Abbey Normal
Senior Member
Long but fascinating BusinessWeek Online article. About 1/3 of it below. There is a link for the balance at the end of the article.
I was able to pay for college with a combination of work, low-interest loans, some financial aid, and a grant. It doesn't sound that easy any more. But the most important thing is that these kids are getting into huge credit card debt at a time when they are very vulnerable. If I had a credit card in college, when I had so little money, who knows how much debt I would have incurred.
Thirty & Broke
The real price of a college education today
By Susan Berfield
BusinessWeek Online
Paige Nichols has a certain stoicism about her, which has helped her overcome disappointments big and small. She was born in Oklahoma City in 1975, a time of plenty for her family. Her father was prospering as a commodities trader, and he liked to spend his money. Paige would turn out to be the same way. But by the time she entered college in 1993, their financial situation had become, she says, considerably more "volatile." Her parents had been able to pay for the education of her two sisters, 11 and 13 years older than she, but told Paige they couldn't do the same for her.
She finished up at the University of Tulsa in 1997 with a business degree and $20,000 in student loans, which makes her, by official reckoning anyway, a typical graduate. She is now paying off her loans, $300 a month; at that rate it will take her until she's about 50. "Twenty thousand isn't even that much, but it feels hefty," she says. "I'm not making any headway."
Like many who emerged from adolescence amid the promise of the late 1990s, Paige never imagined that money would be the issue upon which crucial decisions in her life would turn. But it is. She has been fascinated with forensic psychology ever since reading a book in college about a woman who studied serial killers, and she was accepted into a master's degree program at the Chicago School of Professional Psychology in 2004. Before long she reconsidered. "I dream big," she says, "then reality seeps in." Paige would have had to borrow at least $32,000, which seemed like "way too much to think about," especially since afterward she might earn less than she would in the corporate world. "I could not justify putting myself in that financial jeopardy," she says. "But it could have been my life's passion."
College Debt and Credit Cards
Paige belongs to the first generation that came of age with the Internet, grew up marketed to at every turn, is too young to remember the Vietnam War, Watergate, or the Beatles: There are all kinds of ways to describe today's 30-year-olds. But what may really come to distinguish them is that they could be the most indebted generation in modern history.
Two new economic realities are at work. Many had to borrow serious money to attend colleges that are ever more costly. And as soon as they entered school, they were offered credit cards; by 30 many have accumulated thousands of dollars of that very expensive debt, too. Imprudent choices sometimes have compounded their troubles. The consequences can be profound: Many of those 30-year-olds feeling unduly burdened by their financial obligations have had to make compromises on some of life's vital decisions.
Paige is a typical graduate not only because of the amount of her student loan debt but also because of the way in which her attitude toward it has shifted. In those early years, she felt unprepared for life on her own and had what she calls an immature attitude toward money. She paid as little as she could on her student loans, about $50 a month, while working in Tulsa as an accountant at Deloitte & Touche and later at WilTel Communications Group Inc. as a product manager. She could have handled making higher payments, but that would have meant scrimping. Paige, though, had long ago learned the prevailing cultural language of brand names and status symbols. Living in reduced circumstances simply didn't correspond with what she thought she understood about being an adult. "My lifestyle was a little out of whack," she says. "I expected to be able to live the way my parents raised me."
Now, after two turbulent years in Chicago, Paige is happily employed as a product manager for a Web site called ShopLocal LLC, earning $65,000 a year. She's hoping to buy a place of her own before she's 35 years old, maybe invest in real estate with a group of friends, start saving more money for retirement. "We were supposed to be the slacker generation," she says, "but I think we grew out of it."
No Guarantees
In myriad ways, the economics of being 30 have changed for the worse. A college degree is now the minimum required to find a place in the working world that affords some job satisfaction and material comfort. But it doesn't offer protection against turmoil in the labor market, as it once did. Nor does it guarantee such things as health insurance or a retirement plan. And real earnings for college graduates without an advanced degree have fallen four years in a row, for the first time since the 1970s.
The cost of higher education, however, has increased so dramatically in the past decade and a half -- up by 63% at public schools and 47% at private -- that more students have to borrow tens of thousands of dollars to attend, ensuring that many of them are paying off those loans well into their 40s. The median debt-to-income ratio now is about 8%. But fully one-quarter of graduates are paying more than 12% of their income, a level many financial experts regard as worryingly high. That burden will only grow: Interest rates on student loans are going up for the first time in five years.
