Young Americans Feel Cash-Strapped
Jan. 18, 2006 — -- Many Americans under the age of 35 face financial hardships much harsher than those encountered by their baby boomer parents. For many, it's harder than ever to make financial headway.
In her new book, "Strapped: Why America's 20- and 30-Somethings Can't Get Ahead" (Doubleday), author Tamara Draut takes a hard look at why so many adults under 35 struggle for financial independence. Draut says astronomical student debts, depressed wages, rising health care costs and soaring property values are just a few reasons an entire generation of young people cannot overcome crippling financial situations.
The book profiles a wide swath of people to serve as examples, and Draut works to connect the dots between various social and economic trends and government policies over the past 30 years.
Focusing closely on the student loan burden, she suggests a program that would shift federal financial aid away from a loan structure to a grant structure. She also lays out ideas for a career-ladder program that would create apprenticeships in fields such as health and teaching, and a "spread-the-wealth" incentive plan -- a federally matched savings program geared toward youngsters and low-income families that would help them save for down payments on housing.
A few numbers cited in the book:
Higher and Higher Education
Inflation-adjusted tuition at public universities has nearly tripled since 1980. Thirty years ago, the average cost of attending a private college was $12,837 a year, in inflation-adjusted dollars. Today the average cost of attending a public university is $11,354, which means the financial burden of paying for a state college today equals the burden of paying for a private college in the 1970s.
Paycheck Paralysis
In 1972, the typical 25- to 34-year-old male with a high school diploma earned just over $42,000, in inflation-adjusted dollars. Today men in this age group earn just over $29,000.
Generation Debt
The rise in credit card debt combined with massive student loan debt means that 25 cents of every dollar in income goes to paying off debt. Because only about half of those in this age group own homes, for many that 25 cents all goes to nonmortgage debt: primarily student loans, car loans and credit cards.
High Cost of Putting a Roof Over Your Head
The Northeast and the West, along with other major metro areas like Chicago, are fast becoming middle-class free zones: Median home prices in Sacramento, Calif., doubled to $258,000 between 1997 and 2002; in Seattle, they reached $260,000, an increase of 42 percent; in Boston, they hit $413,500.
Family and Work
Today 61 percent of mothers with children under the age of 3 are in the workforce -- up from 40 percent in the 1960s. The average cost of child care is more than $6,000 per year, per child.
Draut, the director of the Economic Opportunity Program at Demos, a national think tank headquartered in New York, says she hopes her ideas, combined with 20- and 30-somethings becoming more engaged politically, will help get "generation broke" out of debt and back on the road to financial freedom.
Following is a an excerpt from the first chapter of Tamara Draut's "Strapped: Why America's 20- and 30- Somethings Can't Get Ahead"
CHAPTER ONE
Higher and Higher Education
Renee, a white 26-year-old, grew up in St. Paul, Minnesota. Her parents wanted nothing more than to send her to a four-year college when she graduated from high school, but unfortunately, it was priced out of reach. Instead, Renee began taking business classes at a nearby community college that specialized in business training and got a full-time job. She worked during the day and took classes at night.
Some time later, Renee accepted a new job at a nearby printing company. A nice increase in pay was the upside; working the midnight shift was the considerable downside. Suddenly, balancing school and work became a lot more difficult. Renee would work until 8 A.M., sleep in the afternoon, and go to school at night. Eventually, racked with exhaustion, financially stressed out, and supporting an unemployed boyfriend, Renee dropped out of school. Money played a big role in her decision. She had already taken out student loans and burned through a small inheritance from her grandfather. Already $4,500 in the hole with student loans, Renee didn't want to sink any further into debt.
