The Student-Loan Bubble Is Creating a Generation of Indentured Servants

The first indentured servants arose centuries ago out of necessity and desperation on both sides of the Atlantic. An unskilled laborer from pre-industrial England might need to save up multiple years' worth of wages to book passage to America. On the other side of the ocean, plantation owners and wealthy merchants had a tough time massing the labor they needed to expand their isolated enterprises.

The solution was indentured servitude. In exchange for the price of passage, poor European laborers signed contracts that bound them for years to the merchant who had paid their way. Since most indentured servants were under 21, their parents often handled the arrangement, hoping (at least we can imagine) to send their progeny off to a better life. For several years, indentured servants worked without pay until fulfilling the terms of the debt, at which point they were set loose with little more than the clothes on their back and the experience earned from their first years of toil in the New World.

Many didn't make it across the Atlantic. Many died in debt. Others found fantastic success. But for the vast majority of early American colonists, indentured servitude was the only way to make it at all.

A bridge to a broken future
Today, we see this tradition reborn in the debt load carried by millions of young Americans who went to college because they were told that they had to if they wanted to get a good job. Student loan debt now exceeds all forms of non-mortgage debt in the United States. More than 40% of all 25-year-olds now carry student loan debts, and more than 15% of that debt-laden cohort has fallen behind on payments. The New York Times and other publications have written on the trend of increasingly demanding degree requirements for jobs that shouldn't need one, like receptionists, couriers, or sales agents at rental car outlets.

To get a good job, you need a degree. That's truer now than it's ever been. Today's high school graduates face unemployment rates of more than 8%, but people with a bachelor's degree can feel more secure with a 4.5% unemployment rate. However, to get a degree, in nearly every case, you gotta pay to play. And in many cases -- just as occurred in the 17th and 18th centuries -- simply booking passage was no guarantee of future success.

I'll spare you the anecdotal sob stories of the guy who took out a hundred grand in student loans to get a master's degree in pottery, only to discover that he couldn't find a job above barista level. Those stories are easy to find, and easier to latch onto than hard numbers about broad trends. But consider this: There are more people under 30 with student loans than there are with degrees. Even if we add in the percentage of people under 30 who have some college experience and are likely to get a degree at some point, we still find that nearly 70% of all current and prospective degree holders in that age group -- about 30% of the entire group -- will come out of college saddled with some collegiate debt.


Sources: New York Federal Reserve and U.S. Census Bureau.
Data includes estimates of eventual graduates with current attainment of "some college." Estimates based on graduation rates reported by the National Center for Education Statistics .Includes any degree attainment, including technical certificates and associate's degrees.

This graph doesn't quite show the full picture, since it's pretty rare to find an 18-, 19-, or 20-year-old with a college degree -- Doogie Howser types notwithstanding. It's also quite possible that a number of people will leave college with student loans but no degree to show for the effort. But it's important to look at America's potential future workforce, and calculating likely graduation rates will do the trick.

However, these indebted graduates aren't exactly coming into a labor market that's primed to put them to work. The Center for American Progress offered a wide range of statistics this past June on the labor woes of young workers. It's still fresh enough to be relevant, as U.S. labor force statistics haven't changed very much in two months. The younger you are, the worse your chances of landing a job:


Source: Center for American Progress.

Keep in mind that unemployment statistics don't count those who aren't actively looking for work, and there are more than 8 million "potential graduates" in our tally of the under-30 age group that could be largely absent from the current unemployment calculations while they work on their degrees.

Having a degree does help, but not as much as you might think for younger workers:


Source: Center for American Progress.

The CAP also offers two startling statistics for this underemployed group: A young person will lose out on at least $45,000 in potential wages if he or she remains unemployed for more than six months, and the real wages for young college graduates have declined by 8.5% since the turn of the century. That's almost four times the median student loan of $12,800, which many people took on to avoid precisely that sort of situation. The CAP also notes that half of all college graduates are working jobs that don't actually require college degrees, like the receptionists and couriers I mentioned, as well as retail sales associates, restaurant service workers, and cashiers.

Why is that? Why should so many educated young people be stuck in these low-paying jobs? It could be that the job market itself has changed. More than a fifth of the entire American workforce has been stuck in a part-time job since the official end of the recession:


Source: St. Louis Federal Reserve.

If you're having trouble making this out, it's simply the number of Americans working part-time divided by total American nonfarm employment. It's been high before, but with one critical difference -- every time it's spiked past a one-fifth ratio, it's gone down quickly. Not so today. One of the major reasons is that it's simply the extension of a decade-long trend that's hollowing out the middle class, which is where most people expected to be after getting their degree in the first place. The National Employment Law Project has noted, on more than one occasion, that the financial crisis eviscerated mid-wage jobs while actually boosting the growth of low-wage jobs as a part of the overall labor force:


Source: National Employment Law Project .

Yes, high-wage occupations have grown as well, but there aren't quite as many of those jobs to go around. If you look closely, you'll see that there are fewer high-paying jobs now than there were before the recession:


Source: National Employment Law Project.