Their financial obligations leave them particularly vulnerable to life's discontents. Nellie Mae, the student lender, found that 55% of all borrowers felt hampered by debt in some way in 2002: They changed career plans, gave up on graduate school, put off buying a home, getting married, or having kids. "This is the first generation who won't necessarily do better than their parents," says Tamara Draut, director of the economic opportunity program at Demos, a research and advocacy organization in New York. "They've been told: 'Apply yourself. You'll get a job, a home.' For many young people that's not the case."
Turning 30 has long had iconic status in American society: It is associated with a seriousness of purpose, a willingness to plan for what still might be an indistinct future. But student loan debt can diminish that sense of stability. Michelle Chin, a scrappy, confident, 31-year-old graphic designer who lives in East Los Angeles, says what bothers her most about her financial situation is that she can't save much money. She graduated from Art Center College of Design in Pasadena, Calif., seven years ago and now has $42,000 in student loans and $7,000 in credit-card debt. As Michelle says, "I'd like to hold on to more of my cash, but that almost feels frivolous."
Thirty years ago, when many of their parents attended school, it was entirely possible to get through college with modest family savings and steady work during the summers. Since the mid-1980s, though, tuition has been growing far faster than many families can afford. The price of public colleges, where about 80% of all students are enrolled, increased 28% in the past five years alone, far more than in any five-year period since 1975. At private colleges, the total cost increased 17%. Those figures, it should be noted, already take inflation into account. At the same time, outright grants have been shrinking as a proportion of total financial aid. "The costs of education are moving from the government to families, and in families from parents to kids," says Melanie E. Corrigan, associate director of national initiatives and analysis at the American Council on Education in Washington.
A Rite of Passage
These trends have intersected before -- paying off college loans has never been easy, and earlier generations have had to contend with weak job markets -- but they are felt more keenly today. Almost two-thirds of students have to borrow money to get through school; as many as one-quarter may be accumulating credit-card debt to help pay for tuition. The median debt for college graduates in 2004 was $15,162, an increase of 66.5% since 1993. That may not seem like a crippling sum, but plenty of individuals owe much more. Back in 1993, only 4.2% of graduates had loans exceeding $25,000. A decade later, 17% did.
Today's 30-year-olds are also the first generation for whom having a credit card was a rite of passage. Most of their parents couldn't get a credit card until well after graduation. But beginning in the early 1990s, students have been bombarded by tempting offers at a time when they were just scraping by. For those whose financial education had scarcely begun, it seemed like free money: Spend a couple of hundred dollars and only pay the minimum balance of $10 a month. So students used their cards to buy computers, clothes, gas, textbooks, and sometimes even to pay for tuition. Living with debt has become perfectly acceptable: Last year 76% of college students had credit cards and their average debt was $2,169. "We wink at the magical thinking that credit-card companies encourage us to engage in," says Darryl Dahlheimer, a program manager at Lutheran Social Service Financial Counseling in Minneapolis. "The bitter 30-year-olds are the ones who are still paying off the pizza they ate when they were 20."
When these students start out in the working world, many use their credit cards to fund a richer lifestyle than they can afford, get by between jobs, or cover emergency expenses. The average credit-card debt among 25-to-34-year-olds was $5,200 in 2004, 98% higher than in 1992. "Young people are taking on a level of debt that was never possible for an earlier generation because it's not based on income," says Robert D. Manning, author of Credit Card Nation and professor of finance at Rochester Institute of Technology. "This is a generation that has a razor-thin margin of error."
Few would argue that building up credit-card debt is in anyone's best interest. Most economists, though, believe that borrowing $20,000 or so for a degree that, in the past anyway, would enable graduates to earn $1 million more over their lifetime is a pretty smart investment. But for those who have to borrow considerably more, or come from families that can't slip them a couple of thousand in a pinch, student-loan debt can be a real burden. "We're a society that values freedom of choice, but debt can restrict and narrow choices," says Gaston Caperton, president of the College Board and former governor of West Virginia. The real price of a college education may have to be calculated by different means altogether.
...
