Posts tagged ‘Federal Reserve Bank of New York’

December 30, 2013

Most college graduates are underemployed

by Grace

Most college graduates are underemployed, as shown by the chart on the left.  The chart on the right shows that the vast majority of college graduates are working in fields unrelated to their undergraduate major.

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This comes from research produced by Jaison Abel and Richard Dietz of the Federal Reserve Bank of New York.

… We utilize newly available census data that identify both an individual’s level of education and, for college graduates, undergraduate college major. We construct two measures of what we call job matching for those with a bachelor’s degree. Our first measure, which we refer to as college degree matching, determines whether an undergraduate degree holder is working in an occupation that requires at least a bachelor’s degree. Our second measure, which we call college major matching, gauges the quality of a job match by identifying whether a person is working in a job that corresponds to that person’s undergraduate major. For example, consider a college graduate who majored in Communications. If this person worked as a public relations manager, an occupation that both requires a college degree and relates directly to a Communications major, we would classify this person as matching along both measures. By contrast, if this person worked as a retail salesperson, he or she would be classified as not matching along either measure.

Being overqualified is sometimes the only way to secure employment and pave the way for future career growth.

This data does not necessarily support the argument that a college degree is a waste of time and money for most.  In a perverse way, it actually supports the importance of going to college.  In this jobless economic recovery we have too many college graduates chasing too few college-level jobs, so employers can screen out job applicants who lack a college background.  Those retail salespeople, office receptionists, or any number of similar workers with college degrees were probably helped in gaining employment by the fact they had demonstrated the persistence and intelligence needed to complete four years of higher education.  It also helps their chances of future career and income growth.

A law school graduate blogging about “the loss of my last shred of dignity” while working at a store counter selling cologne is featured in a Business Insider story.

The blog’s anonymous author graduated from a law school that was in the top 50 ranked by U.S. News and World Report. He was on law review and even got a summer position at a firm after his second year. He didn’t get a job offer though.

May 20, 2013

Amid declining household debt, rising student loans remain a drag on the economy

by Grace

Total household debt continues to decline, but rise in student debt hampers economic recovery.

The total amount of debt held by Americans fell again in the first three months of the year and stood at the lowest level since the middle of 2006, the New York Federal Reserve said Tuesday….

The level of household debt in the first quarter fell by $110 billion, or 1%, to $11.23 trillion, mainly because consumers reduced mortgage balances and used their credit cards less.

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A…
Auto and student loans rise.

The increase in the value of auto loans was the smallest in four quarters, suggesting that car companies might have cut prices to attract buyers as demand for new vehicles slackened. Still, auto loans rose $11 billion to $794 billion to mark the ninth straight quarterly gain.

Student loans have ‘surged 46% since the end of the recession’.

Student loans, which climbed $20 billion in the first quarter, have surged 46% since the end of the recession to an all-time high of $986 billion. More students are going to college or remaining in school longer to obtain graduate degrees to improve their chances of finding a job amid a slow economic recovery.

Yet the escalation in student loans is also leaving many young people saddled with large debts. Although the delinquency rate on student loans fell slightly in the first quarter to 11.19%, that’s still the second highest rate ever. Before the recession, delinquencies averaged around 7%.

The decline in household debt is good for a recovering economy, but economists believe growing student loans are ‘acting as a drag on growth’.

The anemic economy has left millions of younger working Americans struggling to get ahead. The added millstone of student loan debt, which recently exceeded $1 trillion in total, is making it even harder for many of them, delaying purchases of things like homes, cars and other big-ticket items and acting as a drag on growth, economists said.

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April 23, 2013

Do we have a student loan crisis?

by Grace

While it’s unlikely that student loans on their own have created a crisis, they do seem to be a drag on our struggling economy.

When the The Atlantic looked at the student loan “crisis”, some of the numbers are alarming.

… The cost of college has spiked 150 percent since 1995, compared with a 50 percent increase in the cost of other goods and services. Last year, outstanding student loans soared to nearly $1 trillion—a 300 percent jump since 2003. College is an undeniably risky investment, seemingly more so than ever. But are rising debt levels a national crisis?

But their infographic presented a more balanced look at some of the numbers, with the first three sections making the argument that the averages do not support the idea of a crisis.

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Not a crisis, but problematic for a struggling economy

Updated 2012 numbers from the Federal Reserve Bank of New York report

The paper starts by noting that student debt has grown dramatically over the last decade — some 43 percent of Americans under the age of 25 had student debt in 2012, with the average debt burden now $20,326. By contrast, back in 2003, just 25 percent of younger Americans had debt, and the average burden was $10,649.

Younger Americans with student debt are less likely to buy homes and automobiles, holding back spending that has typically fueled past economic growth.