New college graduates will wind up working the latte line or answering the phone in an office. That's where the jobs are found nowadays. Mid-wage occupations were 60% of the lost jobs during the recession, but only 20% of the post-recession job gains. On the other hand, nearly 2 million new low-wage jobs have been added since 2010, accounting for 58% of job growth during the recovery. Under the NELP's definition, lower-wage occupations range from $7.69 to $13.83 per hour. At the upper end of the scale, that's worth about $28,750 in annual pay -- and this rosy assumption anticipates that these low-wage jobs offer 40-hour work weeks and at least some paid vacation, which is rarely the case in reality.

The future doesn't look that much better. Many of the occupations projected to add the most jobs by 2020 are rather low-wage: retail sales, home health aides, office clerks, fast-food workers, and so forth. Recent grads will not only have to compete against each other for these jobs, but they have a flood of displaced but experienced (former) middle-class workers to contend with as well. All this competition just serves to keep pay low: The average median annual wage across all of these new jobs, weighted by the number of new jobs added, is $32,700. A lot of that is thanks to the outsized impact of nursing salaries -- take those new jobs out of the picture, and the average annual wage of the other high-growth jobs drops all the way down to $30,000.

In time, however, even high-demand nursing graduates might find themselves in a vicious fight for a shrinking job pool. They won't be alone -- a number of students wind up snagging sheepskins of rather uncertain long-term value:


Source: National Center for Education Statistics.

In the past 40 years, the U.S. population has grown by 50%, but the number of annual visual arts graduates has tripled. Business programs have graduated more than three times as many people as they did in 1970. It probably should come as no surprise that the degree track most responsible for "streamlining" the American workforce -- the pre-MBA business grad -- is now churning out more graduates by far than any other program. Much of the growth in math and engineering graduation figures comes from the computer sciences, which barely existed as a degree path four decades ago. Without computer science added in, math and engineering graduation rates don't keep up with population growth.

Education, the one degree track in long-term decline, also happens to be the one most welcoming to new graduates, according to Georgetown University's Public Policy Institute. Only 5.7% of recent education grads are unemployed, compared with 7.3% of recent business grads and nearly 10% of recent social science grads. Even recent math and computer science grads are having a tough time -- 9.1% of them are unemployed.

Nursing graduates aren't broken out in these numbers, but the American Association of Colleges of Nursing has the figures we need: More than 80,000 students graduated from baccalaureate nursing programs in 2011. At that rate, all the new nursing jobs set to be added by 2020 (about 700,000) will be filled up by some point in 2019. When you add in the 24,000 graduates from nursing master's programs, it looks as if those positions will be filled by 2017. More eager students join these programs each year, despite alarming statistics showing that more than a third of all 2011's new registered nurses had failed to find a job in the field several months after their graduation.

Pieces of a bigger picture
But let's say the average college grad gets a job making $30,000 a year. Let's say it's near The Motley Fool's headquarters in Northern Virginia. After taxes, he makes $1,890 per month. If he moves in with two buddies, he'll wind up paying about $600 in rent and $100 in utilities. Now we're down to $1,190. A decent used car will cost about $300 a month, using a conservative estimate that includes the monthly payment, insurance, and gas. Down to $890. Food is important, so our new grad has to spend about $300 a month for that basic necessity (young guys eat a lot). That takes us down to $590 in available cash. Take out another $100 for a cell phone and $100 for monthly entertainment, and you're down to $390.

My fellow Fool Morgan Housel notes that the median student loan would result in a monthly payment of roughly $130 a month under relatively ideal conditions. That leaves $260 a month to spend or save -- if that, since these are all very rough back-of-the-envelope figures and could easily understate the true costs of living -- and many of our recent graduate's friends won't be so lucky. Only 39% of current student loan borrowers are actively paying off their loans and haven't fallen behind. The rest (that would be the delinquent 15% of our under-30 borrowers) might be looking at our $30,000-a-year grad and thinking, "Maybe I should've gotten that degree instead."

Debt weighs more heavily on people who have lesser means to repay. There are mechanisms to delay student loan repayment, but unlike all other forms of debt, the only way out is to pay off the loan. The $322 billion in outstanding student loan debt weighing down the under-30 age group might not mean as much to you as the roughly $1 trillion in total student-loan debt weighing down the entire country, but in nearly every case, the debt of older Americans is at least backed by experience, which is worth a leg up in a tough job market. A quarter of all delinquent student loans are held by people under 30, and once the penalties start it can quickly become a death spiral without the option of bankruptcy to clear the slate, or the opportunity for professional advancement and greater earnings to make up the difference. At least the old system of indentured servitude had fixed-length contracts and a clean slate at the end.

For millions of young Americans, a college degree has become the price of entry to the job market. The jobs they get when they've finished may not need a degree at all -- but few employers want to be left with the uneducated remainders of the workforce, so a trend toward stricter degree requirements, regardless of necessity, seems all but inevitable. With less experience than older graduates, the millennial generation is already at a disadvantage when it comes to getting a decent job in a tough market. Forcing the bulk of that entire generation through the college-loan wringer just so they can get half a shot at a better future will be counterproductive for the entire country if the best jobs on offer for an inexperienced graduate are behind the counter of a coffee shop.

