do have few thoughts and observations as to why student debt is so high. I think it all started with giving people free money.
When congress passed education credits of $1000 a year, this was a “Ka Ching” moment for the institutions of higher education. They knew they could raise their tuition rates by the amount of the tax credits. Compound this over a 4-6 year+ time, the students continued to borrow more and more money and the colleges and universities continued to raise their tuition rates.
The demand for a college education and degree continued to grow, and the law of supply and demand kicked in even more. Again, the institutions continued to raise their rates because they could. The students continued to borrow more and more money to fund their education.
The college I attended in the mid 1960’s , here in Portland, OR, had tuition of $305/term. Today, it is excess of $2000/term. Let us add in the cost of books. This cost to the student is out of line for books, adding in another $1000+/year. The cost of books is ridiculous, just like the cost of the allergy drug that has a manufactured cost of $1.00/dose and the consumer is being charged over $500+/dose. Reduce the cost of what students have to pay for their books. Probably will not happen.
Another issue is that the skills needed in todays’ job market. I would think many students borrowed heavily to get their degrees in fields where there are no jobs or the jobs are low paying. A sad story, but that is reality today. Did the parents and the HS counselors do their job in trying to guide these kids into fields where the jobs are? I have 2 nephews who went into engineering, both are gainfully employed making a good living, a grand daughter who got here Master degree at the U of Oregon and proud to say she is starting her job as a first grade teacher here in Oregon. These kids worked 1-2 jobs to help pay for their education. Do they have some debt, yes they do, but debt they can afford to pay off in 4-5 years.
Should we let these kids off the hook for their high student debt? I think we should not, but I thinks there are ways for them to pay back their debt through some type of service to the country as well as the monetary obligation that they signed up for. After all, no one made them sign on for borrowing all this debt. Expensive lesson, you bet it is.
I totally agree with you about books. And what makes me even crazier is when professors wrote books that cost a lot of money, and they make their students buy them. Because we're talking about the importance of story in the Portland State University business class I teach during the summers, one of the things I do is give every student a copy of "The Big Picture: Essential Business Lessons from the Movies." It is my pleasure ... and it would seem crass to ask them to pay for it.
From another reader:
In the College world we now have 6 times as many "administrators" as we did 20 years ago. And while teachers and teachers aids salaries have barely increased, the Administrators salaries have nearly doubled. That is part of the growth of the availability of loans from the federal government. It seems a circular augment. More money is made available so colleges hire more administrators and raise the cost of tuition because they know the money is available. Cut the moneys that are available and the cost will start to go down. Supply and demand...
And another, MNB reader Peter Louree:
The government could help by capping student loans to minimize the amount of money colleges and universities have access to which will force the market to reduce costs and lower tuition (maybe). There certainly is an opportunity for the market to respond to this and offer a better value for what we call a “4 year degree”. Note Mark Cuban’s warnings of the “student loan bubble” that he was been talking about for several years. The market is responding as more students are going the route of community college for the first two years of school, but maybe a new model can develop and evolve to offer a more affordable option for an accredited degree that somewhat mirrors the traditional college experience.
And another:
My son has student debt and so does his wife. They laughingly call it their “other house payment”…but it’s not that funny.
It’s the difference between living a lower middle class lifestyle and the mid to upper middle class lifestyle their incomes should permit.
Seriously let’s say their household consumption is reduced by $12,000 annually…multiply that times oh maybe 10 million other households. That’s a very sizable GDP impact. $240B (I think…lots of zeros..I know that). Like around 1 – 1.5% growth over our total current GDP.
Solving it…well good luck, one party, the one in charge of the legislative branch, won’t even vote for or even bring for a vote reducing student loan rates or allowing them to consolidate the student loan debt at lower rates. Which is absolutely insane policy.
So good luck ever getting forgiveness or some other program…and I am not even sure forgiveness is the right thing to do. Making college more accessible and treating existing student loan debt like any other debt makes sense to me.
But keep in mind things that 80% of Americans might agree on, like tougher gun purchasing restrictions, can’t pass in a government owned by big business & lobbyist.
