Landmark Links March 14th – Fight For Your Right


Lead Story…  I guess that this is what getting old feels like.  The Skyrocketing level of student debt is one of the most substantial headwinds facing the US economy in general and the housing market in particular.  More and more young people are living at home after college, unable to afford their own place.  This delays household formation substantially which has all sorts of negative ramifications for the economy.  Much of this is due to the ever-rising cost of higher education.  However, a new survey from LendEDU gives some insight into another issue with student loans: in many cases, the proceeds are too generous and borrowers don’t understand the default ramifications (sound familiar?)

In general, I’m sympathetic to the plight of student borrowers and the amount of debt that they increasingly carry when they graduate.  Today’s students are caught between a rock and a hard place when it comes to paying for college.  They are given two unpleasant options after graduating high school (excluding those fortunate enough to have rich parents or get a full scholarship): go into debt to obtain a degree or don’t go to college and fall behind (technically, there is a third even worse option which is to drop out of college with a debt balance).  The first option is bad.  The second is even worse.

I start to become less sympathetic when college kids make genuinely stupid decisions that put them further into debt.  I’m not talking about kids who go to non-accredited diploma mills (many of these are scams and prey on those who don’t know any better) or even those who major in subjects that will likely land them job at Starbucks (I was a political science major so I have no room to talk).  I’m referring to something far worse: using student debt to pay for spring break trips (and other non-educational or living expense related expenditures).  At this point, you’re probably thinking who on earth would be dumb enough to use debt that can’t be discharged through bankruptcy to finance a boozy spring break trip? A new study by LendEDU entitled Spring Break Student Loan Study: Beers, Bikinis, & Student Debt has the depressing answer (emphasis mine).

When one considers the financial limitations of most students, it is easy to ponder this simple question: How are all these cash-strapped college students footing the bill for a one week destination getaway?

Here at LendEDU, we understand that the vast majority of students need student loans to attend college. The popularity of expensive spring break trips amongst students that borrow so heavily did not make much sense to us. We not only wanted to discover how students were funding their spring vacation, but also how they fund other aspects of their lifestyle. To answer this, we conducted a survey of 500 current college students that are going on spring break this year. The respondents also had to have outstanding student loan debt.

The results of our study were alarming and frustrating. We conducted our survey via Pollfish and Whatsgoodly. Both companies used the same screening questions and criteria.

I have to admit, I’ve often wondered the same thing for the same reason.  It gives me flashbacks to the expensive vacations and fancy cars that people were paying for with HELOC dollars in the mid-aughts.  I also have the same question about increasingly luxurious student housing accommodations.  So just how bad is it?

According to the LendEDU poll, 30.60% of college students with student debt claim that they are using money they received from student loans to help pay for their spring break trip this year. For reference, you can use student loan funding for living expenses.

The National Center for Education Statistics calculated that 20.5 million students will be attending college this year in the United States. Orbitz reported that 55% of students will be going on spring break. Using this data, we can roughly calculate that 11,275,000 students will be going on spring break this year. And, it is estimated that 69% of all current college students use student loan debt by the time of graduation. By doing some additional arithmetic, we can calculate that roughly 7,779,750 student debtors are going on spring break this year.

Factoring in our data, and assuming the claims made in our survey are accurate, this means that 2.38 million students are using money received from student loans to pay for their spring break excursion this year.

Considering the severity of the student loan crisis in the United States right now, this number is severely disappointing. In a previous study, LendEDU found that 49.80% of college students incorrectly believed the government would forgive their federal student loan balance. This means that a number of college students are using government money to pay for spring break and are fully expecting the government to forgive their lavish expenditures. In another study, 51.20% of parents that cosigned on their child’s student loan said their retirement has been put in jeopardy due to late payments made by their child. Many students are hamstringing their parent’s ability to retire because they are using their student loan money to pay for an island adventure.

A whopping 30.6% of students with college debt are using a portion of the funds to pay for spring break trips.  Any way that you look at it, that’s a substantial number and much larger than I would have expected.  This is poor decision making at it’s worst.  Many of these kids are going to graduate from college and have a difficult time paying rent or buying a car or a house because of the debt load that they took on to get wasted on the beach in Panama City or South Padre Island.  To make matters worse nearly half of them appear to believe that the government will forgive their debt.  They are in for a very rude awakening.  The survey results ended with a depressing list of the other things that college students pay for with their student loan money (I’m not even going to bother highlighting this because I’d end up bolding the entire thing).