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  • Report this Comment On August 25, 2013, at 11:02 AM, redoctober90 wrote:

    There are quite a few holes in this article, which I'll try to decipher (this is my first post on here, and I've been up for 20 hours ATTM).

    -First of all, there is nothing that says "you need a degree to get a job". That's what your high school counselor, your parents, and many politicians will make you think. You do need a specialization, however, it need not be in the Ivy halls - or even in a classroom. If you have the skills with the hands, you can make a good living fixing cars, or welding, or fixing things. Not everyone is cut out for the trades - a logical fallacy of many who think their kids are best in this economy learning a trade.

    -I'd find it hard to believe there are more debtors than degrees. I went to Penn State of all places, and I only know one person who didn't finish out of a group of 100. Perhaps the quality of education is key (plus I was in meteorology at the time, a major that is always in demand; after all, you can't live without the atmosphere!)

    -Most entry level jobs pay $12-15 an hour, which is substantially less than $30k. And a car with payment, insurance, and gas for $300 a month is a joke. Plus, if you live in Virginia, they have a heck of a mass transit system from what I've heard. :)

    -One of the main issues with our loan system is that not only do we burden the kids, many who are quite immature at 18 when they fill out their FAFSAs, with the loans, but parents often cosign on the loans, which means if the kids turn out to be turnips, those loans go on Daddy's pension, sucked right out of the check before it even reaches the mailbox. I know many parents who make six figures who are literally eating the ramen noodles with the kids because of the predatory loans.

    -In closing, I think personally a raise in the student loan interest rate would be a good thing. Perhaps when a 20% interest rate for a degree qualifying you for a lifetime of "serve this tradesman his hamburger" and "clean this spill up or you're fired" will make people reconsider their education. Furthermore, in that spirit, every high school should ditch the Shakespeare and social studies and have a full year of learning how to do basic accounting, law, and tools to start their own business. We don't need jobs, we need new businesses. When's the last time you saw a competitor to Best Buy, or Walmart? Where did SUN TV, Zayre, Hills, Ames, and the such go? Competition drives jobs and the economy.

  • Report this Comment On August 25, 2013, at 11:24 AM, SpecialK007A wrote:

    “The CAP also notes that half of all college graduates are working jobs that don't actually require college degrees, like the receptionists and couriers I mentioned, as well as retail sales associates, restaurant service workers, and cashiers. Why is that? Why should so many educated young people be stuck in these low-paying jobs?”

    A part of the reason is that although these jobs can be busy and hectic, they are relatively low stress because the stakes are low (cimpared to, say, being an engineer or teacher), especially if the employee feels he or she isn’t going to stay in the job forever. Add to that that you’re probably working with other young people and around the things you enjoy anyway – clothes, food, music – and it’s a no-brainer as to why young people would stay in those jobs even after getting degrees. Many would stay in those jobs forever if they were just paid more money.

    Now, about the loan issue. It’s funny that in the same article you reference $100 for a cell phone and $100 for monthy entertainment (which I think is ridiculously low compared to what young people really spend), you make the median $130 a month for a school loan seem positively Draconian. Are you serious? Is that all the fuss is about?

    Articles like these imply that the average student is paying $1000 a month or something ridiculous, but what you’re really saying is the average amounts to the cost of their cell phone plus a video game or a couple of nights out at the bar.

    Please.

    If they are making $8 an hour, that’s an extra 7 hours of work a week to pay of that loan amount, after taxes. And that’s if they don’t find a cheaper cell phone and give up a few nights out on the town or get a better paying job. If young people can’t scrape together the time or money to pay that back, the problem isn’t the loans but their priorities.

    The job market is bad, but it will get better. I graduated in a terrible recession in the early 1990s and did all right. We all have to tighten our belts and sacrifice when we’re young. The difference is there’s a generation of young people – and their parents – who think any form of sacrifice is wrong for that generation. They want it all, and they want it now. Anything less is not to be tolerated.

    Well, hardship often builds character, and for a generation that got grade inflation, constant attention, luxuries like cable and Internet, and a trophy just for showing up, maybe a little hardship is what they really need to succeed.

    BTW, I was an English major, and I've been six figures in that field for 20 years. Anyone who says that we're to get rid of humanities courses in lieu of some technical program is an idiot. You can be successful in any field if you work hard.

  • Report this Comment On August 25, 2013, at 11:26 AM, SpecialK007A wrote:

    Wow, an English major but apparently not a typing one -- that's what I get for doing this on the fly.

  • Report this Comment On August 25, 2013, at 11:35 AM, BlazingMG wrote:

    There is always room for the intelligent and driven to make it. There is always room for the less intelligent and driven to fail. Having a degree or not is irrelevant to this fact. You do not need a degree in anything to succeed in life.

    As to the adults that foolishly entered into a loan contract. You can not legislate foolishness away with a program. A fool will always be a fool. Suck it up and take responsibility for your actions and pay up.

  • Report this Comment On August 25, 2013, at 11:41 AM, TMFBiggles wrote:

    @ redoctober90 -

    Trying to respond to your responses point by point...

    - No, there's nothing that says you need a degree to get most jobs, but the trend towards degree inflation (referenced in the article via unnecessary degree requirements for low-level jobs) has made it more important to have a degree as a ticket into anything above fast-food level.

