A few more jobs reports like February’s might put a dent in the nation’s still-high unemployment rate. The Bureau of Labor Statistics said U.S. employment surged by 236,000 last month, nudging the jobless rate down to 7.7 percent.
But a summary of unemployment rates for various age groups, recently published online by the Urban Institute, showed variations in the rate, by age. Rates have been consistently lower over the past decade for older workers than for those in their 20s, 30s, and 40s – even during and after the Great Recession.
In a still-sluggish economy, one might wonder: are older workers who remain on the job somehow depriving younger adults of work?
There is “absolutely no evidence of such ‘crowding out’, ” concluded the Center for Retirement Research, which supports this blog, in a recent study analyzing the labor market from 1977 through 2011. To rigorously test this relationship, the researchers tried several statistical variations – even looking at the older-younger worker dynamic during the Great Recession. They kept getting the same result: no crowding out.
In fact, they noted that their own evidence and research by others suggests the opposite. When older people have jobs, they add to consumer demand and fuel the economy. The authors conclude that “greater labor force participation of older workers is associated with greater youth employment and reduced youth unemployment.”Learn More
Young adults, when asked if they have college loans, often just sigh or groan quietly.
But how much does this debt really matter to their lives? Conflicting trends make this difficult to answer. College graduates have ample time – decades of employment – to pay off their student loans, economists argue, and they’ll bring in more earnings to pay them back. A college education is worth $1 million in extra earnings over a lifetime.
Behind the student-loan sigh is anxiety that the post-Great Recession job market makes it tougher for many graduates to earn what they need to pay their loans back. Indeed, the rate of delinquencies has risen in tandem with increased borrowing. Payments on half of all student loan accounts are now being deferred, the consumer credit firm TransUnion reported last week, and these deferrals are the first step to still more delinquencies.
Some researchers are warning about the additional financial risks facing graduates with large loan balances. “That didn’t happen in previous generations,” said Ohio State University’s Lucia Dunn, whose study published last month in Economic Inquiry found that young adults are on a path to having far more credit card debt in middle age than did their baby boomer parents. Credit cards, student loans – debt of all kinds – she said, “is just an overwhelming burden for many young people.” … Learn More
Women with large student loan balances are less likely to marry than their girlfriends who’ve graduated debt-free, new research shows.
Men, in contrast, are immune to this impact. Their marriage prospects are the same regardless of how much they owe for their education, according to Fenaba Addo, who studied the effect of college and credit card debt in the “marriage market.”
As U.S. college debt outstanding has surpassed the $1 trillion mark, the fallout is widening. Recent graduates complain that paying off their student loans affects their ability to take critical steps to improve their future finances, such as buying a house or saving for retirement. But there are psychological effects too: young adults who carry a lot of debt, for example, are more stressed, even depressed.
It was only a matter of time before student loans started messing with their love lives.
Addo, now a post-doctoral fellow at the University of Wisconsin’s Department of Population Health Sciences, became interested in the topic as she watched her girlfriends taking on “crazy amounts of debt” to finish college or complete graduate degrees… Learn More
As delinquencies by college graduates have increased, so have their personal financial risks: 15.1 percent of loans originated in late 2010 are now delinquent, up from 12.4 percent of late-2005 loans, according to a January report by FICO, creator of the credit score. More students are also delaying their loan payments.
“This situation is simply unsustainable,” warned Andrew Jennings, head of FICO Labs. “When wage growth is slow and jobs are not as plentiful as they once were, it is impossible for individuals to continue taking out ever-larger student loans without greatly increasing the risk of default.”
American Student Assistance (ASA) is a non-profit that helps college graduates with the complex task ofmanagingtheir loans. Debtpreventionis the best course of action, and an increasingly urgent one for students. For those who are already in debt, clickherefor how to call an ASA counselor. Click “Learn More” to read a May 2011 article about ASA. …Learn More
To get a grip on retirement worries, overwhelming student loans, or squeaking by, it always helps to get more money or make a plan.
But finding a way to think about how to manage your money is also useful. It’s like making music, says Timothy Maurer, a Baltimore financial planner. At first, you have to master the “boring stuff, but eventually real songs start being produced.”
p.s. Maurer said that his brother Jon Maurer, who is “a far more accomplished musician than I,” is the pianist in this video.
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Michael and Erin Gallagher are just 26 years old but have made a strong start financially, socking away $50,000 by maxing out their 401(k)s while honoring a $20,000 budget for their October 5 wedding in downstate Illinois.
Jennifer and John Lucido, both 32 years old, now have $250,000 in the bank and have built a 2,500-square-foot home near Detroit.
By comparison, the typical U.S. household had saved $42,000 for retirement in 2010, according to the Center for Retirement Research, which funds this blog.
Both couples are members of that rare species of 20-something super savers, spurning intense peer pressure to spend money on consumer items, go out for dinner a lot, and run up their credit cards. Neither couple got where they did the easy way either. They worked hard, but they were also quick to catch on to important lessons about being frugal and saving – from their parents or from each other.
“I have clients in their 30s and 40s who don’t even have $200,000 in their 401k,” said Naomi Myhaver, a financial planner at Baystate Financial Services in Worcester, Massachusetts.
An August article in The Journal of Consumer Affairs suggests one reason people like them are so hard to find. Young adults are extremely vulnerable to peer pressure to run up credit card debt so they can support a high lifestyle and social life.
In the study, 225 college students were asked questions such as whether they have “very strong” connections to their friends or “feel the need to spend as much as [friends] do on activities we do together.” College students have an average of 4.6 credit cards and $4,100 in debt… Learn More
Last week, Squared Away published the first five of 10 strategies to help parents and their college-bound kids limit their borrowing through student loans. As promised, readers can find the remaining five ideas below.
On a complexity scale, finding a college is comparable to buying a house, and some of these debt-cutting strategies are extremely difficult to put into practice. In addition to the financial challenges involved, the emotional aspects of parent-child dynamics and the college application process are daunting.
But the soaring cost of an undergraduate education has made student debt prevention a top priority for most families. Here’s more help from college financial advisers.
Deborah Fox of Fox College Funding LLC in San Diego said the days of majoring in English, philosophy or history are over – or should be. Given the financial pressures of college, she said, students can’t afford to “just study what’s interesting to you.” When weighing future earnings for graduates with such majors, the numbers just don’t add up, especially if the English degree is from a high-cost institution like Columbia University (high cost among private colleges) or the University of Illinois at Urbana-Champaign (expensive for in-state students).
Fox asks her clients to identify skills the college-bound teenager is good at. When entering college, they should already have a handful of potential occupations in mind. Then they can focus on relevant internships, jobs, courses and life skills that will help them get a job when they graduate – and begin paying back their loans. Freshmen should immediately begin testing their theories about the work they’ll want to do – “possibilities they could get excited about,” she said. She tells clients’ kids to “start exploring them immediately, shadow [people in their field], take someone out for coffee. Find out what is the day-to-day work like.” …Learn More