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A Generation of Debtors Grow Up Owing

From college loans to soaring health costs and mortgage payments, twenty-somethings face a life of staring into a deep financial hole.
 
 
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The children of baby boomers are the new debtor class. Buckling under a heavy weight of debt, new workers step into an economy of low-wage and contingent work, a combination that makes the basics of adulthood increasingly unattainable.

"We grew up in the Regan era where everything was fake, voodoo economics, and we're not seeing the connections," says Anya Kamenetz, author of Generation Debt: Why Now Is a Terrible Time to be Young. "I don't think we can continue treating people as disposable, not providing them with health care or the means to save."

Educational debt is the most visible -- but not the only -- barrier to the well-being of the "millennial generation," roughly defined as Americans born after 1978. Every gate on the way to middle-class life is now tougher to unlock. Mortgages, health insurance expenses, car maintenance, child care and tax loads for two-income families have all ballooned.

The accumulating stress on this generation is spilling over -- not yet into the street, as it did in France in late March, but into some emerging forms of collective action.

Owing 'til you're old and gray

The familiar combination of summer work, a part-time job during the school year and a little help from home doesn't begin to cover today's college costs. To afford one year at a public university, about $11,000, students earning minimum wage would have to work full-time year-round.

"Students are in a pretty deep financial hole," says Luke Swarthout, higher education associate for the State PIRGs, which advocate on a variety of consumer, environmental and good-government issues. The Federal Reserve says graduates now shoulder three times more debt than a decade ago, after adjusting for inflation. Undergraduates now average almost $20,000 in debt, with a quarter taking on more than $25,000, according to Robert Shireman, director of the Project on Student Debt, a Berkeley-based think tank.

"They end up still paying off their loans about the time when they're figuring out how to help with their own children's education," Shireman says. Some never emerge from their chasm of liabilities. The Supreme Court recently decided that retirees' Social Security checks can be garnished for old student debts, and changes to bankruptcy law last year make it nearly impossible to discharge educational loans.

For students who approach their working lives seeking returns beyond pure remuneration, rising debt loads postpone basic decisions. Pam Morus, 29, spends about 10 percent of her income every month keeping up with $35,000 in student loans. A music therapist in Chicago, she received no grants during her five-year program at Eastern Michigan University. She'd like to purchase a home and start a family soon, but unless she finds a partner who brings in significantly more income, it is impossible. "I barely make enough money to pay my rent," she says.

Even with a scholarship to American University's law school, Julia Graff, 28, started her career as a staff attorney at the Delaware ACLU last year facing $80,000 in debt. She anticipates paying lenders until she retires. Graff knew her ambition to pursue a nonprofit career meant she would forgo luxuries. But her debt-to-income ratio means trips to university dental clinics and taking on odd jobs like tutoring and translating Spanish.

"I live paycheck to paycheck," Graff says. "Eventually I'm not going to want to live like I did when I was 18."

And when lives don't match up with debt schedules, the strain can be severe. After finishing community college, Mandy Minor, 30, bounced around the University of South Florida before settling on business administration. She graduated five years ago, picking up $60,000 in consumer and student debt along with her diploma.

Minor owns a small writing and design firm with her husband, and had a daughter five months ago. She pays $400 a month just to maintain her debt load, and has given up on buying a house. She worries how to provide health insurance once her daughter no longer qualifies for Florida's state-provided care.

"It bothers me on a fundamental level that we even have to worry a little about how our daughter will receive medical care," she says. "It sickens me, and I know I'm not alone."

Minor says some of her credit-card bills predate her college years. "I think sending high school students offers of credit should be illegal," she says. Taken together, such individual struggles illuminate the consequences of punitive political decisions. After all, student debt is intimately linked to government actions, like Congress' decision to boost interest rates to 6.8 percent for undergraduate Stafford loans, both new and old.

Ensuring economic security is not solely an issue of self-interest for young people. Because higher education remains the most important factor for predicting economic success -- and thus an opportunity to bridge inequality -- it is a social justice concern as well.

Last year, Yale students held a sit-in to demand financial aid reform. Within a week, they won a pledge from the university that families making less than $45,000 would no longer pay tuition. Yale was just catching up: The Ivies have embarked on a game of financial-aid chicken, fighting to see who can boost higher the amount families can earn before footing college costs. Currently, that figure stands at $50,000 at the University of Pennsylvania and $60,000 at Harvard.

Struggling for a living wage

Once they've graduated, however, what really staggers young people is a one-two punch: saddled with loans, students have a hard time finding a stable job that will actually support them. Steady productivity gains have been swallowed by capital, stagnating wages for young people. A Federal Reserve survey says the median net worth of households under 35 rose just 1.3 percent in the last decade after inflation.

"Management has pulled a fast one," says Kamenetz. "They've gotten people to accept intangible benefits instead of old, actual benefits. We've all sort of followed this idea that we're all free agents." Flexibility and contingent labor have replaced the certainty of bargaining agreements and pensions. And contrary to media narratives about consumers run amok, foolish spending is not the root of most families' financial problems, writes Harvard Law professor Elizabeth Warren in her book, The Two-Income Trap: Why Middle-Class Mothers and Fathers Are Going Broke. Credit card bills are higher now, but consumer spending between this generation and the last balances out -- for instance, as more is spent on airline tickets, less is spent on tobacco.

So where do young people turn to confront their economic plight? They are channeling some energy into workplace organizing. Retail workers at Borders and Starbucks have employed minority unionism, which initially doesn't seek contracts or bargaining units but builds a base of power through action by less than half the workers. Workers across the country trade information about corporate policies online, coordinating efforts between stores and sniping at overpaid executives.

The underlying model is nothing new: Unions like United Farm Workers have used it for decades. But it could fit young people in hard-to-organize retail work, says Kate Bronfenbrenner, director of labor education research at Cornell University.

"Young people don't feel as vulnerable as older workers because they're not going to be in this job forever," she says. "They are more willing to take risks."

Minority unionism could challenge giant chain stores, she says, if unions commit to long campaigns and follow a social-unionism approach that brings the community behind the drive. The storybook example is the L.A. Justice for Janitors Campaign, which in the early '90s saw the flowering of a community-union partnership that placed moral concerns alongside economic ones. However, these are difficult, expensive campaigns in high-turnover jobs exceed the reach of any sympathetic union local. Critics see minority unionism as a half-cocked attempt to engage young workers.

"We had industrial unions when we had industrial manufacturing. Now we have a new way of working that is much more short-term and mobile," says Sara Horowitz, president of Working Today, a New York-based advocacy group that provides insurance and other benefits for contingent -- and often young -- laborers. "Unions have evolved since the days of Moses and Exodus, and there's no reason to think they're not going to evolve again."

Working Today counts 16,000 contingent workers in its ranks. Although its benefits are limited to workers in New York, it lobbies nationally to fill gaps like health care and retirement savings for the 30 percent of the workforce it estimates work independently.

Millennials are also warming to another old tactic for addressing their grievances. They are increasingly appearing at the polls, with half of voters under 30 turning out in 2004, their largest showing in 14 years. Sustaining this interest, though, would require reversing a long-standing trend: Youth voting rates have been declining since 1972.

The emerging generation's beliefs could offer an opportunity for reshaping the political discourse. Recent studies by the liberal New Politics Institute and a University of Maryland public policy center suggest millennials are more likely to identify as progressive than any other age group.

But unless they find political avenues to channel their discontent, they may soon find themselves screaming in the streets like their French counterparts. "They have different lives than their parents did, a different set of economic opportunities," Horowitz says. "It's time for them to talk about what they need."

Mischa Gaus is a freelance writer based in Chicago.