It’s official: This year’s class graduates with a record amount of debt. The Wall Street Journal reports that total student loan debt taken on by parents and students adds up to an average of $22,900, 8 percent higher than last year. That’s scary stuff, especially considering how hard it is for new grads to find jobs right now.
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But a closer look suggests it’s not such terrible news, after all. As the Wall Street Journal says, education debt can help people get ahead, because “it endows people with economic advantages that the recession and slow recovery have only accentuated.” The College Board calculates that college grads currently face a 4.6 unemployment rate, compared to 9.7 percent among people who hold only high school degrees. They also earn far more: Bachelor degree holders over age 25 earn a median salary of $55,700. High school grads earn just $33,800.
In fact, the bigger problem might be avoiding student loan debt altogether. Richard Settersten and Barbara Ray argue in their recent book Not Quite Adults that some young people are taking their fear of debt so far that they hurt themselves financially. "Many young people, especially those from lesser means, see the price tag [of college tuition] and think, 'Oh my god, I can't possibly take that on.' They could be shortchanging themselves,” says Ray. (See 7 Biggest Money Mistakes College Grads Make.)
To get behind some of the statistics, here’s a look at some of the biggest myths about the current generation of twenty-somethings and their bank accounts:
Myth: Twenty-somethings don’t know much about money.
Truth: It turns out recent grads know a lot—in some cases, more than their parents’ generation. A survey by the online brokerage firm Scottrade found that the recession actually inspired 20-somethings to educate themselves about how the economy works as well as to learn more about their own personal financial situations. In addition, a higher percentage of respondents said they’re doing more research before investing relative to older groups.
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Myth: Gen Y feels down on their luck.
Truth: It’s true, these are not easy times in many ways. From recessions to wars, it’s not easy finding a good job, and unemployment is especially high among young adults. Bu according to the Pew Research Center, only three in ten young people say they earn enough money to lead “the kind of life they want,” while nine in ten say they believe they will be able to do so in the future. Only 76 percent of Gen Xers and 46 percent of Baby Boomers say the same thing.
Myth: Recent grads are spend-a-holics.
Truth: Surveys taken since the recession show that 20-somethings report caring less about following the latest trends and styles, preferring a newer, frugal mindset. A survey by TNS Retail Forward found that shoppers in their 20s and 30s were most likely to buy the least expensive versions of products.
Myth: Paychecks are much lower these days.
Truth: In many ways, twenty-somethings are the richest generation to have existed. Yes, they face a high unemployment rate, but the full-time jobs that do exist often come with record benefits—largely health insurance-related. Studies by the Federal Reserve Bank of Minneapolis show that after you adjust for inflation and benefits, median compensation rates have increased 28 percent since 1975. That helps explain why a Pew survey—taken after the recession—found that 60 percent of respondents under the age of 40 say their standard of living is better than that of their parents at the same age. Just 15 percent said it was worse.
The bottom line: The class of 2011 doesn’t need to let their debt define them – it can just be a stepping stone to better jobs and bigger incomes out in the real world.
Kimberly Palmer (@alphaconsumer) is the author of the new book Generation Earn: The Young Professional's Guide to Spending, Investing, and Giving Back.