Interviewer: If you're in your 20s or 30s and are full of optimism about your future, you may want to sit down. Today's 20- and 30-somethings are more likely to be farther in debt, thanks to student loans, credit cards and 1)obligations, than any other generation before. In fact, many are stuck on a financial 2)treadmill that isn't getting them anywhere. Is there anything they can do about it? Tamara joins us with more on that and perhaps some good news.
First of all, you're no stranger to financial problems. You and your husband were flat broke at the age of 30. What happened?
Tamara Draut (Director of the Economic Opportunity Program at Demos): Well, we found ourselves a couple of days away from payday and very short on cash, so we basically decided to sell some CDs to get us through to the next payday, so we could get something to eat. And, you know, we didn't know whether to laugh or cry because, here we are, 30 years old, I have a master's degree at this point, he has a college degree, you know, we should be getting ahead at this point; we're 30 years old. So we took a long pause and said, “Well, if we're having such a hard time making ends meet, what's happening to those people out there who aren't as fortunate, who don't have college degrees?”
Interviewer: Well, I think your story 3)resonates with a lot of people out there. Why are so many 20- and 30-somethings that have college degrees…why are they so financially strapped?
Tamara: Well, you know there's a whole 4)combination of things happening. One is they're now entering the real world with lots of student loan debt. You know about 2 out of 3 college graduates have student loans and they're carrying about $19,000 on average. The cost of housing. To be a college grad today means most likely you're gonna need to move to a high cost area because, unfortunately, that's where all the jobs are.
Interviewer: Right. Well, you said the economic situation is 5)bleak but it's not hopeless. So what can they do? What can you do to turn it around, start turning it around?
Tamara: One of the things is get your own financial house in order as much as you can. If you're a recent college grad—and nobody likes this advice, but everybody's actually taking it—move back in with your parents. If you're lucky enough to live near a place where you can get a great job and live rent-free for a year, do yourself a favor, pay down those student loans, pay off any credit card debt you have and really give yourself some financial footing.
Interviewer: Well, part of this whole financial treadmill is that you describe a college degree as the new high school 6)diploma, so a lot of people feel the need to go off and get a masters or they might want to go to law school. Can they get around that?
Tamara: It depends on what career they're in. Social workers, librarians, teachers—these are all professions now that require master's degrees.
Interviewer: Will it pay off if they go and get higher education?
Tamara: Sometimes it will, but not always, because what that means is taking on a lot more debt in the order of $46,000 for your traditional master's degree, hundred-some thousand for going to law school.
Interviewer: And you said starting salaries are going down?
Tamara: They are. If you look at what's happened over the last three decades, let's take college graduates: your typical earnings for somebody who's in their 20s and early 30s have declined in three decades after you adjust for inflation. And for people without bachelor's degrees, their earnings have declined by about 30%, so it's gotten much, much harder to earn a decent living if you don't have that college degree.