For full BusinessWeek Online article: http://biz.yahoo.com/special/youngearn06_article1.html
I was able to pay for college with a combination of work, low-interest loans, some financial aid, and a grant. It doesn't sound that easy any more. But the most important thing is that these kids are getting into huge credit card debt at a time when they are very vulnerable. If I had a credit card in college, when I had so little money, who knows how much debt I would have incurred.
Thirty & Broke
The real price of a college education today
By Susan Berfield
BusinessWeek Online
Paige Nichols has a certain stoicism about her, which has helped her overcome disappointments big and small. She was born in Oklahoma City in 1975, a time of plenty for her family. Her father was prospering as a commodities trader, and he liked to spend his money. Paige would turn out to be the same way. But by the time she entered college in 1993, their financial situation had become, she says, considerably more "volatile." Her parents had been able to pay for the education of her two sisters, 11 and 13 years older than she, but told Paige they couldn't do the same for her.
She finished up at the University of Tulsa in 1997 with a business degree and $20,000 in student loans, which makes her, by official reckoning anyway, a typical graduate. She is now paying off her loans, $300 a month; at that rate it will take her until she's about 50. "Twenty thousand isn't even that much, but it feels hefty," she says. "I'm not making any headway."
Like many who emerged from adolescence amid the promise of the late 1990s, Paige never imagined that money would be the issue upon which crucial decisions in her life would turn. But it is. She has been fascinated with forensic psychology ever since reading a book in college about a woman who studied serial killers, and she was accepted into a master's degree program at the Chicago School of Professional Psychology in 2004. Before long she reconsidered. "I dream big," she says, "then reality seeps in." Paige would have had to borrow at least $32,000, which seemed like "way too much to think about," especially since afterward she might earn less than she would in the corporate world. "I could not justify putting myself in that financial jeopardy," she says. "But it could have been my life's passion."
College Debt and Credit Cards
Paige belongs to the first generation that came of age with the Internet, grew up marketed to at every turn, is too young to remember the Vietnam War, Watergate, or the Beatles: There are all kinds of ways to describe today's 30-year-olds. But what may really come to distinguish them is that they could be the most indebted generation in modern history.
Two new economic realities are at work. Many had to borrow serious money to attend colleges that are ever more costly. And as soon as they entered school, they were offered credit cards; by 30 many have accumulated thousands of dollars of that very expensive debt, too. Imprudent choices sometimes have compounded their troubles. The consequences can be profound: Many of those 30-year-olds feeling unduly burdened by their financial obligations have had to make compromises on some of life's vital decisions.
Paige is a typical graduate not only because of the amount of her student loan debt but also because of the way in which her attitude toward it has shifted. In those early years, she felt unprepared for life on her own and had what she calls an immature attitude toward money. She paid as little as she could on her student loans, about $50 a month, while working in Tulsa as an accountant at Deloitte & Touche and later at WilTel Communications Group Inc. as a product manager. She could have handled making higher payments, but that would have meant scrimping. Paige, though, had long ago learned the prevailing cultural language of brand names and status symbols. Living in reduced circumstances simply didn't correspond with what she thought she understood about being an adult. "My lifestyle was a little out of whack," she says. "I expected to be able to live the way my parents raised me."
Now, after two turbulent years in Chicago, Paige is happily employed as a product manager for a Web site called ShopLocal LLC, earning $65,000 a year. She's hoping to buy a place of her own before she's 35 years old, maybe invest in real estate with a group of friends, start saving more money for retirement. "We were supposed to be the slacker generation," she says, "but I think we grew out of it."
No Guarantees
In myriad ways, the economics of being 30 have changed for the worse. A college degree is now the minimum required to find a place in the working world that affords some job satisfaction and material comfort. But it doesn't offer protection against turmoil in the labor market, as it once did. Nor does it guarantee such things as health insurance or a retirement plan. And real earnings for college graduates without an advanced degree have fallen four years in a row, for the first time since the 1970s.
The cost of higher education, however, has increased so dramatically in the past decade and a half -- up by 63% at public schools and 47% at private -- that more students have to borrow tens of thousands of dollars to attend, ensuring that many of them are paying off those loans well into their 40s. The median debt-to-income ratio now is about 8%. But fully one-quarter of graduates are paying more than 12% of their income, a level many financial experts regard as worryingly high. That burden will only grow: Interest rates on student loans are going up for the first time in five years.
