The Millennial Trap: a College Degree, Debt and Lousy Jobs

By Michael Marks and Wes Martin
For Reporting Texas and The Dallas Morning News

Kamna Tripathi never thought it would be so hard.

The 2013 graduate of Southwestern University in Georgetown buys groceries with food stamps. She sometimes skips meals so she can cover other expenses. Working more than 70 hours every week at two low-paying jobs isn’t enough to make ends meet.

Tripathi, 23, said she feels trapped by the credit card debt that she racked up in college, the cycle of living paycheck-to-paycheck in a dismal job market.

“It’s tough to keep your morale up through that, especially when you have a bill that needs paying,” Tripathi said. “How do you stay focused, cool, calm, and collected when you’re so desperate for that money and job?”

Tripathi’s struggle is the new normal for a generation of young adults faced with staggering levels of debt, underemployment and joblessness.

A college degree still improves the odds of employment and earning potential. Americans with a four-year college degree earned an average of 98 percent more than those without one in 2013, according to a study by the Economic Policy Institute, a nonpartisan think tank.

Even so, these graduates face a difficult job market. “Since the unemployment rate of young college graduates remains significantly elevated, the class of 2014 will join a sizable backlog of unemployed college graduates from the last five graduating classes (2009-13) in an extremely difficult job market,” the Economic Policy Institute concluded.

College-age millennials are faring worse than “Gen Xers, baby boomers or members of the silent generation when they were in their mid-20s and early 30s,” Pew Research Center analysts reported in February. Those with only a high school degree “are doing even worse.” (Pew’s definitions of generations are here.)

Those who find jobs may find themselves serving coffee or working in retail even with a college degree. Launching a career in their chosen field may be a dream delayed — or unattainable.

“Underemployment among recent graduates — a condition defined here as working in jobs that typically do not require a bachelor’s degree — is also on the rise, part of a trend that began with the 2001 recession,” researchers wrote in a recent study published by the Federal Reserve Bank of New York.

Recent college graduates “are increasingly working in low-wage jobs or working part-time,” the researchers wrote.

Many law school graduates are having a hard time finding work, as well. Median salaries for new graduates have dropped from $72,000 in 2009 to $61,245 in 2012, even as tuition has climbed.

Young people are resorting to both long-term and short-term loans to finance their education and pay other bills. That is partly because of a decrease in state spending on higher education.

Forty-nine states are spending less per student on higher education than they did before the recession, according to “The Great Cost Shift Continues,” a March 2014 report by Demos, a Washington think tank.

Since then, 28 states have cut per-student funding by more than 25 percent, and funding cuts have led to large tuition increases. Nationally, average tuition at four-year public universities increased by 20 percent in the four years following 2008, after rising 14 percent in the four years prior.

“And students and their families rely more and more on debt to meet those rising tuition costs,” the Demos report states.

Meanwhile, the outlook for the generation’s minorities is even bleaker. Young blacks and Hispanics continue to be underrepresented in college classrooms and overrepresented in unemployment lines, statistics show.

The unemployment rate for black Texans historically has been much higher than for other races and ethnicities. For black Texans between the ages of 20 and 24, the unemployment rate repeatedly was more than double the rate for whites over the past decade.

Hispanics, the fastest-growing ethnic group in Texas, are “much more likely to have lower levels of educational attainment than the non-Hispanic white population,” according to a new report from the Office of the State Demographer.

“This paints a gloomy picture for the types of jobs that Texas will attract in the future and foretells of potential for higher rates of unemployment and poverty,” the report said.

Such trends affect not just young Americans. Their problems could stunt the national economy and even limit the U.S.’s ability to compete in the global market.

Fewer, or poorer, young people in the workforce also could lead to cuts in government benefits, such as Social Security, that rely on a constant flow of tax revenue.

“The economy today is failing this generation. And the consequences of that are felt … by all of us in the form of slowed economic growth,” said Sarah Ayres, an analyst with the Center for American Progress, a nonprofit think tank in Washington.

A persistent problem

Americans between the ages of 18 and 24 are nearly 10 percent less likely to have a job now than they were a decade ago, according to the Bureau of Labor Statistics.

Unemployment for people under 25 is twice the overall unemployment rate, according to the Economic Policy Institute.

Dr. Sandy Black, an economics professor at the University of Texas at Austin, said that many young people find themselves unable to compete in the job market.

“Young people are being pushed out of the workforce because they have fewer experiences and less skills,” Black said. “Recent graduates have education as a skill, but a lot of times employers are looking for experience, or a combination of the two.”

Youth unemployment doesn’t tell the whole story though. Nearly 1 million people under age 25 are “idling,” according to the 2014 report by the Economic Policy Institute.

That means that they are not searching for jobs or going to school. If they are included in the March 2014 youth unemployment rate, it increases from 14.5 percent to 18.1 percent, according to the institute.

Texas lawmakers tried to address this problem during the 2013 legislative session when they passed an education reform bill that emphasizes skill-building and vocational programs in Texas high schools.

But Black said that the youth unemployment problem in Texas can’t be solved by legislative measures alone. Continued economic recovery is crucial, she said.

“You don’t rebound right away if you come into the labor market at a bad time, and once the market improves, it’s not going to get better [for workers] right away,” Black said. “There’s some research showing the persistent effects of high unemployment are estimated to last up to 10 years” on the whole market.

Billions in debt

The unemployment problem is a “jobs crisis,” said Ayres. If it continues to fester for young job seekers, they may not be able to pay off their debts.

“The only way to get this economy running is to … get [young Americans] innovating and working and boosting productivity and paying taxes,” Ayres said.

