6mix

Young, educated, in debt and underutilized (it’s not all bad)

By Shannon Hughes • Jun 15th, 2011 • Category: Lead Story

By Catherine Dalton and Shannon Hughes

Nevermind that multi-generational households – ones that contain at least two adult generations – are nothing new. They’re common outside of the industrialized world, and were the norm in America just a few generations ago. It still stings to graduate from college and face moving back in with mom and dad.

As unemployment and home foreclosures continue to ravage the nation, increasing numbers of Americans are foregoing their independence out of financial necessity. In 2008, 49 million Americans, 16.1% of the population, lived in multi-generational homes, according to the Pew Research Center. And the majority of people choosing to move in with other adult relatives are educated young adults.

“I’m definitely not thrilled to be back at home with my parents,” scoffed Rachel Gilbert, 24.

After graduating from Hofstra University in 2009 with a marketing degree, Gilbert had a difficult time finding a job in the thick of the recession. “There is a sense of embarrassment and defeat when you have to give up your independence…but I didn’t have much of a choice,” Gilbert said.

Gilbert’s mother, Judy, joked: “I wasn’t about to let her live on the streets, plus I could use the free babysitting for my younger ones.” Her daughter blushed and rolled her eyes, and Judy Gilbert chuckled. “As a parent, you think of college as an investment and you hope that if you pay for your child to have a higher education the reward will ultimately be your child getting a good paying job after graduation and then have the opportunity to live on their own. But in this economy college does not guarantee those things.”

Rachel Gilbert is certainly not alone. According to a 2010 study conducted by Monster.com, out of 1,200 college grads and soon-to-be grads, 71 percent anticipate living with their parents because of limited financial resources, and 31 percent predict that they’ll be doing so for at least a year.

This difficult reality is increasing for young people who are saddled with student loan debt and unable to find adequate full-time work – or work period.

Unemployment and Underemployment

Recent graduates are facing one of the toughest job markets in living memory. The official unemployment rate as of March 2011 was 9.2%, though the Bureau of Labor Statistics puts the rate at 16.2%, which includes everyone looking for full-time work.

Though the unemployment rate for 20-24 year olds dropped below 15% to 14.9% in April for the first time this year, young people, even educated young people, are faring poorly, as the few jobs available are increasingly going to those with more experience. The recession is also forcing older workers to remain in the workforce longer, further reducing available positions for entry-level employees.

Those who do manage to find employment are earning considerably less than they would have before the recession. In a study of 2,300 new graduates in 2009, The New York Times reported, “60 percent have full-time jobs, nearly 36 percent have moved back home to live with either their parents or relatives and nearly one-tenth are carrying more than $60,000 worth of debt. Of those who have jobs, more than two-thirds were making less than $35,000 a year and 45 percent were earning $15,000 or less.”

This is the primary reason educated adults are forced to move in with relatives: they just cannot earn enough money to survive on their own.

And the economic forces that compel college grads to seek familial support are likely to keep them dependent on that support longer. There is evidence that entering the labor force during an economic downturn has long-term negative consequences on an individual’s earnings.

Working in low-paying industries means a worker will not be garnering the professional skills he or she needs for career advancement. And earning very low wages for years on-end during what should be years of prime earning potential means that “recession grads” may accumulate far less than a similarly skilled worker coming into a healthy labor market.

Former students are not only earning less and straying from their chosen fields, they are taking whatever they can get. When Meet Shah, 24, of Melville, New York, graduated from Binghamton University in 2005 with a Bachelor of Science in financial economics and actuary science, he certainly did not see himself selling luggage on Long Island.

After graduation, Shah worked for Wells Fargo. He quit after a year and decided to take an increasingly common course among graduates hoping to improve their job prospects and wait for the economy to improve – getting an advanced degree. “I realized there was not much growth at Wells Fargo,” he said, “and I wanted to get a Master’s, too.”

“I went to Pace’s graduate school for better opportunities,” Shah explains. He admits that the state of the economy played a major role in his choice to pursue a Master’s in accounting. “I didn’t expect to go to grad school this soon, but the market is very competitive and a bachelor means nothing these days. You need a master’s to get a decent job.”

In his final months of graduate school, Shah has realized that even with a Master’s degree, getting a job is not an easy feat, so he works at a department store to ensure some sort of income while he waits to hear back from the dozens of banks and financial companies he has applied to.

