Big ticket loans

My big ticket loans

David Vaughn

Eco/561

April 1, 2019

Kate Stow

My big ticket loans

            My college career is coming closer to an end and I am not completely surprised by the cost, but I am dissatisfied in some ways. I will explain with these questions; do I pay too much for what I receive? Or will the time I have spent in college amount to the heaping debt that I have accumulated?

Opportunity cost defined as- The amount of other products that must be foregone or sacrificed to produce a unit of a product (Campbell R, 2012), in this case it asks the question; If I have spent this much time in college will the tradeoff be a large amount of debt, in exchange for a good paying job. So the purpose of this paper is to determine my reasoning in deciding to make a big purchase. This big purchase in this scenario is me deciding to enter college. This is opposed to any other item I may have needed a loan for. One such item I may have purchased I think of is video games which do not necessarily require a loan. This does however give a variation of what I may have bought that could be effected by the CPI or consumer price index  a measurement of consumer shopping P.179 (Campbell R, 2012). This in turn may also be considered personal consumer expenditures. (PCE) which also means measuring the price changes in consumers goods and services, like a game or my big ticket item a college education. Both can be affected in the micro and macro views of economics. My school loans and games that is. So the purpose of this paper is my decision to make a big purchase and how it is effected by the GDP (gross domestic product) CPI, or PCE or personal consumer expenditures.

My decision to enter college

            I grew up being uneducated. That led to me not having any strong ideas on how to generate money or a good job. I felt I  lacked the tools necessary to acquire the positions I wanted. I wanted to be free of poverty. Thus leading to me deciding to enter college, I wanted to pursue a degree, for a chance at a better job and life. I never looked at what a PCI could be and its effect on my college education. I would not think of my college education as being a part of any aggregated funds. Things like grants or anything subsidized were unfamiliar to me accept maybe a Pell grant. So the decision was simple enter school and start class. A personal expenditure had been made and I was unaware of it. I just totaled into the aggregate amount for education and labor services.

Definitions for aggregate in macroeconomics is a large amount of delegated funds or materials that have been deemed for a purpose P.6 (Campbell R, 2012). Continuing with my big ticket purchase and my decision to further my education I am still in college. I was successful in getting my degrees but I also generated a large amount of debt. This lead to me deciding to enter the job search, once again I am apart of PCE but as a unemployed and disallocated person and my loans are now a part of the said $1.5 trillion school debt (Friedman, 2018) my growing $80,000 debt will total into this with interest.

This will make the total somewhere near $100,000 after I earn my M.B.A. With my income as it is it was said that it will take me 300 months to repay this. I think it comes from me being harassed. I used the simple interest formula and was in shock. The formula I=PRT the P meaning principle or amount of the loan 30000. With the rate I used the growth in GDP in 2018 it went up 2.2% (www.bea.gov/news/2019), I then used the time 300 months divided by twelve equals 25 years. I=PRT or; I = 1,650,000. This is completely inaccurate and I find it ridiculous that this amount could be considered the interest I need to repay. So I looked at my servicer which is mentioned in my research Nelnet (Friedman, 2018). According to (Friedman, 2018) Nelnet has $48.3 billion in in mounting debt. Could this be because of the simple interest formula? With this amount of debt as it is and mounting that is only offset by either deferment or forbearance. I decided to reenter college that is how the amount will soon be near or above $100000. So why would I want to pay this amount as opposed to only buying a video game.

A closer look at trends in GDP and CPI:

            To begin I want to look at the initial statistics for recent years according to (Friedman, 2018). Says that student loan debt is $1.52 trillion and that there are 44.2 million U.S. students with loan debt, a student loan delinquency or default rate of 10.7% nationwide. This goes along with the total increase in student loan debt in the most recent quarter (amount totaling) $29 billion. New delinquent balances in 30 plus days this may be an additional $32.6 billion according to (Friedman, 2018). If I were to look over the totals for GDP and CPI would I see a rise or trend in them that can be a factor in the amount of interest or money necessary to enter and complete college.

            To fully understand the correlation, I want to discuss the differences in PCI and PCE. Although similar with both measuring consumer shopping habits CPI & CPE have slight differences. A PCE may be considered predictable says (Kenton, 2019). (Kenton, 2019) Also says that many analysts prefer the CPI because of its use of the fixed basket of goods, and its ability to determine economic stability.

            Thus could this be consumer interest at work which has manifested into actual shopping. The shopping being my loans or education and video games. Is the rise or inflation measurable in the economy.

According to (economics, 2019) which provides information on inflation you can see that from 2010, and 2012 an increase was displayed higher than previous years this then leads to a drop around 2016. This drop is considerable because of the raise around 2011-2012 and 2018-2019. So seeing that at and around the time I have decided to enter college in 2011-2012 there is a large spike in inflation. My mounting debt (fact) totaling into the nations school debt (fact) may have caused a rise in CPI.

My decision to enter college and the possible correlation between them. This may be a positive economic theory at work. The cause and effect of me and others deciding to enter college. Thus increasing the aggregate limits of school funding. So how does this correlate into my decision to enter college?

Conclusion

Simple I never accounted for the small things that I purchased. Even though I was intelligent and could conclude my thoughts and actions, I did not feel any concise decision was being made when I chose to get a degree because there were no long ponderings, I did not think of thirty years of past consumers. Or the Federal rate of funds, I honestly watched CNN from time to time and I did not give a lot of thought to some things. I did not expect to pay so much which is not quite true. In some ways it may have been less because I was in belief that it would cost me $20,000 a year to get one degree. Where would I get such a number, possibly from those that steal and harass. My decision to get a degree was based on me wanting a better life.

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