    - As I mentioned, those stats are for people under 30, many of whom haven't graduated yet. I explained the methodology of my calculation and its caveats below the chart.

    - As I said, it was a rough back-of-the-envelope calculation. I haven't actually owned or needed a car in over two years, so my understanding of transportation costs is pretty rusty.

    - That is another issue I had not considered. I am not sure whether the student-loan statistics available by age on various sites count the intended beneficiary of the loan or the primary loan-holder, but I believe it's the latter. The NY Fed does mention that parents taking out loans for children is a source of growth. However, I chose to only focus on the debt carried by recent graduates here.

    - I'm not sure how much the consideration of interest rates enters into the decision to take on student-loan debt. Would be worth a study, or at least a detailed survey, perhaps.

    - Alex

  • Report this Comment On August 25, 2013, at 11:44 AM, SpecialK007A wrote:

    So, not being a math major, maybe someone can help me. If $130 is the median payment, does that mean $260 is the maximum anyone is paying for a student loan? If so, I am once again underwhelmed by the problem for debtors.

  • Report this Comment On August 25, 2013, at 11:48 AM, Aegius wrote:

    Supply and demand. A college education is a commodity just like any other.

    Colleges are able to charge as much as they do because people are fighting to pay it!

    Meanwhile America faces a shortage of skilled labor....electricians, plumbers, welders etc. Often time these careers pay much more than someone with a college degree may earn.

    And if you are able to join the military....not only do you get a skill and job experience, you also get your college degree payed for free and clear.

  • Report this Comment On August 25, 2013, at 12:05 PM, thedude47 wrote:

    essentially we all live way over our heads, that's the biggest problem we have in the USA. maybe the kids get a degree, but did you teach them to balance a checkbook and prioritize their "needs" vs. "wants"?

  • Report this Comment On August 25, 2013, at 12:11 PM, richwood6 wrote:

    We have five children, first three went to a community collage for the first two years and we able to get them through without getting into the student loan trap. After going as far as they could they stayed in state and chose state schools, we paid what we could, got some grants and took out minor, 5K or less in loans. We have two with degrees and each has less than 9K in loans, that is a manageable amount. Our third will finish this year in the same range of debt.

    There are ways to avoid getting trapped with huge student loan debt. Why someone goes out of state when they can get the same education in state is something I will never understand, Those folks must just hate money. I have a brother who sent his daughter to Florida, owes 65K in student loan debt, for an English degree. If your going to an Ivy league school I can understand it, not to any basic school, your asking for trouble.

    Also the military is a great way to go, you can use the skill set they teach you and apply those skills in the civilian workforce. There are also trade schools and apprentice programs out there, not all roads to success have to go through collage. There are plenty of ways to avoid this trap, you just have to look.........

  • Report this Comment On August 25, 2013, at 12:19 PM, CollegeGrad2009 wrote:

    "think personally a raise in the student loan interest rate would be a good thing. Perhaps when a 20% interest rate for a degree qualifying you for a lifetime of "serve this tradesman his hamburger" and "clean this spill up or you're fired" will make people reconsider their education."

    Of course. Because the only ones who should be going to college are the children of the elites, whose mommy's and daddy's can pay for it. Way to make sure the dismal rates of upward mobility in this country (compared to the rest of the industrialized world) sink even lower.

    1) Tuition has to come down. Colleges need to stop allocating astronomical sums to their college football programs and other foolishness.

    2) The U.S. government should be sending more of its money directly to the colleges (with appropriate accountability), instead of indenturing students so that the colleges can spend the money on projects they don't need.

    3) Overall interest rates on student loans should be lower, not higher. I'm betting the default rates would be lower, not higher, too.

    4) The problem is not that too many kids are going to college when they don't have a right or reason to attend, but that employment has fundamentally changed in this country and will only get worse for the former middle class. In terms of inequality and class division, we are locked in a death spiral.

  • Report this Comment On August 25, 2013, at 12:21 PM, pasibete wrote:

    The median value in any set of values, Special K, is larger than half of the values and smaller than the other half. So the median value does not predict the maximum value. Suppose there were only seven values, median value 130. The other values could be 120, 121, 122, 131, 132, 133. Or they could be 5, 7, 8, 500, 700, 878,000. A median value reflects only one characteristic of a set of values. That's why statisticians also use other values, such as the mean (sum of all values divided by number of values) and the modes (values that occurs most often; there may be more than one mode).