As countless underemployed graduate students have done before him, Shah has moved back into his parents’ home. Despite the struggle of finding employment, however, he does not regret having gone to graduate school and remains optimistic. “I will have a Master’s at the age of 24,” he said. “Not many can say that. Hopefully I will have a job though. This, too, not many can say in today’s times.”

Student Loans

Tuition costs have risen sharply over the past decade, and even more so over the past several years. The cost of tuition and fees were 7.9% higher in 2010 than the previous year. The cost for room and board has risen even more dramatically.

Though it is more expensive, more Americans are beginning to view a college education as the only route to professional and economic security. There are shrinking opportunities for those without a college degree as jobs disappear and employers demand higher credentials for relatively basic types of work.

Add to all this rising student-loan debts.

By the end of 2011, Americans will owe over $1 trillion in student loans, and students graduating with a Bachelor’s degree now owe an average of $24,000. Many graduates who are able to find employment see living at home the only option if they plan to pay off their student loans.

For those who have pricey professional degrees from law or medical schools, the debts can be astronomical. Even highly trained graduates trying to enter normally lucrative professions are finding that companies just don’t have room for new people.

Jessica Moore, a 28-year-old graduate of the Georgetown University Law School thought she was doing everything right. In May of 2007, immediately after graduating, Moore landed a job at a high-paying firm in Manhattan.

She had taken out $140,000 in private loans to attend law school and expected to be able to make large payments with the six-figure salary she was to make at her the firm. Despite doing her best, Moore was stricken by a force that has spared few recent grads: bad luck.

When the economy came crashing down, Moore was laid off. After scouring for work prospects, Moore took out $40,000 more in loans to get her Master’s degree in tax law from New York University, in the hopes it would improve her chances of getting back to work.

“I’ve always wanted to be a lawyer, but considering the amount of debt I’m in and the lack of jobs in this economy, it’s been extremely difficult,” Moore said. Four years and $180,000 in loan debt later, Moore finally found a job working part-time as a legal consultant at a small firm in the suburbs.

In the four years since, she had gotten married and moved from her swank Midtown Manhattan apartment into her parents’ basement in order to save money. “I just got married, and because I was unemployed at the time my husband and I couldn’t sign a lease without knowing whether we’d have the income to afford rent,” she said. Moore is paying back her loans “very slowly” with monthly payments of $1,500.

She expressed the frustration of many motivated people who are beginning to feel that their fate will be determined more by luck than their own hard work: “I really expected that coming from great schools I would never have to worry about money. Considering the economic crash we suffered, that clearly was not the case.”

The Changing Face of Family Life

Though Moore and her husband decided to forge ahead with their lives despite living with Moore’s (now the Moores’) massive debt, many 20-somethings are putting off these important steps. There is growing evidence that more young people are putting off marriage and starting families because of their crushing student-loan debt. Many young adults seem to feel that they cannot begin to set out on these milestones of adulthood while living in their childhood bedrooms.

But there is a positive side to all this. The stigma of living at home seems to have gone down as huge numbers of ambitious young people find themselves doing just that. Most see this stage in their lives as a temporary phase; they will live at home just until they land a job that offers them a reasonable amount of economic security. But if the recession drags on, the legions of adults living with their parents will be forced to grapple with what may very well be a new reality.

As young indebted college grads continue to pour into a labor market with no room for them, millions of people may find that they may never be able to achieve the kind of complete personal autonomy that has come to be considered a prerequisite to having a life.

Perhaps the most traumatic effect of this trend toward multi-generational households is the shame experienced by adults who feel like failures because they are not able to be self-sufficient like their parents probably were at their age.

Anthropologist Peter Lovenheim attributes this pain to a pervasive cultural myth: that “we’re all supposed to strive to be autonomous, to live our lives without relying on anybody.” As sad as this trend of “boomerang kids” may seem to a generation of individualistic Americans, some recognize it as evidence of a more sustainable and interdependent family in America.

As baby boomers age and again turn to their families for support, and young adults find themselves beginning their own families while still living with parents, future generations may develop a much more accepting attitude towards families where adults are dependent on one another.

Some, like Lovenheim, have come to believe that our communities may just end up better off in the long run. He hopes that, as this demand for complete financial autonomy becomes less attainable, a lot of people will begin to realize “that that just goes against human biology and that we’ve evolved to be social creatures. In fact, not only do we need each other, I think we’re often happiest when we are at least somewhat dependent on each other.”

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