Student Loans Plus Limited Jobs Equals Trouble
When she graduated from the University of Iowa two years ago with a major in elementary education, Amber Newman envisioned standing in front of a class of bright, energetic youngsters and providing them with the solid educational base that would help them become successful in the upper grades as well as later in life.
But when Newman didn’t land a job in the classroom, she found another way of working with young people – she’s a nanny in Chicago to two boys, ages 1 and 4. Although it’s not her dream job, she’s glad to have a job in this struggling economy. Any job.
“I’m okay, I’m not living on the streets, I’m not hungry,” said Newman, who lives with her parents in suburban Chicago. “A lot of my friends have taken teacher’s aide positions just to be involved in schools and get their foot in the door. Some work in daycare or are nannies like me. None of my friends who have done elementary education have changed their interest.”
What has changed is the labor market.
“I kind of knew toward the end of my last year that there wasn’t going to be a lot of regular teaching positions because of budgeting,” Newman said. “When the economy went down, education took a big hit.”
Two-thirds of the class of 2010 were met with a 9.1 percent unemployment rate – the highest in recent history – and an average of $25,250 in debt, according to “Student Debt and the Class of 2010,” a recent study by the Project on Student Debt, an Institute for College Access & Success initiative.
The unemployment rate for teachers is likely to remain high as financially-stressed governments reduce jobs in the public sector.
Newman says enrolling graduate school while still job hunting is not a viable option.
“I think it just cost too much to go back to school,” said Newman, who has about $30,000 in debt despite having received two scholarships. “When people ask me what I got my degree in and I say education, they would look at me kind of sad and say, ‘Good luck.’”
And if the student is Black, like Newman, he or she will need more than luck.
A study conducted by the College Board Advocacy & Policy Center in 2010 – the same year Newman graduated from college – found that student loan debt levels of $30,500 or higher were more common among 27 percent of African-American college graduates, compared with 16 percent of their white counterparts.
Federal Reserve data show that the median student loan amount for Whites increased from $13,463 in 2007 to $15,000 in 2009, an increase of $1,537. Over that same period, student loans for Latinos rose from $13,463 to $17,000, an increase of $3,537. The highest increase was among Blacks, rising from $8,285 in 2007 to $14,000 in 2009, a jump of $5,715.
Meanwhile, the percentage of households relying on students loans was also highest among African-Americans (27.9 percent), compared with 14.2 percent for Latinos and 15.9 percent for Whites.
The increased reliance on student loans is directly connected to the economy,
“The expansion of education debt occurred at the same time that other credit markets, especially mortgages and credit cards, contracted,” Christian E. Weller said in a Center for American Progress report. “Households went deeper into education debt during the crisis as other forms of credit became less prevalent.”
Students loans now exceed total U.S. credit card debt.
More Blacks may be forced to turn to student loans because Pell grants – direct allocations that help poor students attend college – may be slashed. That will have a profound impact on Historically Black Colleges and Universities (HBCUs) because two-thirds of their students receive Pell grants. Without those direct grants, families are more likely to seek loans.
Regardless of whether a college graduate lands a job, repayment of student loans are scheduled to begin approximately six months after commencement. According to the Institute for Higher Education Policy, only 37 percent of student loan borrowers were able to repay their loans without delinquency.
That number is likely to rise if Congress doesn’t act soon.
“More than 7 million students and their families rely on Subsidized Stafford Loans to help pay for college,” says a report by the Center for American Progress. “The loans distributed by the U.S. Department of Education currently hold an interest rate of 3.4 percent. But that rate is set to double if Congress fails to act by July 1, 2012. If that occurs, millions of students will see their interest rates soar to 6.8 percent on the new loans they take in the next year thereby causing a steep rise in their loan burden and effectively increasing the cost of attaining a college degree.”
Newman hasn’t abandoned her dream of being an elementary school teacher and is again applying for teaching positions.
“I started looking last summer but not full force because there weren’t that many job listings,” she explained. “It was kind of discouraging.”