Student loan debt is still among the highest form of debt in the U.S., second only to home mortgages. However, new research from Junior Achievement and PricewaterhouseCoopers shows that some young students may not be too concerned. In fact, the study found that one in four (24%) students and graduates between the ages of 18 and 29 believe that their student loan debt will ultimately be forgiven.
While this sense of optimism is certainly refreshing, it hints toward some serious gaps in terms of student loan knowledge and financial reality. This generation of college students and recent grads have far more to consider than those that came before them and, as a result, the picture of college campuses and post-high school life in the next decade is rapidly changing.
What "Forgiveness" Really Means
While older Millennials and Gen-Xers still struggle to pay back their own loans while managing careers and families, these younger students may have good reason for their optimism. As recently as this past summer, President Obama announced that he would take a series of executive actions with the goal of alleviating student debt for graduates working in the public or not-for-profit sector. Applicable to federal loans only, the requirements for loan forgiveness include 120 or 10 years or repayment, full time employment, and a comprehensive income-based repayment plan.
[Looking for more information about recent Higher Education Legislation? Read Snowballing Student Loan Debt Leads to Dramatic Higher Education Reauthorization Proposals]
The 24% of students who expect these programs to help them out may understandably benefit from them—as many as a quarter of the current workforce hold public positions. However, it is unclear as to whether they fully understand how. The report failed to assess how students expect to gain this forgiveness and the strict requirements that will undoubtedly make qualifying tough.
What the Next Generation of College Students Looks Like
All this adds up to a very different picture of the next generation of college students and graduates. Each group has distinct concerns and characteristics that differ from those in their position as little as a decade ago.
- Graduates in the class of 2012 hold an average of $26,885 in debt, according to Pew Research Center and the class of 2013 is expected to only increase that number.
- Among recent college grads, more than one-third pay over $300 per month in loans and 5% are paying more than $1000.
- Among young college students, 60% report that financial aid availability was the number one factor in helping them decide where to attend college.
- An even more concerning 62% were boxed out of their top choice for financial reasons.
Unlike years past, when the value of a college education, particularly a four-year degree, was a given to many high school seniors, more are questioning it. Students question the value of student loans as an investment. In fact, a recent study by Mintel found that only 1 in 5, a mere 20%, considered a college degree valuable as compared to over 50% just two years ago in 2012. As a result, alternate routes such as two-year community colleges with the option to transfer and part-time employment are becoming more popular and viable options to many students.
Why College Still Matters
Despite these challenges, more people than ever are earning bachelor's degrees each year. And while, in a way, this devalues the degree, it also sets a standard that students and parents cannot ignore. Rather than a boon to a job application, a degree, or rather a lack thereof, is a barrier to entry. It is also significant to note that the average Millennial with a college degree still earns $17,500 more per year than his cohort without one—a statistic significantly larger than among Generation X.
