New College Grads: Better Job Prospects But Higher Debt
Average student debt for the class of 2013 with bachelor degrees has reached new heights at $30,000. The news comes as a double-edged sword for this latest cohort of newly educated workers: employment prospects have improved since they entered college in 2009 yet they have more debt to pay off.
The high-water mark was calculated by education finance expert Mark Kantrowitz, who used government data to come up with the new number.
Kantrowitz’s findings (earlier reported on by The Wall Street Journal) are higher than those calculated by the College Board, which last year reported that average debt among students who borrowed money and graduated in 2010-11 was $25,300. But while borrowers with a degree have higher wages and are less likely to be unemployed than those who don’t, dropouts are less fortunate, as this report from the Department of Education on debt levels for college non-completers shows.
College debt has been growing as a share of all consumer debt, nearly tripling since 2004 from 3.1 percent to 8.8 percent, a Cincinnati Enquirer article points out. And it doesn’t seem as if incomes are keeping pace with the growing debt obligations, as the number of loan delinquencies has been on the rise, too, nearly doubling between 2004 and 2013 to 11.2 percent.
The new fiscal millstone around millenials’ necks is starting to show its effects on the economy. An April report from the New York Federal Reserve observed that “Now, for the first time in at least ten years, thirty-year-olds with no history of student loans are more likely to have home-secured debt than those with a history of student loans,” meaning young graduates with debt are less likely to take on mortgages. The same trend was noted for car ownership.
Historically, housing recoveries have been precursors to an economic return to normal after recessions, but there’s been a string of stories noting twenty- and thirty-somethings are breaking with the past when it comes to big-ticket purchases like vehicles and homes.
That doesn’t mean this group of spenders is holding back on purchases. As this Los Angeles Times story illustrates, millenials are giving a nod to the generation that grew up during the Great Depression by charging less to credit and spending more on goods deemed essential or experiential. Not surprising? The relatively young are still happy to spend their limited reserves on classes, from chandelier making to sewing.
And while college graduates tend to have higher incomes, in recent years there’s been debate over whether post-secondary students learn much while at school. In “Academically Adrift”, two researchers wrote, “How much are students actually learning in contemporary higher education? The answer for many undergraduates, we have concluded, is not much.” Researcher Richard Vedder made the case college degrees work as signaling devices to employers because completing school is correlated with positive traits businesses hold dear in their human resource decisions.
But professors received a boost this week after a new report that drew on students from 1,300 colleges challenged the conclusions made by the writers of “Academically Adrift.” Those students with record-setting debts will be glad to know researchers think they learned something, too.
Photo source: Flickr/Nic McPhee