And still another:
It’s funny that you rarely read anything about college costs increasing beyond the inflation level of any industry. Heaven forbid BIG OIL or BIG PHARMA or BIG RETAIL reports strong earnings as the media will go out to demean and destroy them. BIG EDUCATION and their financial models with tens of millions in reserve are “hands off” from the media and government oversight. The real problem is unchecked and unchallenged college costs at the expense of American families. Government and big education continue to benefit from each other. Politics anyone?
Funny, I was under the impression that there is a lot of discussion and news about "big education" and the associated costs.
I don't know what the solution is, but I do know this. "American exceptionalism," which has to be renewed not just with every generation, but every day, is dependent on a highly educated and engaged population. If we can't figure out how to make education accessible, affordable and attractive to young people, then we're never going to be able to say with a straight face that America's best days are ahead of it.
On another subject, an MNB reader's assertion that the difference between Henry Ford and Jeff Bezos is that Ford created jobs and Amazon kills them prompted this email from another reader:
I feel it might be more accurate to say Amazon is redistributing jobs. While you might be able to say it impacted the reduction of jobs at companies like Macy’s, I think you’ll find a whole list of other companies and industries where it has created more jobs, for example: delivery services (Fed Ex, UPS, USPS), packaging manufacturers, goods manufacturers producing the new Amazon line of products, electronics manufacturers producing Amazon’s new technology devices, internet-service providers, and movie and television production companies. In my mind, Henry Ford is an excellent parallel to the impact Amazon is having on jobs.
Regarding Target's continuing issues, MNB reader Russell Zwanka wrote:
In continuing the Target food discussion, it just seems that the food strategy was developed by Marketing only- rather than Merchandising and Marketing together. Marketing is a vital part of the mix, until it over-promises. In the case of when Target first introduced "P Fresh", we all looked on with anticipation of what this prominent retailer was going to do to add value to the food retail space. When they finally took down the curtains (literally curtains), and after seeing banners in their stores for months announcing the arrival of "something fresh"....it was like an ugly baby had been birthed. A pantry-level offering in a high demographic store, a limited selection in what was supposed to be a traffic builder, a terrible corner location about as inconvenient as they can make it (remember, for some reason, most Targets have only one entrance and exit in one corner), "fresh" that consisted of packaged goods and gas-flushed meats, a confusing store brand offering, rampant stockouts, and what seemed like a P&G-only offering in Household (nothing against P&G, but not much on variety either). We all breathed a sigh of relief when we saw the end-result. Hopefully, the new leadership can chart a new course.
But, it does seem to be taking a while. Spending a year visiting customers' homes and reviewing surveys may be helpful, but a few "fail fast" initiatives might be suggested as well. Do have to give them credit for their refrigerated probiotic and Kombucha ends, though.
Finally, I was surprised by this email from an MNB reader who was responding to our obit for Steven Hill, the former "Law & Order" star who made waves earlier in his career when he played the lead during the first season of "Mission: Impossible," but was let go because his Orthodox Judaism made it impossible for him to work after sunset on Fridays and all-day Saturdays - a schedule way out of synch with how a network TV series is shot.
I wrote:
Hill was unwilling to compromise his faith, and he was replaced by Peter Graves as Jim Phelps in the second season for the rest of the series run.
Leading one MNB reader to write:
It was only a religious belief. Whoever said a religious belief should be more important than anything else - let alone everything else?
I never said that it should be. I was merely pointing out that Hill put his religious beliefs above his career. This is sort of like what happened when LA Dodger pitcher Sandy Koufax refused to start Game 1 of the 1965 World Series because he was observing Yom Kippur. Or what Chick-fil-A does when it closes all its stores on Sundays.
I think these are acts of principle, and I would never suggest that they reflect only a religious belief. That would strike me as intolerant.
MNB reader Robert M. Fawcett wrote:
I think they aren’t buying products because they simply don’t have the money, whether its bought with a credit card or not? They come out of college with a mortgage.
