American students graduating from college in 2016 have no doubt earned many distinctions during their respective tenures, but as they get set to explore the infinite abyss they’re about to earn another — record debt.
That is, the highest-ever amount of debt faced by recent college graduates, defined as those between the ages of 22 and 27.
According to the Wall Street Journal, this record debt comes in at $37,172, up from around $35,000 last year with that amount breaking records, too. Is there a silver-lining? It seems so. Also noted in the article is a growth in starting salary for college grads at over $43,000 following a trend in recent years.
Other good news for grads came in the form of a poll by Career Builder last year indicating that 65 percent of employers would seek to hire graduates from the class of 2015 — the highest number since 2007. While some prospects are improving in the aftermath of the Great Recession of 2008, having record levels of debt is a concern for many grads despite the optimism of increases in salaries and employers looking to hire. The temperance of such good news is rooted in the reality of where recent college graduates are starting from.
The Federal Reserve Bank of New York, according to research it conducted in 2014, tracked the rates of unemployment and underemployment of recent college grads. While the outlooks are getting better, the damage from 2008 is clear.
Following the boom-bust patterns of the U.S. economy since the end of financial regulations in the 1970s, the last two decades follow suit, but despite the bright spots on the horizon for the class of 2016, they are starting out from positions of greater disadvantage. While the rate of unemployment for recent college grads peaked at 7 percent in 2010, it expectedly decreases over time. That said, given the starting point is much higher than the past, it remains that current college grads face tougher odds.
Underemployment, too, plays a role. Not every recent college grad lands a job in their intended field, let alone one that pays the bills.
While the underemployment rate for college graduates as a whole has held steady for over 20 years, recent college grads encounter much more fluctuation, making the burden of record debt much larger. In the same report, the New York Federal Reserve Bank also noted that 44 percent of recent college grads remain underemployed as recently as 2015, while those making less than $25,000 are at the highest numbers since the early 1990s.
This has made the issue of debt relief a pressing issue in Washington, as the Obama administration is seeking to expand repayment options for the nation’s roughly 40 million people with student loans. The Department of Education, under Secretary John B. King Jr., plans to work with up to 40 NGOs (nongovernmental organizations) to help with student loan debt levels.
“The goal is to get all of the folks who would benefit from income-based repayment into one of the plans that makes sense for them,” said Education Secretary John B. King Jr.
Repayment has become a problem for millions of Americans. According to the Consumer Financial Protection Bureau, the nation’s second-leading consumer debt market are those strapped with student loans, with figures jumping from $600 billion in total debt in 2006 to $1.2 trillion as of 2015.
With nearly one in four borrowers struggling to keep current on their debt, defaults and delinquencies are another concern facing college graduates as they plan out their futures. While there’s been a decline in defaults, from about 14 percent to 13, it isn’t a substantial one.
While debt can be burdensome on the financial plans of recent graduates, say when it comes to buying cars or homes, it can also be downright scary. Earlier this year, Paul Aker of Houston, Texas, was shocked to see armed U.S. Marshals descend upon his home in an effort to place him under arrest for a $1,500 student loan debt dating back to 1987. With court fees adding to his accrued interest, Aker’s total increased to around $7,000. As the U.S. Marshals plan to issue up to 1,500 more warrants for student loan debts, the worries of recent college graduates looks to mount.
[Photo by Jacquelyn Martin/AP Images]