  • Report this Comment On August 25, 2013, at 12:22 PM, culturecat wrote:

    The major hurdles facing millenials is stagflation, in tandem with stagnated wages and a glut of low level service jobs. Gone are the days when a young person can be trained at higher paying entry level apprenticeship positions with just a high school diploma. Most of those positions now require a college degree, at least a bachelors before even being considered for an interview. In the 70s a young 20something could train on the job for some pre engineering, manufacturing positions with say , a Reynolds aluminum type industrial occupation. I have friends. whose parents came up that way and gained upward mobility to middle class. Its not that way anymore. Most of those jobs have been outsourced or require an advanced degree. The wage cap also has stayed the same since then with no major adjustment for cost of living. An $8 an hour job is now a poverty level wage. No ones able to rent a decent place with that let alone buy groceries. In order to bring up the standard of living to a comfortable level, like the young boomers back in the day, there has to be a wage increase to at least $ 15.00 an hour. That will buy your necessities, and if you budget tightly, maybe save 20 in the bank. Student Loan debt margins have risen due to privatization of these loans. Thats a factor . Back in the day boomers frequently defaulted on their federally financed student loanswhich basically spoiled it for the rest of the younger generations coming up. Ever hear of the term "career student?" This was a social phenomenon back then since cheaper federal grants(with lowr interest rates on repaymnet) and loans were abundant. The economic trends today are far more daunting. That doesn't mean one can't succeed. However, it may mean you have to specialize and be targett specific when going for an advanced cerification. thats why a lot of younger people are going for specialized certification or credentialing rather than the 4 year degrees. There are jobs within the health care, behavioral health, business , computer tech sectors that dont require bachelors. Thats one way to escape the drudgery of lifelong indentured servitude in a predominantly service sector economy. Clearly, policymakers need to address this downward trending since it will have longterm negative repercussions for our society in the long run reagrding infrastructural and social welfare deficits . Its not just Millenials that are being handed the short end of the stick, its also displaced middle aged, older workers. Overall, young people are doing the best they can with the circumstances they have to deal with. The Policies enacted that brought America to this downward spiral is not within the control of the average American just trying to survive this economy. Thats the real core issue that needs to be acknowledged and stop blaming this generation for externally driven factors not within their realm of influence. This generation is very politically aware and more socially progressive than the previous generations. Its a challenging world but they are creative and resilient and have no doubt they will change the world for the better.

  • Report this Comment On August 25, 2013, at 12:28 PM, redoctober90 wrote:

    @ aegius -

    I understand that there is a lack of skilled labor as such, but the problem seems to stem not only from lack of candidates, but also the total pool is lacking the training.

    I live in the Rust Belt, which has a pretty well stocked lineage of people who follow in their parents' footsteps into the vo-tech. It's not true everywhere, but mind that for now.

    I have heard stories that 20-year olds with the certificates are lacking some fundamental skills when they get into the field. For example, many auto techs have general studies on basic/intermediate repair, but in working with a specific make of car, they lack a lot of familiarity with the way it is laid out, e.g. they can plug the OBDII in and recognize valve click, but wouldn't understand how to get to the lifters. Same thing with many apprentice electricians - they are given ideal situations but can't do installs in preexisting buildings, which in a town with a lot of century old buildings means a lack of jobs.

    To the author's point, it is a very heavy burden on everyone involved with the student. I always got the feeling college debt is seen as a "long-term debt", or mortgaging the present to pay for the future. The problem is that in order to get FAFSA funding, the parents need to list their incomes. Which some are not willing to divulge to the Feds. So, then, one must list that they are emancipated or the such to receive funding.

    The overlying problem is that we have made college job training, which for most undergraduate work is not sufficient. We need to go back to a classical model where companies would be willing to train and pay for hard working talent - rather than through unpaid internships and a college degree, be an entry ticket to the work world.

  • Report this Comment On August 25, 2013, at 12:40 PM, culturecat wrote:

    @ Aegius : Agreed. Exactly and absolutely. The classical job training model is what built Americas middle class. There should be rewards for businesses, perhaps via tax incentivizing to return to this model . Again, the leardship and policy makers have to be proactive in effecting results.

  • Report this Comment On August 25, 2013, at 12:54 PM, michaelbinCA wrote:

    Cause and effect. Indentured servitude is the effect. Nothing happens by chance. So, the necessity to achieve indentured servitude created the need for the student loan. A legal method of achievement.

    Oh, flakes. Pay me for the music.

  • Report this Comment On August 25, 2013, at 1:01 PM, michaelbinCA wrote:

    Spent most of my adult life in the college environment. Have seen many students who work two jobs, spend hours on the road driving back and forth from home to work. Spend little time studying, little time even attending lectures. But grade inflation, affirmative action (not necessarily a domain of the minorities) and, above all else, PAYMENT OF TUITION, paves the way for the degree. Just making sure that the professors are tenured. C's and B's get degrees.

  • Report this Comment On August 25, 2013, at 1:05 PM, sleavittpastor wrote:

    How about these as root causes of this problem:

    1. an generally underachieving student population (pre-college) brought about by low expectations

    2. a student population who does not value work and possessing a sense of entitlement

    3. a student population who won't do the dirty work

    4. a student population that refuses to learn

    college is far more important for learning how to learn than partying their four years (hopefully) of college away

    5. a student population who has been given far too many chooses in developmental years to have a sense of who they are and who they could be -- lacking a vision for what they can contribute to society

    This is not about a student-loan bubble -- it is really about irresponsible and unprepared students. Perhaps it is really more about the lack of parenting....

  • Report this Comment On August 25, 2013, at 1:17 PM, jsuffolk wrote:

    As 25 yr old computer science grad who's risen to a low level manager in charge of hiring, the 9.1% unemployment stat among grads in our field has a lot to do with the mindset of some young people.

