President Barack Obama fielded questions today from Americans in an interview organised by Zillow’s CEO Spencer Rascoff.
His answer to a question from a recent college graduate should be gut churning for Millennials to listen to.
The question of interest was from a recent grad who is still stuck living with his parents, a situation endured by one in three Millennials. He wanted to know what the president planned to do to help his generation.
“We need more affordable, quality rental housing,” said the President. “Jacob looked like a pretty young guy, renting is probably the best option.”
Then, he correctly said “What for their parents would have been the down payment on a home right now is going to service their student loan debt. ,” an observation that I can personally attest to.
Great, one might think. So what do we do now?
The president then pivoted to his suggestions for student loan reform, and, even more perplexedly, immigration reform.
“If we get immigration reform done, suddenly you’ve got all kinds of families coming out of the shadows,” which the President argued would help to raise the cost of real estate.
Which, by the way, is the opposite of what our Millennial questioner really wants. How, precisely, does more expensive real estate aid young renters screwed over by student loans seeking affordable housing?
But let’s first look at the student loan proposal that the President said should give that young professional faith.
You can read the whole proposal here. It would limit payments to 10% of income, forgive debt that remains after 20 years (10 years for nurses, teachers and military folks), and give out more Pell grants.
But here’s the thing: None of that affects the people who already have student loan debt.
The key caveat is that it only affects students enrolling in 2014 or later.
Are you in college or recently out of college? Are you one of the many, many millennials who retreated into grad schools instead of braving a failing or mediocre economy? Well, you’re out of luck then.
This isn’t a small segment of the economy, either.
Roughly 10% of the country is in the age bracket of a recent college graduate, according to the Census. These are people aged 21-26 years old, with college graduation years somewhere between the economic wasteland the 2009 graduating class walked into and the economic “meh” the forthcoming 2014 graduating class is about to join.
So when the president is asked by a member of this huge segment of the American people what he hopes to do with them, then goes on to acknowledge the fact that this is a problem, but then states his proposals to fix two other problems that don’t help this 10% in any way, shape, or form, that cuts somewhat deep.
And the striking answer is the President doesn’t actually have a solution for this problem at all.
It’s understandable that he wants to fix the problem — crippling student loan debt — at the source, which I imagine is potentially great for my younger sister, someone currently looking at schools.
But what does the President plan to do about the major problems 21-26 year olds are facing, exactly? This is the generation that watched people from his generation crash the economy. This group is still reeling from its effects.
But the most galling part of all of this is how the president handled a question asking about that. He’s proposed helping everyone older than Millennials (through his HARP proposal) and everyone younger than Millennials (through student loan reform) but not, precisely, Millennials. The president hopes to see housing prices rise as a result of immigration, which also screws Millennials.
It’s to be expected that the President dodged the question. That’s what politicians do. But he didn’t have to rub it in.
UPDATE: Here’s the full text of the President’s response to the question via the White House Press Office:
MR. RASCOFF: This next question comes from Jacob. Jacob is among the one in three Millennials who lives with his parents because he can’t find affordable housing. So let’s watch Jacob’s video.
Q Good morning, President Obama. My name is Jacob and I live in LA. I’m a recent college graduate with a full-time job, but I still live at home with my parents. I’m wondering, with massive student loan debt, will I ever be able to move into a house of my own? Not even looking to buy, just looking to rent.
THE PRESIDENT: Well, Jacob asks a question that a lot of young people are asking right now. And there are two components to it. Number one, we need more affordable, quality rental housing. And what I said in my speech yesterday, all of us, long term, have the aspiration of a home of our own. But in a lot of markets, renting is a great option, especially if you’re still young. And so as we look at the various housing proposals that I’ve put forward — making sure that people can refinance, making sure that we’re reforming these GSEs — one of the components is also making sure that we’ve got more resources to construct or get on the market more affordable housing.
And that is not something that people should shy away from, deciding that at this stage in their lives — Jacob looked like a pretty young guy — that renting is probably the best option, until you know that you can actually purchase safely, soundly and make your payments. Part of what happened during the housing bubble was that people who probably should have been renting were encouraged to go into the housing market, and they got hurt and the economy as a whole got hurt.
But he also mentioned something else, which is the fact that a lot of young people, what for their parents would have been the down payment on a home right now is going to service their student loan debt. So I know that Zillow is focused on housing and not college education, but I will say that some of the initiatives that I’m putting forward to drive down the cost of college and the debt burdens that young people have when they get out of school can make a huge difference in the housing market over the long term, because the $US30,000 or $US25,000 on average that young people from state universities are coming out with in terms of debt, that’s a down payment on a house.
And so we’ve got a whole range of ideas about how we can drive tuition down, work with universities to be more efficient, help young people graduate faster so that they’re not ending up spending more money, reducing the interest rates on student loans. All that will have an impact on the housing market
I should add, by the way, there’s another issue that doesn’t seem like it’s related to the housing market, but actually is related, and that’s immigration reform. We know that if we get immigration reform done, suddenly you’ve got all kinds of families coming out of the shadows, paying taxes, paying penalties, but they’re also going to be really likely to buy homes, oftentimes in some of the neighborhoods where you have the most foreclosures, the most trouble. They add value to a community, increase property values.
And over the long term, it’s one of the reasons why it’s estimated that immigration reform would actually add a trillion dollars to the overall economy, partly because they’d be buying houses.
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