Caleb Gaines racked up more than $100,000 in debt paying for an MBA from Belhaven University in Jackson, Miss., and an undergraduate degree. He says his monthly payment on school loans is about $1,000.

He applied for over 200 jobs within a year of graduation. He looked for work in Tyler and Dallas. He finally found a position in Austin with a state agency, in a field unrelated to his major.

Gaines would sometimes sleep in his car or on the couches of friends as he traveled for his job search. When he found a job, his debt made him feel like he couldn’t pass it up, regardless of the salary.

“It’s not a lot of money, especially with having an MBA,” Gaines said. “But now, I wouldn’t say no to anything.”

Americans like Gaines collectively owe over $1 trillion in student loans.

They owed only $461 billion eight years ago, according to the recent study by the New York Federal Reserve.

Students aren’t just taking out loans, they’re defaulting on them. Ten percent of all borrowers defaulted on their student loans in 2011, the most recent year for which data is available from the U.S. Department of Education.

That’s the highest default rate since the Education Department reported it was 10.4 percent in 1995.

Everyone’s problem

Debt, unemployment and low wages for young adults have ripple effects throughout the economy.

“They’re not buying furniture, they’re not buying the cable package, they’re not putting that money back into the economy, so it’s really causing [the economy] to stagnate,” Ayres said.

Other generations are affected.

A shrinking workforce and lower wages have led to losses in Social Security funding. Workers between 18 and 24 paid approximately $6.8 billion less into Social Security in 2011 than they did in 2007.

Many young Americans have been forced to move back in with their parents.

Between 2007 and 2012, the number of 18- to 24-year-olds living at home rose by 5 percent, according to a Pew Research Center analysis of census data.

Economists say that obtaining independent housing for the first time creates a “household.”

One new household is worth about $145,000 of economic impact, according to Moody’s Analytics. The number of young adults moving back in with mom and dad could equate to billions of dollars lost from the economy.

“A lot of friends have moved home to save money and cut costs,” Tripathi said. “A lot of us feel like it’s sort of admitting defeat to move home.”

Debt also limits entrepreneurialism and innovation, Ayres said.

Although many young people launch successful startups, financial constraints prohibit others from getting the money they need to launch a business.

“[Debt] is making it harder for a young person who might have a good idea to invest in themselves and invest in their idea,” she said.

These trends could make economic growth slower.

“If we don’t start moving our younger folks into the workforce in a much higher level way, we could actually be stunting the growth of our entire economy. We’re going to lose our

competitiveness; we’re going to decline in the global economy,” said Scott Gerber, founder and CEO of the Young Entrepreneur Council.

‘Just to pay your bills’

Jennifer Nelson graduated with a theater degree from Bryan College in Dayton, Tenn., in 2011. She moved in with her boyfriend’s parents in Allen and took a minimum-wage job at a Sonic restaurant while looking into graduate programs.

Her boyfriend wants to become a chiropractor and start a clinic. Her long-term plan is to go back to school to earn an MBA so she can run the business.

Nelson knows that she and her boyfriend both will need more money.

“His school is going to cost $100,000. If I go for a master’s, that’s about $80,000 depending on the program. Working a minimum wage job … that’s kind of rough,” she said.

Inflation-adjusted median income for 15- to 24-year-olds was $29,722 in 2010 — the worst recorded by the U.S. Census Bureau since 1994. It edged up slightly to $30,604 by 2012.

Even with a bachelor’s degree, Nelson has struggled to find a job that will pay more than just minimum wage.

“You get a job that’s only going to get 25 hours a week, and they pay minimum wage,” she said. You do “just anything and everything that you can think of just to get work, just to pay your bills for the month.”

A workforce utopia

Some political leaders have portrayed Texas as a workforce utopia that leads the nation in job growth. But the numbers reveal a more complicated picture.

Researchers at the Federal Reserve Bank of Dallas recently wrote that “Texas experienced stronger job growth than the rest of the nation” at all wage levels from 2000 to 2013.

The national unemployment rate in April was 6.3 percent. In Texas, it was 5.2 percent, down from a peak of 8 percent in 2010. As is true across the nation, determining how many people are underemployed or have given up trying to get a job is difficult.

But the unemployment rate for young Texans is not much different now than it was a decade ago.

About 21.5 percent of Texans 16 to 19 years old were unemployed in 2013. In 2003, it was 21.3 percent. For Texans who were 20 to 24 years old, the unemployment rate was 10.7 percent in 2003 and again in 2013.

Until he finally got a job, Gaines paid his bills with unemployment checks and by drawing out of an IRA he had set up while working during college. Gaines now works over 60 hours a week between two jobs. He hopes to find a single position where he earns enough money to support himself.

Tripathi began working with AmeriCorps, a federal program whose volunteers work with the disadvantaged, not long after graduation.

Tripathi said her contract with AmeriCorps expires this summer. She recently landed a position with a rental car company, but she will still have to keep her part-time retail job and work over 70 hours a week to pay her bills.

At AmeriCorps, she worked with the unemployed, helping them develop job skills. She said that’s a reminder of what she’s facing.

“Just watching their struggle with getting jobs has been really rough, because I know I’m going to be in this same boat in a couple of months,” she said.

The entire report is also available at The Dallas Morning News.

About this series

This project is the result of a collaboration between The Dallas Morning News and Reporting Texas, a program at the University of Texas at Austin’s School of Journalism. Student journalists spent several months examining unemployment and debt among millennials, and how those issues were related to higher education.

Also in this series

For Law Students, a Supply Glut and ‘Exploding Scholarships’
Despite fewer job openings for lawyers, some officials still press for more law schools.

State College Support Dives, Shifting Debt Onto Students
Student debt should concern everyone because of its potential effects on the national economy.