One Trillion Dollars, that’s a Billion-Billion Dollars in student loan debt…more than all credit card debt combined. That’s what’s owed by millennial-aged students and former students (1).
Millennial’s student debt owed averages $27,000 with many owing over a hundred grand. And while we’re at it, let’s let congress royally screw you by charging interest two to three times greater than it costs the government itself to borrow…They wouldn’t want to give you a break…unless it’s to break it off in you as well (2).
Student loan rates weren’t always this high, were they?
In 2002, President Bush signed legislation that changed student loan rates from variable to a fixed rate as of July 1, 2006. Before the change, student loan rates changed on July 1 every year and were based on auction rates of Treasury Bills ending in May. Then they would add 0.25% to that rate. During the recession, T-Bill rates were as low as zero. So, under the old formula students could be paying a rate on their student loans of a whopping 0.25%(2). What are your student loan rates?
The progressive One Wisconsin Institute reported that graduates from 2011, have a student debt rate some 60% of their annual salary. They estimated that it will take some twenty-one years to pay off their average student loans (3).
So, a twenty-five-year-old graduate won’t get out from under his/her student debt burden until about age 45. And if you can’t find a job, the loans go into deferment which will do such a number on your credit rating that every other decision you might consider borrowing money for (like cars, a house, appliances, furniture…you know, the drivers of capitalist, consumption-based economy) will either be postponed or you will borrow at a much higher rate.
Welcome to middle age! By the way, now that you have finally paid off your student debt, why not take out some new loans to educate your own kids?
According to Adam Goldfein, the Millennial Generation is in for a rough road. He claims that the combination of high debt and low employment will have a long-lasting negative effect, and some may never recover from early job troubles. Goldfein quotes a study of young Danish workers who had been jobless for ten months. They were twice as likely to be unemployed fifteen years later and 14% earn less than their counterparts who were employed at the same time (4).
What with Baby Boomers needing to work longer and often having to accept offers at a rate sometimes 25% less than they made previously, increased downward pressure mounts for Millennials from every angle. If they get an offer over a more experienced Boomer or Gen-Xer, it is for a considerably less than earlier. Millennials could very well become America’s first generation that earned less than the previous one.
But Wait! There are positives in what has so far been a presentation of Pooh-pooh on a plate.
Although many Millennials have chosen soft areas of study that have led to no vacancy signs on the door, many of this generation are willing to return to school (I know, more debt) to focus on more technical areas where jobs are fairly plentiful. Millennials still have the time to make the career adjustments that Boomers and Gen-Xers cannot. You have few qualms about staying with your parents while pursuing these goals and you have (and seek) the flexibility that neither of the other groups has. In short, many of you can have a do-over. Wipe the slate clean, if necessary, to do what you want in life!
Here are some suggestions:
· Take an assessment to determine what your desires and aptitudes are
· Decide if you can make a living at it (Including starting your own business)
· Return to school is possible (and if necessary)
· Consider moving back home if necessary (and practical)
(1) Time, May 14, 2009, Anne Fisher, When Gen-X Runs the Show
(2) Policy Mic, May 26, 1013, Hanna Johnson, Millennial Unemployment: 3 Ways Government is Screwing Young People Out of Jobs http://www.policymic.com/articles/44629/millennial-unemployment-3-ways-government-is-screwing-young-people-out-of-jobs
(3)The Huffington Post, April 21, 2013, Terry Savage, The Shame of Student Loans http://www.huffingtonpost.com/terry-savage/the-shame-of-student-loan_b_3127099.html
(4)Adam Goldfein, Millennial Generation is in for a Rough Roadhttp://adamgoldfein.com/millennial-generation-is-in-for-a-rough-road/