From another reader:
It's my observation that this generation is more focused on experiences than the accumulation of "things" i.e. renting(then traveling) over home purchase. And when they do purchase, they will do so online. This will drive a fundamental change to the retail world.
And about that mortgage...
MNB reader Monte Stowell wrote:
There is no easy answer to resolving the student debt crisis in this country, but I do have few thoughts and observations as to why student debt is so high. I think it all started with giving people free money.
When congress passed education credits of $1000 a year, this was a “Ka Ching” moment for the institutions of higher education. They knew they could raise their tuition rates by the amount of the tax credits. Compound this over a 4-6 year+ time, the students continued to borrow more and more money and the colleges and universities continued to raise their tuition rates.
The demand for a college education and degree continued to grow, and the law of supply and demand kicked in even more. Again, the institutions continued to raise their rates because they could. The students continued to borrow more and more money to fund their education.
The college I attended in the mid 1960’s , here in Portland, OR, had tuition of $305/term. Today, it is excess of $2000/term. Let us add in the cost of books. This cost to the student is out of line for books, adding in another $1000+/year. The cost of books is ridiculous, just like the cost of the allergy drug that has a manufactured cost of $1.00/dose and the consumer is being charged over $500+/dose. Reduce the cost of what students have to pay for their books. Probably will not happen.
Another issue is that the skills needed in todays’ job market. I would think many students borrowed heavily to get their degrees in fields where there are no jobs or the jobs are low paying. A sad story, but that is reality today. Did the parents and the HS counselors do their job in trying to guide these kids into fields where the jobs are? I have 2 nephews who went into engineering, both are gainfully employed making a good living, a grand daughter who got here Master degree at the U of Oregon and proud to say she is starting her job as a first grade teacher here in Oregon. These kids worked 1-2 jobs to help pay for their education. Do they have some debt, yes they do, but debt they can afford to pay off in 4-5 years.
Should we let these kids off the hook for their high student debt? I think we should not, but I thinks there are ways for them to pay back their debt through some type of service to the country as well as the monetary obligation that they signed up for. After all, no one made them sign on for borrowing all this debt. Expensive lesson, you bet it is.
I totally agree with you about books. And what makes me even crazier is when professors wrote books that cost a lot of money, and they make their students buy them. Because we're talking about the importance of story in the Portland State University business class I teach during the summers, one of the things I do is give every student a copy of "The Big Picture: Essential Business Lessons from the Movies." It is my pleasure ... and it would seem crass to ask them to pay for it.
From another reader:
In the College world we now have 6 times as many "administrators" as we did 20 years ago. And while teachers and teachers aids salaries have barely increased, the Administrators salaries have nearly doubled. That is part of the growth of the availability of loans from the federal government. It seems a circular augment. More money is made available so colleges hire more administrators and raise the cost of tuition because they know the money is available. Cut the moneys that are available and the cost will start to go down. Supply and demand...
And another, MNB reader Peter Louree:
The government could help by capping student loans to minimize the amount of money colleges and universities have access to which will force the market to reduce costs and lower tuition (maybe). There certainly is an opportunity for the market to respond to this and offer a better value for what we call a “4 year degree”. Note Mark Cuban’s warnings of the “student loan bubble” that he was been talking about for several years. The market is responding as more students are going the route of community college for the first two years of school, but maybe a new model can develop and evolve to offer a more affordable option for an accredited degree that somewhat mirrors the traditional college experience.
And another:
My son has student debt and so does his wife. They laughingly call it their “other house payment”…but it’s not that funny.
It’s the difference between living a lower middle class lifestyle and the mid to upper middle class lifestyle their incomes should permit.
Seriously let’s say their household consumption is reduced by $12,000 annually…multiply that times oh maybe 10 million other households. That’s a very sizable GDP impact. $240B (I think…lots of zeros..I know that). Like around 1 – 1.5% growth over our total current GDP.
Solving it…well good luck, one party, the one in charge of the legislative branch, won’t even vote for or even bring for a vote reducing student loan rates or allowing them to consolidate the student loan debt at lower rates. Which is absolutely insane policy.
