The 20-Something Crunch: High Debt, Low Employment

Libby Kane

Come July, things could get even harder for the millions of graduates with student loans.

That’s because on July 1st, the current interest rate is set to double to 6.8%, pending a decision by Congress.

While this seems like bad news, it would just make a bad situation worse. Right now, student loan debt is at its highest point ever, topping $1 trillion. Additionally, recent graduates have the highest unemployment rate in over a decade, which isn’t exactly helping them conquer that massive debt. Instead, they’re putting off what would traditionally signify “growing up”—buying a home, starting a family—in order to meet their loan payments.

And increasingly, they aren’t even managing to do that.

While the news is grim, no one implicated in this situation is trapped. Read on to find out how this situation affects all of us, and if you’re affected, about legislation you can help pass, volunteer organizations that want to help pay down student debt, and a giveaway—ending today—that could score you a free $1,000 toward your student loans.

Borrowing More, Falling Behind

Extending the current low student loan interest rate for federal Stafford loans for another year will cost our government an estimated $6 billion. Sure, $6 billion sounds like a lot … but it’s a mere 0.6% of the $1 trillion in loans owed by our grads–a figure that rises as current students continue to borrow and former students fall behind in their payments, according to The Wall Street Journal.

Further exacerbating the situation is the fact that over half of students borrowers take on risky loans from private lenders before maxing out lower-risk government loans. (Private loans, in contrast to government loans, have uncapped, variable interest rates and don’t have to be flexible about repayment.) The Journal reports that most students get little or no help from colleges in choosing loans, but evidence indicates that guidance could help. A few colleges such as Barnard, Mount Holyoke and San Diego State University that have instituted programs helping students choose loans have seen the rates of students taking out private loans plummet.

Once signed up, students can basically never escape their loans: Student loans are not even discharged if the student files for bankruptcy–they’re only excused in cases of “undue hardship” as determined by the court.

High Debt, but No Jobs

Unfortunately, recent grads aren’t finding jobs that could help them pay off their debts. Research from the Associated Press found that half of new graduates are jobless or underemployed, the highest figure in 11 years.

“Jobless” is pretty self-explanatory, but “underemployed” indicates workers who either hold jobs beneath their skill levels or work only part-time when they want full-time employment. MSNBC reports: “In the last year, recent grads were more likely to be employed as waiters, waitresses, bartenders and food-service helpers than as engineers, physicists, chemists and mathematicians combined.” However, in fields that don’t require a degree, those with degrees are favored over those without, both in terms of promotions and pay.

If you’re wondering what these graduates-turned-baristas studied in college, we know that, too. “College graduates who majored in zoology, anthropology, philosophy, art history and humanities were among the least likely to find jobs appropriate to their education level; those with nursing, teaching, accounting or computer science degrees were among the most likely,” reports

Putting Life on Hold

People with student loans might be the only ones receiving actual calls from creditors, but everyone is affected by their outstanding—in both senses of the word—debt. A recent survey by The National Association of Consumer Bankruptcy Attorneys found that young people are delaying major financial milestones that carry the economy: getting married, buying a car and home, having children. They’re putting their lives on hold to repay their student loans.

This debt affects them in other ways, and even ripples out to other family members. The Journal lists the following among the negative consequences of missing debt payments: ”Possible loss of state-issued professional licenses, inability to get credit cards or home or car loans and risk for parents who co-sign loans of losing homes, cars and other assets.”

What You Can Do if You’re in This Situation

If this story hits too close to home, remember that:

1. You’re not alone. Don’t believe us? We plotted the numbers of exactly how many Americans are affected by student loans in this infographic.

2. It’s not your fault. After all, no one plans to graduate during or shortly after the worst recession since the Great Depression. Which is why ideas like student loan forgiveness, and legislation to keep the interest rates reduced are garnering headlines today.

3. You can help change the system right now. 

Call your state senator or representative and encourage him or her to forgive student loan debt, or at least extend the low interest rate. Online petitions such as the one at have also gathered a following over the past few years (some have collected over 130,000 signatures), but haven’t yet made any discernible difference.

If immediate action is more your style, then volunteer for community service projects at SponsorChange, which will repay you your services by contributing up to $1,000 to your student loans. We’re not talking visiting a soup kitchen or reading to children: SponsorChange projects are more like building a website or managing social media outreach at a non-profit. Each project lasts about four months and takes only about three hours per week, and is designed to be flexible around a full-time job. In giving back to the community, you can start to alleviate your loans.

Even more immediate: Today is the last day to enter our student loan giveaway, in which we’re giving three readers each $1,000 to put toward their student loans. Interested? Enter here

Update, April 30, 2012: In response to reader comments that “it’s not your fault” seemed to indicate that people duck responsibility for their loans, we have updated the story to reflect that we meant that the recession and poor unemployment outlook for recent grads are not their fault. Also, we’ve added in details showing that students get little guidance when taking out loans, and that students who do get such guidance are much less likely to take out private loans.  

  • meridith

    If the interest rate increase occurs how will that affect people who consolidated their loans? I consolidated my undergrad and graduate loans a few years ago at a very low 2.88%.

    Also, the SponsorChange program applies only to people who live in Pittsburgh, PA.

    • Jenna

      The interest rate change applies only to new federal loans.

  • Cristen

    Although LV’s initial intentions to teach on how to overcome debt & prosper financially are honorable, item #2 above stating ‘it’s not your fault’ if you have student loan debt & item #3 encouraging student loan forgiveness seems to negate the initial intentions. How is failing to take responsibility for the debt which you chose to take on, not your fault? No one is forced to take out student loans. Unfortunately, it’s a product of our society, to think that we must get a loan in order to obtain an education. Of course higher education is expensive, I know first hand. But I also know that ultimately, I am responsible for the choices I make. Encouraging your readers to ask for a government bailout, is in fact encouraging an attitude of entitlement, to advise them to ‘spread the burden’ of their debt to the rest of the country’s taxpayers who had nothing to do with their individual, poor financial decisions. This really is unconscionable.

    • laurashin

      Hi Cristen,

      Thanks for your comments. I’ve updated the story to reflect that we meant that the recession and bleak employment outlook for recent grads are not their fault. I also added in some extra information on how little students get guidance in choosing their loans, and those that do are much less likely to choose private loans.


  • Sara

    If you sign on to a loan and fill out all of the paperwork you are entering into a contract. It is your obligation and responsibility to pay that money back. I would say it is their “fault.” People need to take ownership of their debt. I obtained a PhD in a very applied field with about $35k in student loan debt. I would say that about $25k of that debt was completely unnecessary. I used it to fund living expenses and to keep a pretty nice/posh standard of living. I definitely could have cut back. My loan debt is certainly manageable. I know that some people have much more debt, but that should not put other people on the hook for paying it or forgiving it. 

  • Julie

    People, relax. I think it’s pretty clear that the article is referring to the difficulty students have repaying their loans. Of course everyone is responsible for their student loan repayment. Jeez.