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Are student loans a problem for our industry?

There’s more than one reason that boating is struggling to attract millennials, but the problem of student loans is high on the list. Is it a crisis? Yes.

Millenials were born from the early 1980s to the late 1990s and the age range is now 20 to 36. There are 75.3 million millennials and no group is more saddled with student loan debt than this one, according to the Pew Research Institute.

Between 2000 and 2014, the number of student-loan borrowers more than doubled to 42 million and the volume of outstanding federal student debt nearly quadrupled to more than $1.3 trillion. That’s more than any other type of consumer debt except for home mortgages.

Moreover, the default rate is now at the highest level in two decades.

And while it’s primarily a millennial problem, it doesn’t end there. Many of the youngest Generation Xers (ages 36 to 51) who would be prime boat-buying candidates are caught up in it, too. For example, I have a friend, an accomplished journalist, who is still shackled with student loan debt. More than 60 percent of Gen Xers attended college. In many cases, when the Great Recession hit and they saw their jobs disappear, they returned to college for new skills to once again get a job . . . and got more student loan debt.

Unfortunately, there doesn’t appear to be any easy answer. And because it’s a time when our “public servants” in Washington can’t agree on the date for a New Year’s Eve party, it’s hard to see any leadership out of this mess. But there are things to consider.

For example, the Obama administration, through the Department of Education, has reduced repayment pressures by calculating loan payments based on earnings. Further, loan balances are totally forgiven after 20 years. And if a student gets a job in “public service,” the balance will be forgiven in half that time — 10 years.

This is reasonable, despite the fact that taxpayers must pick up the losses (an estimated 90 percent of student debt is guaranteed by taxpayers.) But it is a double-edged sword. Certainly these policies help students, but they also encourage more easy borrowing as student loans can be used for any college-related expense like tuition, room and board, books, computers and transportation.

Still another consideration is that Congress should get involved. Specifically, changing the bankruptcy code by removing this particular distinction from the kinds of debts that cannot now be discharged is a notable suggestion by George Leef at the John William Pope Center. The result, he explains, would make private lenders far more circumspect about their education loans. Many students might be turned down, but for the good reason that their educational “investment” looks like a bad one, he contends.

Further, perhaps, it’s time the schools themselves put some skin in the game. How about establishing some new rules for schools getting Title IV money? (Title IV of the Higher Education Act sets up federal student aid.) In this scenario, the schools would have to shoulder some responsibility if a student defaults on a loan. Perhaps this would cause schools to evaluate the risk of enrolling any student, Leef suggests.

Finally, there are serious questions about whether changes legislated after the 2007-2008 school year that, essentially, assured schools of increased steady income streams could have triggered school hiking tuition costs. These changes increased access to federal programs and raised the loan amounts of undergraduate students in subsidized loans (government pays all interest during enrollment) and unsubsidized loans (relatively few); as well as higher-limit Pell Grants that don’t require any repayment by students in financial need.

Overall, the federal student loan programs appear to be a mess and need a thorough review for major changes going forward. Moreover, the current $1.3 trillion student debt hanging mostly over millennials impedes consumer spending that drives economic growth and could have a negative impact on boat sales for years to come.

As an industry, we should look for proposed actions we can support that will bring about needed changes.

Comments

6 comments on “Are student loans a problem for our industry?

  1. Alyssa Freeman

    Norm, you are spot on! I am a millennial working in the marine industry for 8 years now (30 yrs old). If my husband and I did not have so much student loan debt we would absolutely own a boat. It’s not just the loans themselves, but the interest rates are insane! One loan is at 7%! We are paying about $800 in student loans per month and even at that rate they will not be paid off for another 10 years at least, or until they are forgiven. It is a BIG problem.

  2. Thaddeus B Kubis

    Yes, any money that is taken from discretionary spending is an issue for any industry like the marine industry.
    A greater concern will be the credit rating and debt load that will be sitting on the shoulders and impacting the life of those future boaters. A greater problem is the “brand”, the image of boating. The image, the brand, the message needs to be honed not for those with college debt but for those currently in high school.

  3. David Norton

    If they forgive the students loans I want the money I spent to make sure my kids got a good education and a jump start on life. We work hard for our money and I don’t believe they should forgive. The educational community needs to bear the burden. Tell me if everyone out there has enough technicians? Maybe the focus needs to be on what the industry needs not what the Educational system needs I for one don’t think we should bail them out. Don’t lend them the money if they don’t intend on paying it back. It’s a National problem.

  4. Bryon Kass/ Custom Design

    I agree with Mr Norton. Too high cost, too many loans, no work ethic to avoid loans. What happened to the way we did it as in job plus school? The unnecessary college for those who have no chance at applying their education. Many friends kids who are in construction and other trades after spending too much on an education. Time to put the trades first for those who cant afford college. More emphasis on state schools instead of ivy league. If you are smart enough to go to an ivy league school you should be able to get a scholarship. The dems are going bonkers with their free tuition proposals. And who do you think is going to pay for that?
    Time for a dose of reality. Our industry can’t adjust to others mistakes. All we need is defaults on boat loans. There are plenty of project boats out there cheap!

  5. Neil Williams

    It’s not just the millennials with the student debt….. it is also their parents who signed for the loans (like me). There are no “low” interest rates …. (we are paying almost 8%) … Graduates are coming out of the universities saddled with huge debt. Last thing they are thinking about is a boat purchase along with many parents who will be paying on their children’s loans until they die……..

  6. CaptA

    If someone has enough talent to attend university, they should not be forced to attend a trade school for the sole reason they can’t afford it. At the same time, David Norton is correct, forgiving the loans is not a good idea. The problem is two fold. 1) Education in this country is a business. I have may friends who’s children have decided to leave the USA for a University education. It is literally 25% of the cost of a USA education and in most cases just as good inf not better than what you get here (at the undergraduate level). Of course most of these lucky students happen to have duel citizenship. 2) Not everyone should be going to college. Many college graduates graduate without a marketable skill.

    Even if college debt were not a problem, there is much bigger issue. Gen Xers and Millenialls are not making the incomes Baby Boomers made. THEY WILL NEVER, AS A GENERATION, MAKE THE AMOUNYT OF MONEY THE BABYBOOMERS MADE. To all you a baby boomers out there: YOU HAD THE BEST OF IT!!!! This is a permanent situation.

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