Nearly a quarter (23.80%) of respondents stated that they have used money received from student loans to pay for drinking some type of alcohol. This answer also included spending money at bars.

A third (33.40%) of students answered that they have used money received from student loans to pay for clothing and other accessories.

Similarly, the same amount (33.40%) of students said that they have used money received from student loans to pay for restaurants and take-out.

6.60% of respondents responded saying that they have used money received from student loans to pay for drugs.

Finally, 5.60% of students that participated in our survey stated that they used money received from student loans on gambling or sports betting.

Look, I’m all for enjoying one’s time in college but it’s never too early to learn to live within your means, even if that entails not spending thousands of dollars that you don’t have on lavish trips.  I can assure you that these kids will regret it when they are still living with their parents at 29 years old because they have too much debt to be able to afford a place of their own.  However, the college students aren’t even the ones who deserve the most blame.  As irresponsible as the students are when they borrow like this, the lender (in this case the Federal government) is even worse.  College students are going to make dumb choices because it’s what they do.  If you offer college kids what amounts to a blank check to pay for trips and booze that doesn’t get paid back for years, they are going to spend it because most of them don’t yet have the perspective to recognize that it will come back to hurt them down the road.  The Feds are well-aware that there is a massive problem here – the default rate on student loans is north of 11% – and yet they are still allowing enough excess borrowing to pay finance spring break trips.  Perhaps it’s time for the Federal government to re-examine their student loan policies in order to try to prevent this type of misuse of funds.  The student debt problem is only getting worse and this seems like the easiest place to start at least attempting to take some control of it.  Student loans should pay for the cost of school and basic living necessities, not expensive vacations, booze, etc.  Binge borrowing by students who don’t understand how debt works to pay for things that they don’t need has some eerie echoes of HELOC abuse 12 years ago.  But maybe I’m just getting old.

Side note: I never went on a real spring break trip in college.  Instead, I spent spring break week freezing my ass off in a tent in rural Maryland because that was where the Tufts Sailing Team did our training week/camping trip, so perhaps I’m just jealous.


The Chase Is On: Seven charts that confirm that investors are still hungry for yield.

All in the Family: How family offices became the preferred investing vehicle for the ultra-high net worth set.  (h/t Alex Kamkar)

Bottoms Up: The fact that wage growth is now faster for lower paid workers than higher paid ones is the most underrated story about the US economy.


The Big Short 2.0: Traders are buying up credit default swaps written against bonds made up of mall mortgage debt in the expectation that 2017 will be the year when many go bust.


Deferred Maintenance: Americans are flipping the oldest houses on record — and making the most money on record too as the focus shifts from foreclosures to properties in need of some TLC.

Believe it or Not: It’s still cheaper to own than rent in most US markets.


Taken to the Cleaners: How a terrible early-2000s deal allows California utility providers building to continue power plants that we don’t need at the expense of consumers.

Please Make it Stop: Time changes suck whether you are springing ahead or falling back. But I never knew just how awful it was until I had young kids.

This is Not Surprising: New study finds that young Wall Streeters regularly use drugs and pay for sex.

Chart of the Day


Employee of the Month: A recently fired employee stabbed and tried to run over his boss because, Florida.

Up in Smoke: A Florida lawyer’s pants caught on fire during a trial thanks to a faulty battery on an e-cigarette.  His client was on trial for Arson.  Seriously.

On Demand: Pizza Hut introduced something called Pie Top sneakers which contain a blue tooth device that sync’s up with their mobile app, allowing users to order pizza from their shoe.  This would be cool if it could be used to order an edible pizza rather than Pizza Hut.  It’s also a perfect illustration of why America has an obesity epidemic.

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Landmark Links March 14th – Fight For Your Right

2 thoughts on “Landmark Links March 14th – Fight For Your Right

  1. Eric knopf says:

    My biggest spring break was spent crashing on couches at BU, URI, & Tufts while sailing in the snow. Whole trip cost about $200 plus plane ticket. I should have taken out loans and gone to Cabo.

    Liked by 1 person

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