    Our company has been on a recent hiring spree - I've hired 3 for my small team in the last 2 weeks, two of which were recent grads while rejecting many others. The difference: some cruise through school seemingly learning nothing except how to drink beer, while others take internships, do projects that show they're excited about technology, etc.

    We've accidentally hired one or two of the lazy kind because we're trying to fill more positions than there are people and have paid for it: they end up being a drag on the productivity of others whom are trying to help them and after a few months we end up letting them go, which is painful for everyone involved.

    I would also note that there's an overall 2% unemployment rate for CS grads in my area.

  • Report this Comment On August 25, 2013, at 1:19 PM, jsuffolk wrote:

    Just to clarify, I mean 2% among all CS graduates, not just recent graduates. I wouldn't be surprised if the rate among recent graduates is 9.1% for the reasons I've mentioned.

  • Report this Comment On August 25, 2013, at 1:59 PM, DiesMali wrote:

    Part of the student loan problem is that scholarships and grants have largely dried up. The few that are left mostly go to the rich kids, as an enticement for them to go to that college and later become alumni donors. A few more go to the very poor, but only the minorities and/or sports stars. If you're white and aren't athletic, you are basically screwed.

    In addition, a lot of the entry-level jobs have dried up or been outsourced. The ones that remain require 5+ years of experience in addition to a 4-year degree. It's estimated that 55% of recent grads (2009-now) are under- or unemployed, and only 20% are actually working in their degree fields. Most of what is available now are 29-hour/week jobs with no benefits (they work you just below 30/week to dodge Obamacare), and they require you to work rotating shifts so it's impossible to hold a second job.

    My field bled nearly 50% of its jobs between 2009 and 2011, which is right when I was finishing up and leaving college. It had been a booming field from 1985 until 2009, and then it took an exceedingly hard hit when the economy went splat. I've had to go back and get EMT and medical certifications in order to make it, but jobs are hard to find even in those areas since a lot of other people had the same idea when their own career fields crashed and burned.

    The OTHER other thing that's making it hard on us is that a lot of our loans have been sold by the federal government to private loan companies. My own got broken up and sold to 3 separate private companies last fall, each of which raised my interest rates by at least double (from 3.4% to 7.8 and 8.5% respectively), changed my terms of repayment to benefit themselves (I'll now be paying $168k on my original $50k principal), and doubled my monthly payments. I was doing okay before that, but now I'm sinking. They also have been balking at letting me go on Income-Based Repayment, and I'm apparently not allowed to consolidate since my parents cosigned for some of the loan amount. I'm far from the only person in this situation, too. There's a class-action lawsuit that someone has been trying to get going against one of my loan companies, but it's going nowhere since we can't find a lawyer we can afford as broke college grads.

  • Report this Comment On August 25, 2013, at 3:00 PM, mrscori2006 wrote:

    My husband and I do not have degrees. Together we make over $75,000 a year. We do not have children either, so we live pretty comfortably. College is a joke and in a few years I think we will see the only people going are for specialties like doctors, lawyers, etc.

  • Report this Comment On August 25, 2013, at 3:08 PM, alisathemom wrote:

    If entry level professional jobs --I mean jobs that were around in the 90s that got you in at a base level where you could work your way up--weren't being outsourced to India (software programmer, computer science, marketing, customer service, tech support, etc)--this might solve some of the problem. My first job in 1990 wouldn't exist now. I now make 6 figures in the same industry--high tech consulting.

  • Report this Comment On August 25, 2013, at 3:30 PM, bandruien wrote:

    I graduated from college a little over a year ago with an information systems degree. Since then I've held three short-term contract positions and am currently unemployed and seeking a job. There is a serious problem in the work force with entry-level jobs requiring not only a 4-year degree, but several years of experience as well. And that's when you can FIND an entry-level opening... most openings that I find in the information technology field are for mid-level or senior management. However, that's not the main point I meant to make.

    I have trouble believing that $130 is the median monthly student loan payment. I got off relatively lightly because I had the GI Bill to pay my tuition... I got student loans mostly to cover books and living expenses because I was taking massive course loads every semester and did not believe I could maintain my studies and a job at the same time. I finished a 4-year degree in just over 3 years with a 3.89 GPA... and about $18,000 in student loan debt.

    My monthly loan payments totaled approximately $225, at least until I lost my job and managed to get an unemployment deferment. That's almost $100 /month more than this article estimates, and like I said, I got off relatively lightly. Most students I went to school with were graduating with $30k, $40k, even $60k-$100k in student loan debt depending on their majors.

    I have a $100/month cell phone bill because I have a smart phone... which I was told was absolutely imperative in today's society, especially for someone working in the information technology industry. I pay less than $700 a month in rent, about $100 in utilities. My car, thank the gods, is paid off but I still shell out $100 a month in auto & renter's insurance, and anywhere from $30 - $250 a month in gas depending on my commute (for six months I had a 120-mile round trip commute every day). I have no entertainment budget. When I was working I'd buy a book or a dvd from the Walmart bargain bin when I had some spare money, but it still came out to less than $40 a month. Now that I'm unemployed my idea of an entertainment budget is maintaining my $7/month Netflix subscription. And I don't know how much longer THAT will last.

