New Realities for College Grads & Finances

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Student loans and credit cards debt

Source: web

By now, we all know that today’s college students face more stumbling blocks than any other time in history. The student loan debt in this country is alarming and has long since surpassed credit card debt.

For college students, they face a double whammy – more are graduating with not only student loans, but credit card debt they’re not sure how they’re going to be able to repay. Now, though, a new perspective puts the harsh realities front and center.

Sallie Mae Study

There’s a recent Sallie Mae study, “How Undergraduate Students Use credit Cards: Sallie Mae’s National Study of Usage Rages and Trends”, that provides a hard look at the numbers. Did you know that 91% of undergraduates have at least one bank credit card? That number is up from 76% in the same Sallie Mae study that was conducted in 2004. Not only that, but our college students have more credit cards these days. Half of all college students have four or more credit cards and the average balance is just shy of $3,200. This is the highest since the agency has been tracking the numbers. On average, college seniors will graduate with more than $4,000 in credit card debt alone – not counting student loan debt.

In order to cover their college expenses, 92% say they use their credit cards to cover things like books, supplies and even college tuition. Unfortunately, 25% of college students say they’ve already had to pay at least one late fee. This, as we know, will contribute significantly to a weaker credit history and these students have yet to enter the workforce. Another 15% say they’ve paid an over the limit fee, too.

Unemployment

There’s been some controversy associated with the true unemployment numbers. We’re still living in a reality that includes higher unemployment with any real signs of a corner actually being turned. It’s not only about creating jobs for those on the unemployment rolls, but every year, a new surge of college graduates are hitting the ground running in their efforts of securing a position. It’s estimated that 1.8 million college seniors will be graduating with a four year degree later this year along with 900,000 who will be completing their associate’s degree, but won’t be furthering their education. This, according to the National Association of Colleges & Employers, is painting a dreadful outlook. Remember – there are already millions who are unemployed and have either given up or who are still actively seeking jobs that simply aren’t there.

Since 2008, when the recession officially kicked off, there have been 8 million college graduates. Couple in the 2.7 million who now have their master’s and the 77,000 Ph.Ds, the harsh reality is clear. Many of these graduates also have growing credit card debt. With no way to repay their student loans, let alone their credit card debt, it appears a new crisis is on the horizon. In other words, their hard word looks great on paper, but it’s not being reflected in their wallets.

A Different View

From a different perspective, consider this: three million teens will be graduating high school this spring and there are currently 21 million in college. Many of these high school grads won’t be attending college at all – which means they’re going straight into the job market – to compete with graduating college students and those who have been in the workforce for years. And, of course, this cycle continues year after year. Meanwhile, the jobs to support all of these folks are simply non-existent.

In fact, the only sector that appears to be showing any sign of growth is in the health care field – and part of that is due to changes Obamacare will bring about. And speaking of Obamacare – there are the tax increases to consider, too. This means older people who were hoping to retire sometime in the next several years are now rethinking their plans and are now extending their work years. While the political changes – such as Obamacare – play a role, the fact is, many saw their retirement funds take major hits in recent years. People simply cannot afford to retire. There are many surveys that show that trend, too. Even those who have retired often find themselves attempting to re-enter the workforce, which means even more competition.

During the recession, we saw credit card debt and then credit card delinquencies increase, along with other unsecured loans, automobile loans and mortgages. Many are still pulling their financial lives back together with lower credit scores. There is a growing number of companies in the U.S. that are now incorporating credit checks into their due diligence efforts. It’s interesting to note that younger adults, before they even get a running start, are already struggling with credit problems.

Rutgers Study

Finally, we take a look at a recent report from the John J. Heldrich Center for Workforce Development at Rutgers University. Here are those hard statistics:

  • Of all the country’s high school graduates who earned their diplomas between 2006 and 2011, but who did not go to college, only 3 out of 10 of those students are employed full time today.
  • Of those who graduated at the height of the recession, only 16 percent are employed full time.
  • Less than 10 percent of those high school graduates are in a position they would choose, meaning they’re working in jobs that they wouldn’t have sought were it not for the economy. They’re also not being offered 40 hour work weeks.

College costs will continue to increase as budget constraints force more universities to up the ante for their students. The tuition at higher ed schools has doubled in the past few years and on a community college helve, those costs have increased by 71 percent.

Interestingly enough, many college students who drop out before they graduate college say stress over bills and their respective familial struggles and hardships to keep them in college are the reasons why. In most cases, they’ll find positions that have nothing to do with their education and those jobs will pay significantly less than what their parents earned at the age. Young men who have their high school diplomas only will earn just 75 cents for every dollar earned their fathers earned. Women are still not earning as much as their male counterparts. It’s improved, but women still earn just 91 cents for every dollar earned by their fathers.

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About Author

David is a CPA and has spent the past decade as a financial adviser helping clients meet their fiscal objectives. With an appreciation for journalism, he has spent the past few years overseeing several financial columns as well as writing two previous finance blogs. He resides on the East Coast with his wife and two sons and has guided many through the recent recession while providing a no-nonsense approach to spending and saving.


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CREDIT DAD is an independent, advertising-supported website. Many debit cards, credit cards and other financial offers that appear here are from companies from which CREDIT DAD Websites receive compensation. This compensation may impact how and where products appear on this website (including, for example, the order in which they appear). CREDIT DAD Websites do not include all card offers in the marketplace.