Americans under the age of 35 are having a tougher time than their parents faced striking out on their own and getting ahead. This is particularly true for recent college graduates who account for about 28 percent of the workforce.
In 1972, an average 25-to-35-year-old American male with a high school diploma earned around $42,000 per year. That same age group now earns a little more than $29,000 a year, adjusted for inflation. In contrast, an average college graduate earns more than $40,000 annually, driving home the need for a higher education in today's highly skilled job market.
Heavy Burden of Student Loans
According to Tamara Draut, author of the book, Strapped: Why America's 20-and-30-Somethings Can't Get Ahead, 25 cents of every dollar earned by this age group goes toward paying off student loans and consumer debts. She says that a major shift in how people pay for college has taken place in recent decades.
"States have been cutting their appropriations, not investing enough to keep up with the surge in enrollment as young people have gotten the message loud and clear that, to get into the middle class today, you need to get into college. At the federal level, we've completely shifted away from a grant-based financial aid system to what I call a debt-for-diploma system, which is, if you want to get a diploma, you're going to have to go into a five-figure student loan debt," says Draut.
In the 1970s, federal grants covered nearly half of public and a quarter of private college costs. In recent years, grants have covered only 25 percent of public and 10 percent of private college tuitions.
In the 1970s, the average annual cost for a four-year public college education ran about $6,000, including room and board, adjusted for inflation. A similar education at a private college cost about $13,000. Today's young people pay an average of $12,000 to attend a public university and $21,000 at a private university, for tuition alone.
Jonathan Zaff, President of 18-to-35, a non-profit advocacy group for youth, says that, in addition to educational costs, other factors, including rising housing prices, contribute to the financial strain on today's young people.
"The amount of debt students leave [college] with falls within the $17-20,000 range, which, depending on the interest rate they're paying, could equal around $150-to-200 a month [in payments], if not more. What also happens is that you end up with credit card debt. And the other side, which is a much more important part of that and much more prevalent," says Zaff, "is that you need to pay for your daily costs with credit because you actually don't have the cash flow to sustain even a basic level of living. Educational costs, food costs and health care costs - - people are putting on credit."
As a result, 65 percent of all four-year public college graduates carry both educational and consumer debts into their professional lives. It takes many years before these debts are paid, as Anya Kamenetz, author of the book, Generation Debt: Why Now is a Terrible Time to be Young, points out.
"The minimum would be about ten years. Some people are refinancing their loans and stretching that to thirty years. If you have a very large debt burden and about eight percent of students borrow more than $40,000 to get a college degree, then they are likely to refinance. And I've met students who are actually paying only the interest on their loan so that their loan burden doesn't go down at all from year to year," says Kamenetz.
Even as they join the workforce armed with a college degree, today's younger workers face a different world than the one their parents knew. 18-to-35's Jonathan Zaff calls it a societal change.
"President Bush calls it 'The Ownership Society.' Other people call it 'Burdening people with too much responsibility for their individual well-being' when it should be a societal issue. But it's this idea that, generationally, you look at those who are in the 18-to-35 age range, and they grow up at a time when there's no longer an assumption that social security [i.e., the U.S. government's pension and benefits system] will be around," says Zaff. "There's no longer an assumption that the job you take will come with a pension. So you almost become content with what you have. You hopefully have enough money to survive."
Lack of Stability
Additionally, the labor market has changed. Most analysts point out that many of today's younger workers have to contend with temporary, short-term jobs and almost none of the stability or benefits their parents enjoyed when they entered the workforce.
Some experts say this is forcing more young people to live with their parents longer or move to cities with lower costs of living. Analyst Tamara Draut says this generation's decisions have broader economic repercussions.
Some analysts contend that the financial burden shouldered by America's younger generation calls for a public policy solution. But they say young people are not active enough politically to make their voices heard.
Most experts say young people want increased federal and state college grants, and lower interest rates on student loans. And advocates say such measures would help make college education more affordable for those who would otherwise enter an increasingly demanding job market with just a high school education.