Month: September 2018

I can forget about student loans for a minute

My son just moved into shared accommodation and there’s a friendly dog living next door. I’m grateful for that.

The whole children thing goes on and on, doesn’t it? Infancy gives way to childhood and then stormy adolescence finally mellows into kidulthood. They might grow up but they don’t move out and parenting is never done.

Although I have little time for the whole Millennial bashing thing, it is certainly true that the old rules about being an adult have changed. There’s even a new term for it — adulting.

 Adulting represents appearing adult while retaining the wide-eyed naiveté and barely suppressed panic of a child doing a grown-up’s job. The kidult is neither fish nor fowl. The law says she is grown, but she knows she is an impostor, playing games and shuffling in her mother’s too-large shoes. She also knows she may never acquire all the accepted trappings of adulthood. The deck is stacked against her and the house always wins.

Me, an adult? In this economy?

In 1978 a US student could work one minimum wage job and graduate college debt free. A 3 bedroom, 1.5 bath ranch home in Ohio cost $24,500. Average house price was $54,800.

In 1978 a UK student could get a means-tested government grant to live on while attending university without fees, work in the summer, and graduate debt free. Average house price was around twice average annual salary. Now the average home outside London costs eight times average salary.

Chained to debt

Young people start life burdened with debt. They are encouraged to get a degree with the promise of a better paying job. Once upon a time not so long ago, that made sense.

On average, UK students graduated in 2017 with £50,000 of debt, more if they were from poorer backgrounds or had longer courses and took larger loans. Interest rolls up from day one of the course, at rates up to 6.1% at a time when base rate is just 0.75% and mortgages can cost 1.5%. Student debt is being packaged for sale to investors, which can only mean ever higher charges.

In the US, the average student loan debt for 2018 is $32,371 (source). Unlike the UK, debt is not forgiven after 30 years (subject to earning less than £21,000, a figure which has been frozen since 2012).

Just get a job – ?

All the jobs I did to support myself at university have disappeared. Clerical jobs and factory jobs alike are now done by machines. My son has worked at events where adults with index linked pensions and big houses treat the wait staff like servants. It’s not enough to repay his overdraft.

And only a small proportion of graduates will earn big salaries. Most will start at around £20,000 and expect to see little growth, in line with pay generally.

 

I try to encourage him to save, but it seems pointless to him. How long will he have to save for a deposit to buy a house? Eight years, saving 15% of salary. Ten years if he wants to live in London.

He might as well blow his salary (assuming he can get a decent job) on cars and holidays and whatever fun he can get. He knows he’ll have to work into his seventies and there’s no guaranteed pension pot at the end of the rainbow.

In my day…

Children are still taught to get educated, get a job, get a house, get married, have children. These are the aspirations of previous generations, but the world has changed. New adults are encouraged to mortgage their futures before they have one. Opportunities to build the assets now held by older generations are out of reach for many.

Is it any wonder that young people look at the disparity between the future they were promised in school and the reality, and find the older generation’s attitude wanting? They are not lazy or entitled. But they feel cheated.

Thank goodness for the dog

My son starts a paid internship this week. For once he will have a little money in his pocket and know some of the freedom that I remember, in exchange for his time and labour of course. There are so many years of toil and responsibility ahead, and I don’t expect him to follow my path in a world that’s so different.

A friendly two year old labrador lives next door to his shared house. She will help him miss our dog less, and to forget that the world has its hand in his wallet, even before there’s anything to take.