Javanomics 101: Coffee today is debt tomorrow

By Blaine Harden

updated 1:46 a.m. ET June 18, 2005

SEATTLE - At a Starbucks across the street from Seattle University School of Law, Kirsten Daniels crams for the bar exam. She's armed with color-coded pens, a don't-mess-with-me crease in her brow and what she calls "my comfort latte."

She just graduated summa cum laude , after three years of legal training that left her $115,000 in debt. Part of that debt, which she will take a decade to repay with interest, was run up at Starbucks, where she buys her lattes.

The habit costs her nearly $3 a day, and it's one that her law school says she and legions like her cannot afford.

It borders on apostasy in this caffeine-driven town (home to more coffee shops per capita than any major U.S. city, as well as Starbucks corporate headquarters), but the law school is aggressively challenging the drinking habits of students such as Daniels.

The Color of Money: Youth is fleeting, but debt isn’t The Color of Money: Coming to terms with student loans The Color of Money: Recent grads need financial guidance

"A latte a day on borrowed money? It's crazy," said Erika Lim, director of career services at the law school.

To quantify the craziness, Lim distributes coffee-consumption charts. One shows that a five-day-a-week $3 latte habit on borrowed money can cost $4,154, when repaid over 10 years. She also directs students to a Web site she helped create. The "Stop Buying Expensive Coffee and Save Calculator" ( http://www.hughchou.org/calc/coffee.cgi ) shows that if you made your own coffee and for 30 years refrained from buying a $3 latte, you could save $55,341 (with interest).

Inside the Starbucks across from the law school, Daniels seemed surprised — but unmoved — to hear all this. "I guess I never had done the math," she said. "On the other hand, I would be a very crabby person without my comfort latte."

Therein lies the rub for those who would curb latte consumption with pocketbook reasoning. As Lim concedes, "no one pays any attention."

Financial planners, best-selling investment gurus and a number of advice columnists have been warning consumers for years that seemingly insignificant daily spending on such luxuries as gourmet coffee can, over time, sabotage savings and hobble a person's financial future.

But these warnings, too, have been ignored, at least as measured by the runaway growth and profitability of Starbucks, the world's leading purveyor of specialty coffee. Its stock is up more than 1,200 percent in the past 10 years. When it went public in 1992, the company had 125 stores. It now has more than 9,000 locations around the world and long-term plans for 20,000 more.

The upside of coffee shops
Starbucks declined to comment for this article, referring questions to the Specialty Coffee Association of America, a trade group. Its spokesman, Mike Ferguson, said that coffee shops provide an excellent opportunity for students to do their homework.

"You can occupy a table for two hours for about $3, which is unique in a retail setting," he said. "At a traditional restaurant, they will kick you out."

The second-largest gourmet coffee retailer in the Seattle area, Tully's, did respond. Its chief financial officer, Kristopher Galvin, said he had never before heard any complaint about the long-term financial impact of spending $3 a day on coffee, either for consumers or for students buying the drinks with borrowed money.

"I would guess, based on my years in college, that having lots of good coffee would help you get through college and help you pay back those student loans," Galvin said.

Nonprofit groups that specialize in lending money to college students disagree. They object not to lattes or cappuccinos but to the several thousand dollars of student debt that can be incurred to buy them. In decades past, lenders chided college students for excessive spending of borrowed money on pizza and cigarettes, but the staggering ubiquity of Starbucks appears to have narrowed the nagging to foamy espresso drinks.

MORE FROM BUSINESS

Business Section Front

Stocks zigzag after wholesale inflation data   Boeing 787 in the air after two-year delay NYT: Poll reveals depth and trauma of joblessness   Judge tosses case against ex-Broadcom execs   Upper Deck gives Tiger Woods ‘full support’ Economy points to recovery; inflation looms   Homebuilder outlook dips despite tax credit Fed likely to leave rates at record low U.S. debt could push interest rates higher Poll: Fighting global warming will create jobs Business Section Front   Add Business headlines to your news reader: