During the last several months, the political classes have come to the realization that the level of student debt in the United States is reaching crisis level. Many have suggested that the burst of the student loan bubble will be more far-reaching and more damaging than the housing bubble that precipitated the Great Recession. This week, the Huffington Post linked to a new study from the Federal Reserve Bank of New York that showcased just how deep the student loan problem reaches:
- Of the 241 million people in the United States who have a credit report with Equifax, approximately 15.4% — or 37 million — hold outstanding student loan debt.
- The average outstanding student loan balance per borrower is $23,300. About one-quarter of borrowers owe more than $28,000; about 10% of borrowers owe more than $54,000. The proportion of borrowers who owe more than $100,000 is 3.1%, and 0.45% of borrowers, or 167,000 people, owe more than $200,000.
- Borrowers between the ages of thirty and thirty-nine have the highest average outstanding student loan balances, at $28,500, followed by borrowers between the ages of forty and forty-nine, whose average outstanding balance is $26,000.
- About 27% of the borrowers have past due balances, while the adjusted proportion of outstanding student loan balances that are delinquent equals 21%.
Many have put the blame on ballooning costs of public and private universities across the country. Christian Science Monitor reported this week that “between 1999 and 2009, tuition at public four-year colleges rose 73 percent on average, and tuition at private nonprofit colleges jumped 34 percent. In the same period, median family income fell by about 7 percent.”
For graduating high school seniors, the allure of a college degree isn’t what it once was. Obtaining a degree, after falling tens of thousands of dollars in debt, no longer guarantees job placement upon graduation. Is there an alternative?
Yesterday, National Journal highlighted a recent study by the John J. Heldrich Center for Workforce Development at Rutgers University on the employment situation for high school graduates without any college background or plans. Some of their chilling findings:
Only three in 10 of these recent grads are employed full time, according to the study, which tracked the employment outcomes of 544 young people who graduated from high schools across the country between 2006 and 2011.
Only 16 percent of those who graduated during the recession (2009-2011) are employed full time, although nearly half are looking for work. A third are unemployed and 15 percent are working part time. One in six have left the labor market altogether.
Thirty-seven percent of students who graduated pre-recession (2006-2008) are employed full time, according to the report.
Nearly 90 percent of those surveyed said they were paid hourly. The average hourly wage was $7.50, only a quarter more than the federal minimum wage. Three quarters of the jobs reported were temporary.
Today, less than 24 hours after National Journal’s piece on youth unemployment was published, President Obama said during a press conference that “the private sector is doing fine.” This statement may come as a shock to Americans when unemployment was assessed at 8.2% by the Bureau of Labor Statistics, the stock market is down 7% since April, and there is still no good news on the horizon for jobs either.
During the last election, Obama garnered 61 percent of the youth vote, compared to McCain’s 31 percent – the results were almost identical for the college educated and not. America’s young people, whom the Obama campaign is trying to whip into a frenzy in order to produce the support he saw in 2008, won’t buy the hype this time around. Every morning they wake up unemployed and in debt, every conversation they have with a classmate and peer affirms that they aren’t “fine.” The Obama White House can turn Republicans into student debt boogeymen, send emails from Sarah Jessica Parker inviting recipients over for dinner, and issue statements about gay marriage every day from now until November. The only issue that matters to America’s youth this election isn’t looking any better for the Obama campaign – it’s the economy stupid.