Zoe is young, educated and broke.
Ryan is too.
Both have jobs, mortgages and a lot of debt.
They are not alone.
Nearly two-thirds of young adult households have incomes under $50,000. One in five struggles with debt hardship. In other words, they spend more than 40 percent of their income to service debt. In fact, the average college-educated young adult has $19,000 in student loan debt and $10,000 to $15,000 in credit card debt.
Many of these graduates will relocate to high-tech centers across our nation and
command sufficient salary to comfortably pay off the debt, but for those who choose to locate here, many will face a challenging future. The median familyincome in Ohio is $51,966, according to the U.S. Census Bureau. Furthermore, when adjusted for inflation, family income between 2000 and 2003 declined about eight percent in Oregon, Genoa and Lake Township, according to the Center for Community Solutions, a Cleveland based non-partisan research group.
If college costs escalate at the current pace and wages in Ohio continue to drop, many college graduates will not be able to repay their student loans in 10 years at the current 6.8 percent interest rate.
This is not a crisis yet, but as our reporters write in Young, Educated & Broke, a special 11-story section appearing this week and next, the darkening shadow of debt threatens the future of young adults. Our reporters look at the common reasons young people fall into the debt trap—student loans, credit card debt, bank fees, payday loans, going “upside down” on a car purchase, and the effect a low credit score, garnishment and bankruptcy can have on their futures. They offer tips on how to avoid the debt trap and how to create a budget.
Debt is a personal matter. In these stories you will meet Ryan, a father of two young children. He owes $70,000 in student loans and collection fees and, because of bad luck, naivety and a poor credit rating, has a car payment of $450 a month at 15 per cent interest.
You will meet Zoe and her husband who owe $46,000 for student loans. You will meet Brittany, a student at Bowling Green State University. She wrote four checks totaling $90 which overdrew her account by a few dollars and resulted in $300 in bank and merchant fees, more than half her monthly income.
You will meet Lisa, a full-time mom and student. Her unexpected bills had her juggling six payday loans at one time. Each cost her $15 for every $100 she borrowed.
These Young, Educated & Broke adults, all in their 20s, made choices about how much to borrow, how much to buy on credit, what to drive and where to live. They are responsible for those decisions and must bear the consequences. But, while debt is a personal matter, the impact of this debt on our economy could be dire. Those who spend 40 percent of their income to service debt have less disposable income to purchase new cars or other consumer goods.
These stories paint a disturbing picture, but identifying a societal problem is the first step in solving it. We are not the first to write about this trend. Google “young and broke” and 34.2 million references appear. Nor do we wish to alarm parents or discourage young adults. There is hope. A graduate of a four-year college will earn in a lifetime an estimated $600,000 more than a high school graduate while a two-year graduate will earn $250,000 more. So, the “Young, Educated & Broke” of today have the potential to pay off large debt.
We hope, however, that by educating you about these trends, our young adults will avoid the debt trap and become smarter consumers.