Millennial Think Tank: The Enormous Debt Burden, Higher Education Cost, and its Impact

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Last Thursday on our weekly Millennial Think Tank Hangout we tackled the issue of the enormous debt burden Gen Y is saddled with, due in large part to the high cost of education. Before I introduce last week’s Tank Members, I’ll frame the discussion with the facts:

  1. Since 1982 college tuition fees have increased by 439%
  2. The median family income has increased by 147%
  3. In 1986 college in the US averaged around $10K per year for tuition; based on standard inflation, it should cost $21,500 now. It doesn’t. It is around $59,500. (See more information here.)
    *In the recorded hangout I misspoke; I stated that the cost of STATE College tuition was $59,500, which is not true. For example, Penn State is $16,572 and Florida State around $17K for tuition.
  4. In the early 90’s the Federal Stafford Loan structure was changed and parental income no longer affected how much a student could borrow; coincidentally, when money was flooding the market, tuition skyrocketed.
  5. The average US student graduates today with approximately $33K in debt; not all of it was spent on tuition.

Participating Thinkers This Week:

Each week, depending upon the topic, you’ll see a variety of Think Tank panelists. This week we were blessed with:

  • Joe Cardillo,  an older Millennial, Content and Analytics specialist.
  • Judy McCloskey, an older Millennial, actor, director at 2nd City, and social media Community Manager.
  • Samantha Estoesta, a young Millennial working in Public Interest Research
  • Jillian Jackson, a middle Millennial and Community Manager.
  • Tiffany Daniels, an older Millennial working in Government & Community Relations
  • Ryan Cox, a middle Millennial working in Marketing.

If you want to watch or listen to the hour long hangout, here it is. Otherwise, my recap follows:

The Primary Points we Learned this Week

When our Think Tank takes on an issue, we do it in depth, and try to really grasp our Millennial’s perspective on it. This week we had a few very clear takeaways:

  • Parental advise or other guidance was missing or ignored when it came to taking on debt; at 18 none of our panelists felt that they were knowledgeable or prepared enough to understand exactly what they were getting into when they took out student loans.
  • Our Canadian neighbors DO NOT fair better than American students; sure, ‘tuition’ may be listed as averaging around $6K per year, but in Canada you must pay additional fees to both your university, and a much higher price for text books. Their students graduate with an average of $37,500 in debt.
  • Many students incur more debt because it takes 5 or 6 years for many to graduate, often due to the need to work while in school.
  • What irks our panelists most is not simply the debt, but their decreased earning potential. In this tight economy Small Business and Start Ups bemoan their lack of funds, which puts our already strapped Millennials in an even worse position, often paying 25% of their income to their loans, and 50% to rent (a message Daniel Herbert sent prior to the hangout that rang true for all of our panelists).

Do They Feel Tricked?

Ryan Cox specifically spoke about the “expected pathway” they felt had been laid out for them: go to college, graduate, and work at the same job for 10 years and pay off your debt. He felt that no one really discussed debt and what it meant with him. He does acknowledge that every choice he made was his own decision, he just wishes it wasn’t so easy to call Sallie Mae for additional cash when he was 18.

Joe Cardillo remembers distinctly feeling that the government loans were encouraged, and it ‘felt like free money.’ Not only was no one cautioning him and discussing what earning potential he would have upon graduation, taking out student loans was encouraged.

Tiffany Daniels feels blessed that her parents made it very clear to her from the beginning: she would go to college, and she would do so on a scholarship. That did not stop her from incurring the credit card and accompanying debt that were offered freely on campus at trade shows and events, with no parental cosigning.

Samantha, our young Canadian Millennial had to work through school, primarily because her parents’ government promoted education investment fund was half of what they expected. She graduated with both student loan and credit card debt, and her husband is still paying of his student loan debt as he nears 30.

They were all in sync on the following:

  • The doubling of interest rates laid another layer of indebtedness to their loan amount.
  • ALL of them agree that parental advice would not likely have had an impact upon their borrowing because the money was so easy to get.

Was Gen Y Sold a Bill of Goods with Education as an Investment?

medium_632746608 (1)This topic caused the most debate, and disagreement, among the panelists. While they all felt that they were told they had NO CHOICE – they HAD to go to school, some of them value the process more than others.

“College is an investment” was something Joe clearly remembers being told… but no one talked about the return. He compared the behavior of those ‘selling education’ to the ‘Countrywides’ of the world when the mortgage crisis was developing. He had very little guidance while in school about what would happen afterwards, and what he should consider. Questions that should have been asked, weren’t. Joe would like to have heard:

What is your earning potential?

What might you do?

What career path might you have?

Samantha touched on her family’s status as immigrants, and how education is rooted in why they came to Canada; she knew that she had no choice but to embark upon a college education.

All of our panel would have liked internships and placement given a stronger focus. Hessie contributed the thought that STEM is being pushed at the expense of all other areas, and Joe stated that he thought that was a very simplistic way of looking at it. Academic institutions have proven that they’re not moving fast enough and don’t fully understand the scope of skills needed in today’s economy.

Judy’s experience has been that her only her friends that own a house either got jobs straight out of high school or a 2 year degree with practical skills, like drafting.

After this lively discussion, Tiffany posed the quesion:

Is a college degree a false promise?

Stay tuned to this blog for  blog posts on this specific issue, where our Millennials will express their different opinions.

The Impact on Millennial Life Choices

It is evident that the economic climate we live in, the lack of high paying jobs, and their student loan and/or credit card debt has had a huge impact on the decisions our Millennials have made in life. Not one of our 6 panelists have children, and only one of them, Samantha, is married. None of them have purchased a home. And none of them appear to be unhappy or frustrated with any of these specific choices. This is the way of the world now, and they all seem to understand that.

Personal debt is not the only thing that is effecting the way these Gen Y citizens think; both Jillian and Tiffany, who had no student loan debt upon graduation, have held back on purchasing a home just as the other Millennials because they don’t think it makes financial sense.  The volatile economy coupled with house prices have made the idea of buying a home almost laughable. All of our panel have been laid off at some point, and they know that they are only one pink slip away from having to move back home for economic reasons.

What Would They Tell Their Children to Do?

At the end of the discussion I had to ask them what they would advise their children to do in regards to their education, and here is what we heard:

Joe: Get practical experience. Including in college.

Judy: Don’t go to acting school. Find something they love, but understand that they need food and shelter.

Ryan: Find something you love, and don’t think not having a college degree with hold you back.

Samantha: Ask them to look at as many transferable skills as possible. Don’t be afraid to apply for things that aren’t part of your degree program that will add skill sets.

Jillian: Work first and figure out what you want – you can do things before going to school so that you know what you want to do.

Tiffany: Go to college, do as many internships as possible as early as possible. No matter what your main degree is, make sure your minor is practical.

As I said earlier in this post, our panelists may agree on a lot, but they are not all in agreement on the need for a college education. We’ll take this topic up again in our blog.  Next week we’ll tackle Entrepreneur-ism; catch it here.

Photo credit: Josh Kenzer via photopin cc.
Photo credit: Charline Tetiyevsky via photopin cc.

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VP of Content & Strategy at ArCompany. She has an extensive background in Sales, and focuses on generational marketing and content. With Hessie Jones she founded ArCompany’s Millnnnial, GenX and Boomer Think Tanks and writes and speaks on those topics from an insights/strategy perspective.

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