Unemployment and the Student Loan Crisis: What You Should Know
By Unemployment-Extension.org | January 15, 2015 at 10:10 PM |
There is no denying it: a college education is a wise investment. College graduates earn roughly three times more than their peers without a high school diploma, and as per a recent announcement by the Center for American Progress, roughly two-thirds of jobs in the American economy will require some college education or advanced training.
Increasingly the cost of college education becomes an unbearable financial burden for students and families across the country. Over than 40 million Americans currently have some form of student debt. And sometimes the investment in a college education doesn’t immediately pay off.
Underemployment and unemployment are rampant among college graduates, especially recent ones, and it is estimated that some 50% of college graduates are working a job that doesn’t require a college degree. Here is what you should know about unemployment and the student loan crisis.
The cost of higher education has skyrocketed. Tuition at nonprofit four-year colleges has jumped by a staggering 150% since 1982 while tuition at four-year public colleges has jumped by a stunning 250%. Consecutively, students have been forced to borrow ever-increasing amounts of student loans. In total, student loan debt has increased by over 500% since 1999.
While the cost of higher education is quickly rising, income levels have stagnated. The inflation-adjusted income of the median American family has decayed over the course of the past three decades. Believe it or not, median family income has significantly declined in the past several years.
According to the United States Census Bureau, “real median per household income in the United States in 2011 was just slightly above $50k, a 1.5% decrease from the 2010 median and the second consecutive annual drop.”
Furthermore, since 2000 the average salary for young people has decreased by a staggering 10 percent. Because the cost of education keeps on rising and household incomes are declining, families are forced to use a greater percentage of household incomes for educational costs, whether that is repayment of student loans or payment of tuition fees.
High rates of unemployment and underemployment increase the financial burden of student loans. Of the 40 million Americans that hold some form of student debt loan debt, roughly 7 million have defaulted on their loans.
As a result of high student loan burdens, in conjunction with high rates of unemployment and underemployment, Millennials are delaying major purchases. According to a newly released study by Young Invincibles, the debt-to-income ratio of an average single student debtor increased from 0.43 to 0.49 between 2002 and 2014.
As a result of increased debt burden, Millennials are delaying making major purchases, including homes and cars. In fact, according to research by the One Wisconsin Institute, the automotive industry loses $6 billion in sales each year.
Defaulting on student loans can make it harder to get a job. When a borrower defaults on student loan payments, his or her credit rating inevitably plummets. That’s bad news, considering that over 60 percent of employers check an individual’s credit rating before making decisions about hiring or promoting.
Furthermore, defaulting on student loans could also make you ineligible for some federal jobs, and the Department of Education encourages institutions to withhold transcripts from those who have defaulted on payments. Such policies mean that those, who need employment most desperately, will inevitably suffer.
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