… it looks like rising student debt really might be eating into the housing and auto markets. If so, that could have big implications for the U.S. economy. Auto and housing sales have been a huge driver of growth these past few years, though auto sales are still well below their peak. (Analysts are expecting around 15 to 15.5 million sales in 2013, versus an average of 16.6 million per year during the 2000s.) If younger Americans are retreating from those markets, that could help slow down the recovery.

Related:  College debt levels higher than all other types of consumer loans (Cost of College)

January 4, 2013

College debt levels higher than all other types of consumer loans

by Grace

The Wall Street Journal picked its top ten economic charts of 2012, including one published in November showing that outstanding student loan debt now “outpaces all other nonhousing consumer debt”.  (Bear in mind the chart does not include unreported student loan “shadow debt” that could increase these figures by one-third or more.)

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U.S. student-loan debt rose by $42 billion, or 4.6%, to $956 billion in the third quarter, the Federal Reserve Bank of New York said Tuesday. Overall household borrowing fell during that period.

Payments on 11% of student-loan balances were 90 or more days behind at the end of September, up from 8.9% at the end of June, a rate that now exceeds that for credit cards. Delinquency rates for all other consumer-debt categories fell or were flat.

By design federal student loans are easy for almost anyone to get.

Nearly all student loans—93% of them last year—are made directly by the government, which asks little or nothing about borrowers’ ability to repay, or about what sort of education they intend to pursue.

President Barack Obama championed easy-to-get loans during the campaign, calling higher education “an economic imperative in the 21st century.” A spokesman for Education Secretary Arne Duncan said the goal is “to make student loans available to as many people as possible,” and requiring minimum credit scores would block many Americans from going to college….

… the government demands no collateral and has no underwriting requirements….

… “The way the system works now…put money on the stump, people come and get it,” said Anthony Carnevale, director of Georgetown University’s Center on Education and the Workforce. “Can’t blame them. It’s sitting out there in plain view. It’s easy to get.”

Jackson Toby, a retired Rutgers professor and adjunct scholar at the American Enterprise Institute, recommends reforms that would make student loan lending standards similar to those of other consumer debt.  This change would exclude many lower-income students.

He proposes that students undergo a comprehensive assessment of credit-worthiness, including how much debt they currently have, their academic history and their expected income upon graduation, given their major, before getting federal student loans.

Imposing tougher standards would exclude some potential borrowers. “You would have loans only going to upper-income students at the best colleges,” said Mark Kantrowitz, who publishes Finaid.org, a student-aid website.

Other charts among the WSJ’s top picks cover the changes in categories of consumer spending over the last century, how unemployment benefits differ among the different states, and how deficit spending has become the norm in recent years.

Related:  Did the student loan bubble just burst? (costofcollege.wordpress.com)

December 4, 2012

Did the student loan bubble just burst?

by Grace

This “Scariest Chart Of The Quarter” posted on Zero Hedge is making the rounds on the internet.  The chart is from the New York Federal Reserve’s quarterly report.

This increase from 9% to 11% in new delinquent student loans may actually be under-reported, according to a footnote in the Fed report.

As explained in a Liberty Street Economics blog post, these delinquency rates for student loans are likely to understate actual delinquency rates because almost half of these loans are currently in deferment, in grace periods or in forbearance and therefore temporarily not in the repayment cycle. This implies that among loans in the repayment cycle delinquency rates are roughly twice as high.
An ominous pronouncement from the Zero Hedge writer:

And so it’s official: Pop goes the student loan bubble, as just confirmed by the Fed.

A lively discussion in the comments section includes some arguments against this claim, but most seem to think the end is near.  If this sharp uptick is actually the beginning of the end, an increasing percentage of debtors may qualify for the Income-Based Repayment Plan (IBR) and eventual loan forgiveness.  That would mean taxpayers will be paying off these loans.

Related:

March 7, 2012

46% of people under 30 have outstanding student loans averaging $23,000

by Grace

A report released this week by the Federal Reserve Bank of New York highlights the drag that student loans have placed on the economy and recalls the notion that this debt burden may be creating a generation of wage slavery.

Forty percent of the people under 30 had outstanding student loans, and the average outstanding debt is $23,300. About 10 percent of borrowers owe more than $54,000 and 3 percent owe more than $100,000.

After adjusting for the estimated number of individuals still in school or who otherwise qualified for payment deferral, the report found that 27% of student borrowers are delinquent in their payments.
… 


It’s probably not going to get better any time soon.

   In sum, student loan debt is not just a concern for the young. Parents and the federal government shoulder a substantial part of the postsecondary education bill. Moreover, the student loan delinquency picture is not fully captured in the broad statistics since a significant proportion of borrowers and balances are not yet in the repayment cycle. The implications of this last fact for future changes in the student loan delinquency rate are a very important area of research.

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