Their financial obligations leave them particularly vulnerable to life's discontents. Nellie Mae, the student lender, found that 55% of all borrowers felt hampered by debt in some way in 2002: They changed career plans, gave up on graduate school, put off buying a home, getting married, or having kids. "This is the first generation who won't necessarily do better than their parents," says Tamara Draut, director of the economic opportunity program at Demos, a research and advocacy organization in New York. "They've been told: 'Apply yourself. You'll get a job, a home.' For many young people that's not the case."
Turning 30 has long had iconic status in American society: It is associated with a seriousness of purpose, a willingness to plan for what still might be an indistinct future. But student loan debt can diminish that sense of stability. Michelle Chin, a scrappy, confident, 31-year-old graphic designer who lives in East Los Angeles, says what bothers her most about her financial situation is that she can't save much money. She graduated from Art Center College of Design in Pasadena, Calif., seven years ago and now has $42,000 in student loans and $7,000 in credit-card debt. As Michelle says, "I'd like to hold on to more of my cash, but that almost feels frivolous."
Thirty years ago, when many of their parents attended school, it was entirely possible to get through college with modest family savings and steady work during the summers. Since the mid-1980s, though, tuition has been growing far faster than many families can afford. The price of public colleges, where about 80% of all students are enrolled, increased 28% in the past five years alone, far more than in any five-year period since 1975. At private colleges, the total cost increased 17%. Those figures, it should be noted, already take inflation into account. At the same time, outright grants have been shrinking as a proportion of total financial aid. "The costs of education are moving from the government to families, and in families from parents to kids," says Melanie E. Corrigan, associate director of national initiatives and analysis at the American Council on Education in Washington.
A Rite of Passage
These trends have intersected before -- paying off college loans has never been easy, and earlier generations have had to contend with weak job markets -- but they are felt more keenly today. Almost two-thirds of students have to borrow money to get through school; as many as one-quarter may be accumulating credit-card debt to help pay for tuition. The median debt for college graduates in 2004 was $15,162, an increase of 66.5% since 1993. That may not seem like a crippling sum, but plenty of individuals owe much more. Back in 1993, only 4.2% of graduates had loans exceeding $25,000. A decade later, 17% did.
Today's 30-year-olds are also the first generation for whom having a credit card was a rite of passage. Most of their parents couldn't get a credit card until well after graduation. But beginning in the early 1990s, students have been bombarded by tempting offers at a time when they were just scraping by. For those whose financial education had scarcely begun, it seemed like free money: Spend a couple of hundred dollars and only pay the minimum balance of $10 a month. So students used their cards to buy computers, clothes, gas, textbooks, and sometimes even to pay for tuition. Living with debt has become perfectly acceptable: Last year 76% of college students had credit cards and their average debt was $2,169. "We wink at the magical thinking that credit-card companies encourage us to engage in," says Darryl Dahlheimer, a program manager at Lutheran Social Service Financial Counseling in Minneapolis. "The bitter 30-year-olds are the ones who are still paying off the pizza they ate when they were 20."
When these students start out in the working world, many use their credit cards to fund a richer lifestyle than they can afford, get by between jobs, or cover emergency expenses. The average credit-card debt among 25-to-34-year-olds was $5,200 in 2004, 98% higher than in 1992. "Young people are taking on a level of debt that was never possible for an earlier generation because it's not based on income," says Robert D. Manning, author of Credit Card Nation and professor of finance at Rochester Institute of Technology. "This is a generation that has a razor-thin margin of error."
Few would argue that building up credit-card debt is in anyone's best interest. Most economists, though, believe that borrowing $20,000 or so for a degree that, in the past anyway, would enable graduates to earn $1 million more over their lifetime is a pretty smart investment. But for those who have to borrow considerably more, or come from families that can't slip them a couple of thousand in a pinch, student-loan debt can be a real burden. "We're a society that values freedom of choice, but debt can restrict and narrow choices," says Gaston Caperton, president of the College Board and former governor of West Virginia. The real price of a college education may have to be calculated by different means altogether.
...
For full BusinessWeek Online article: http://biz.yahoo.com/special/youngearn06_article1.html
