A Generation of Debtors Grow Up Owing

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.