So good luck ever getting forgiveness or some other program…and I am not even sure forgiveness is the right thing to do. Making college more accessible and treating existing student loan debt like any other debt makes sense to me.
But keep in mind things that 80% of Americans might agree on, like tougher gun purchasing restrictions, can’t pass in a government owned by big business & lobbyist.
And still another:
It’s funny that you rarely read anything about college costs increasing beyond the inflation level of any industry. Heaven forbid BIG OIL or BIG PHARMA or BIG RETAIL reports strong earnings as the media will go out to demean and destroy them. BIG EDUCATION and their financial models with tens of millions in reserve are “hands off” from the media and government oversight. The real problem is unchecked and unchallenged college costs at the expense of American families. Government and big education continue to benefit from each other. Politics anyone?
Funny, I was under the impression that there is a lot of discussion and news about "big education" and the associated costs.
I don't know what the solution is, but I do know this. "American exceptionalism," which has to be renewed not just with every generation, but every day, is dependent on a highly educated and engaged population. If we can't figure out how to make education accessible, affordable and attractive to young people, then we're never going to be able to say with a straight face that America's best days are ahead of it.
On another subject, an MNB reader's assertion that the difference between Henry Ford and Jeff Bezos is that Ford created jobs and Amazon kills them prompted this email from another reader:
I feel it might be more accurate to say Amazon is redistributing jobs. While you might be able to say it impacted the reduction of jobs at companies like Macy’s, I think you’ll find a whole list of other companies and industries where it has created more jobs, for example: delivery services (Fed Ex, UPS, USPS), packaging manufacturers, goods manufacturers producing the new Amazon line of products, electronics manufacturers producing Amazon’s new technology devices, internet-service providers, and movie and television production companies. In my mind, Henry Ford is an excellent parallel to the impact Amazon is having on jobs.
Regarding Target's continuing issues, MNB reader Russell Zwanka wrote:
In continuing the Target food discussion, it just seems that the food strategy was developed by Marketing only- rather than Merchandising and Marketing together. Marketing is a vital part of the mix, until it over-promises. In the case of when Target first introduced "P Fresh", we all looked on with anticipation of what this prominent retailer was going to do to add value to the food retail space. When they finally took down the curtains (literally curtains), and after seeing banners in their stores for months announcing the arrival of "something fresh"....it was like an ugly baby had been birthed. A pantry-level offering in a high demographic store, a limited selection in what was supposed to be a traffic builder, a terrible corner location about as inconvenient as they can make it (remember, for some reason, most Targets have only one entrance and exit in one corner), "fresh" that consisted of packaged goods and gas-flushed meats, a confusing store brand offering, rampant stockouts, and what seemed like a P&G-only offering in Household (nothing against P&G, but not much on variety either). We all breathed a sigh of relief when we saw the end-result. Hopefully, the new leadership can chart a new course.
But, it does seem to be taking a while. Spending a year visiting customers' homes and reviewing surveys may be helpful, but a few "fail fast" initiatives might be suggested as well. Do have to give them credit for their refrigerated probiotic and Kombucha ends, though.
Finally, I was surprised by this email from an MNB reader who was responding to our obit for Steven Hill, the former "Law & Order" star who made waves earlier in his career when he played the lead during the first season of "Mission: Impossible," but was let go because his Orthodox Judaism made it impossible for him to work after sunset on Fridays and all-day Saturdays - a schedule way out of synch with how a network TV series is shot.
I wrote:
Hill was unwilling to compromise his faith, and he was replaced by Peter Graves as Jim Phelps in the second season for the rest of the series run.
Leading one MNB reader to write:
It was only a religious belief. Whoever said a religious belief should be more important than anything else - let alone everything else?
I never said that it should be. I was merely pointing out that Hill put his religious beliefs above his career. This is sort of like what happened when LA Dodger pitcher Sandy Koufax refused to start Game 1 of the 1965 World Series because he was observing Yom Kippur. Or what Chick-fil-A does when it closes all its stores on Sundays.
I think these are acts of principle, and I would never suggest that they reflect only a religious belief. That would strike me as intolerant.
- KC's View:
