Congradulations: Lukewarm job market, optimism
While the Georgetown University Class of 2013 revels in their upcoming graduation with Senior Week, recent employment numbers may put a damper on their celebrations. Frighteningly high unemployment numbers for young college grads from the month of April indicate a need for more federal assistance to students. The Consumer Financial Protection Bureau has responded with a reexamination of student loans and debt.
The current job market for college grads is unsurprisingly terrible. The April employment data show that, while unemployment for 18-29 year-olds is officially 11.1 percent, adjusting for young workers who have given up on looking for jobs raises this number to 16.1 percent.
“It is a rough time to be a young person in America,” President of Generation Opportunity Evan Feinberg said. “The effective youth unemployment rate is 16.1 percent, and with about 2 million college students graduating this month, there is no sign of an economic recovery for my generation. Half of all graduating seniors aren’t going to find meaningful work in the coming months.”
The bleak prospects for grads prompted the CFPB to launch a “Request for Information Regarding an Initiative to Promote Student Loan Affordability.” The results of their outreach, released last week, conclude that the biggest stumbling block for students is debt from private loans, which do not provide nearly the same benefits of federally-granted student loans.
“College can open up many opportunities, and we do not want that college degree to become more of a burden than a blessing for those saddled with unmanageable debt in a tough employment market,” CFPB Director Richard Cordray said. “Today’s report warns of the potential domino effects on the economy of high student debt. It also identifies policy and market-based solutions based on the public’s comments that would help borrowers manage their private student loan burden.”
The report highlighted three potential solutions in particular for improving private student loans.
First, “refinance relief” for borrowers who pay on time would allow these students to “find a refinance option with a lower rate that reflects the strong likelihood they will fully be able to pay back their loan,” according to an email from the White House Office of Communications.
“This approach would make sense because students often apply for private student loans when they are young, have scanty credit history, and have little or no income,” Cordray said at a hearing on the CFPB report last week. “Lenders must also consider the possibility that borrowers may not graduate or find a job with a salary that allows them to meet their monthly payments.”
The White House also identified a “road to recovery” as a second way to aid students struggling under the burden of debt. “The ‘road to recovery’ offered by the lender could be a negotiable, transparent, step-by-step process where monthly payments are lowered to match a reasonable debt-to-income ratio,” similar to the way the federal government handles its loans to students.
And finally, policy makers are considering a “credit clean slate” option for debtors who fall far behind their payments. “With the option of a clean slate, consumers may be able to qualify for a mortgage or an auto loan that otherwise would have been denied, which could open up new paths forward for them to get a firmer foothold to climb the economic ladder,” Cordray said.
The need to improve student loans extends beyond the CFPB. Many senators and congressmen have taken on the cause. Senator Elizabeth Warren (D-Mass.) introduced a bill last week that will lower the “subsidized student loan interest rate to the same rate that America’s largest banks pay to borrow money from the Federal Reserve,” according to Salon.
College presidents, however, seem to have other concerns than the financial well being of their students after graduation. A Gallup survey released at the beginning of May found that, weirdly, only 65 percent of college presidents think it’s “very important” for grads to get good jobs, according to The Atlantic. With the number of times Vox hears the words “consulting firm” on campus, it’s safe to say Jack DeGioia isn’t one of those presidents.
While the overall look at job prospects in America is bleak, Georgetown grads in particular are much better off. The New York Times found that Washington, D.C. is currently one of the best areas for young people to be looking for work.
Photo: 401(k) 2013 via Flickr