    My point, I suppose, is in two parts. 1) I have a hard time believing that $130 a month is an average student loan payment and 2) student loan payments can be a much more significant part of a monthly budget than you think. My student loan payments were equal to my insurance plus my cell phone plus a weeks' worth of groceries. And yes... I eat ramen almost every day.

  • Report this Comment On August 25, 2013, at 4:01 PM, mortmain wrote:

    Oh, give me a break. Wall Street is the first one running to the government looking for a bail out. Get the government off the taxpayers back and there will be plenty of jobs. Especially when the baby boomers retire en mass.

  • Report this Comment On August 25, 2013, at 5:55 PM, beardt wrote:

    This is a bunch of hoohah! The proof that the writer knows nothing about the subject matter is saying the nursing field will fill the vacant positions of 700, 000 with the 80, 000 graduating each year. The writer fails to realize the average age of a nurse is 45. Most will be retiring soon. There is not enough doctorally prepared faculty to teach nurses. All of these things lead to nurses going to school and getting more loans. I fall into that category. I have over $100,000 in loans. Am I rich? No. Am I poor? No. I pay over $800 a month in student loans. It was my choice to go to school for what I love.

    Nursing is not a field that you can do without a college degree. I disagree with a majority of you that say a college degree is not needed to make it in the world. I am the first in my family to graduate from college and not work in a bar or factory. There is nothing wrong with those professions, but the long-term effects and benefits are not very great. Every generation wants better for the one before. By focusing on the problems and not the solutions, you are just a part of the problem, too.

    While it is true that scholarships and grants have dried up, there is still work-study ability for undergraduates. Students need to be prepared to work and go to school instead thinking someone should foot the bill for the ride.

    Looking back, I should have done just that. If I had to do it again, I would have acted more like an adult and utilized my ability to pay for things myself. However, like those reading and apparently writing the article, I was used to being coddled by those around me and took advantage of everything offered. I am now PAYING (with $$)for the consequences. So, quit acting like a spoiled child and grow up. We need to do what we need to do to survive and quit playing the blame game.

  • Report this Comment On August 25, 2013, at 6:51 PM, debbie274 wrote:

    so we didn't go into debt & pay it off 20+ years ago?

    what the difference seems to between grads today is that they don't want to work as it takes time away from facebook, texting, social media & games.

    an amazing amount of these 'kids' still

    live at home letting the parents support them.

    I was ready to leave home the minute I turned 18,

    to be 25, 26, ...35 years old and still living at home...grow up.

    go back home when it is time to take care of your parents...but in the meantime...get a job, pay your debts & have your own life.

    no sympathy here...like my folks told me...if you

    can't pay for it you don't need it.

    big big difference between wants & needs.

  • Report this Comment On August 25, 2013, at 7:07 PM, roger142 wrote:

    I think it was back in the 1980's public school teachers really started telling kids to get a good job you have to go to college. Before then many suburban high schools had some technical courses like automotive repair, office administration, or construction, we called them career courses. A friend of mine said his Ohio school had a course they sent students to, to learn how manufacturing works.

    The big problem is we now have too many people getting college degrees, and not enough manufacturing jobs for high school graduates. I realize there are problems with too many high school kids who can barely read or write, and I assume they make up a large portion of people who now have college loan debt, but did not get a degree.

    The only solution to really reviving Americas economy will be based on manufacturing jobs. As for the skill level needed to perform these jobs, keep in mind in 1943 young women who barely had high school educations were the power house behind Americas aircraft industry. Of course they did receive some on the job training, which seems to be something employers don't want to do today.

  • Report this Comment On August 25, 2013, at 8:19 PM, redoctober90 wrote:

    A quick thought: I do think there is a halo effect with young people and a general hate between them and, say, the baby boomer/gen Xers in this country. Not all people who were born in the Reagan through Clinton admins are lazy or entitled...I know many of varying skills, fields, and disciplines who take whatever it is they do for a paycheck very seriously...and most have rather secure standings.

    Back to my point about interest rates: why not let them rise? We implicitly acknowledge a bubble forming; keeping the money issued inflates the bubble and worsens the problem. We're still adding degreed people to a bottleneck that isn't improving. Why are we still letting people get in over their heads? I always believed that the truly successful will always find scholarships or grants or backers for their academic progress. To a good extent, that's all we need. The rest can get their HS diploma and put it to good use. Once they are in sufficient supply, we will see jobs become apprenticeships, a la the 60s/70s model. Of course, if a rich kid wants to spend $100k for a four year bar tour, it's a free market, but we need not issue him or her a degree.

    As a giggle, I had my car serviced a few days ago, and found it amazing the gentleman who was setting up my bill, presumably a mechanic, couldn't spell the name of the company's proprietary traction control system right...even though he works on them all the time. Case in point: I think we have a fundamental education crisis also. :)

  • Report this Comment On August 25, 2013, at 10:07 PM, peckbill wrote:

    Even when the cost of tuition, room and board and meals costs are either not used or are partially paid for by grants, loans, etc., the greedy teachers (so called Professors) make it mandatory that the students used a text book written by the greedy teacher; and, the cost is usually between two and three hundred dollars. Elizabethtown Community College in Kentucky is a prime example of this unchecked practice (all colleges and universities allow their greedy teachers use this practice to supplement their income). This practice should not be allowed; no teacher should be permitted to use a self written text book to teach a class and charge the student for the book. This is just another reason education costs are so high and some of the time the quality of education suffers because the text book is not the best quality of material. This is an area the Federal government should look very closely at and prohibit the practice.

  • Report this Comment On August 26, 2013, at 12:46 AM, GonzoG1964 wrote:

    "Student-Loan Bubble Is Creating a Generation of Indentured Servants"

    Does anybody think this was not the plan all along?

    Everybody wants cheap labor that can't make waves.

    Shut up and drop another basket of fries, losers! And when you get too old to flip burgers, you can spend your proverbial golden years standing by the shopping carts and saying "Welcome to Sprawl-Mart".

  • Report this Comment On August 26, 2013, at 6:02 AM, VATeacher wrote:

    The author of the article failed to add the cost of health insurance that these young people will have to pay when he was calculating living expenses. I wonder how that will affect these young people.

    My high school daughter is contemplating a career in medicine. I am greatly worried that she will not be able to afford to live on her own while pursuing her dream of being a doctor due to the costs of medical school and the requirement to carry health insurance. Even if we keep her on our policy until she's 26, she will still have to carry it herself while she finishes her medical internship and residency.

  • Report this Comment On August 26, 2013, at 2:00 PM, OceanJackson wrote:

    Does anybody actually believe that College is not first and foremost, big business? If you think college is about education...you're not in the top 5% - 10%.

    It's the epitomy of Capitalism to create WORKERS. How do you do this?

    You load them with debt making them unable to escape. How do you do that?

    You feed them student loans for a college education that is not worth the cost, you feed them credit cards, and you feed them houses.

    Everyone in the top 5% - 10% knows this. They're selling it to you so they can make more money!!

    WAKE UP WAKE UP WAKE UP...the disparity between the rich and the poor is getting to the point of breaking the country.

    Once you start seeing college for what it is, not an educational system, but an indentured servant factory, you'll be part of the solution. The trick is to remove you or your child's own specific experience from the equation, and look at the situation generally.

  • Report this Comment On August 26, 2013, at 2:09 PM, OceanJackson wrote:

    Oh, and we now live in an Oligarchy.

    What was that line in The Usual Suspects? The greatest trick the devil ever pulled was to convince the world he didn't exist?

    That's why we believe we're in a democracy...the "devil's" convinced us.

    Right now, the water's been brought up to a very slow boil for a long time. But it is doomed to fail. The problem with an Oligarchy is it's not sustainable. Ever read Plato's natural evolotion of Political Regime's?

    ...And do you wonder why the top 5% are going to Cash in record droves. Many of them know what's coming, that their party won't last forever.

    Who do you think runs the country? The top 5%, the banks, Wall Street, and the top 5% owned media outlets...or the bottom 95% with our "democratic elections" where we choose between candidates that were pre-chosen for us?

    Arthur Shopenhauer said, "All truth passes through three stages. First, it is ridiculed. Second, it is violently opposed. Third, it is accepted as being self-evident."

    I expect everything I said above to be violently opposed. I think it's in the violent opposition stage.

  • Report this Comment On August 26, 2013, at 2:22 PM, TMFHousel wrote:

    <<But let's say the average college grad gets a job making $30,000 a year. >>

    The average starting salary of a college grad this year is $44,450.

    http://money.cnn.com/2013/01/10/pf/college/graduate-salaries...

  • Report this Comment On August 26, 2013, at 2:34 PM, TMFBiggles wrote:

    @ Morgan,

    That figure only accounts for those who have jobs in their field of study, not for all graduates.

    http://www.washingtonpost.com/blogs/wonkblog/wp/2013/05/20/o...

    Only 27% of undergraduate degree holders meet that criteria.

    - Alex

  • Report this Comment On August 27, 2013, at 11:09 AM, TMFHousel wrote:

    Alex,

    Other measures of median starting salaries of college grads center around mid-$40,000's.

    http://nces.ed.gov/fastfacts/display.asp?id=77

    I'm curious: Where did you get the assumption of $30,000 starting wage? The relevance of that example rests entirely with what wage you assume, and it doesn't look like $30k has much grounding in reality.

  • Report this Comment On August 27, 2013, at 11:12 AM, TMFHousel wrote:

    Here's another.

    For all majors, the median starting salary for those with a bachelor's degree in 2013 is $44,928.

    http://www.naceweb.org/uploadedFiles/NACEWeb/Research/Salary...

  • Report this Comment On August 27, 2013, at 11:25 AM, TMFHousel wrote:

    One more rebuttal:

    << A decent used car will cost about $300 a month, using a conservative estimate that includes the monthly payment, insurance, and gas>>

    I'd just point out that in this situation the car loan would very likely be larger than the student loan.

  • Report this Comment On August 27, 2013, at 11:29 AM, TMFHousel wrote:

    OK, one last one.

    Why are we so freaked out about a $200 monthly loan payment for a degree that will statistically more than double your lifetime wages but we say things like "$100 for a cell phone and $100 for monthly entertainment" like it's water under the bridge?

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