Young adults take on debt to pay for better future
Filed under: Debt, Family Money, School
A bachelor's degree in international politics could get one far, correct? That's what my friend Miriam thought when she graduated from George Mason University in spring 2007. Needing to unwind after an arduous school year, she opted to work as a skin-care product specialist at a high-end department store during the summer, living a 20-something female's dream life filled with hefty discounts on designer handbags and shoes, free cosmetics, short work days, all while earning $25 an hour.
She bought a few diamond bracelets, a new car, stocked her closet to the brim with Gucci and Prada, sent out job applications in between--and before she knew, a year had passed. Miriam had everything she wanted, except for the job she fantasized about in countless all-night study sessions.
Positive her calling didn't involve anti-wrinkle creams and used cotton balls, Miriam took out a $30,000 loan to pursue a master's degree in public administration from George Mason. Coveted by individuals yearning to work in the government sector, this broad degree offers its recipients a much higher probability of finding a well-paying job (quickly) than a bachelor's in international politics.
Last month, Miriam joined thousands of 20-somethings who entered graduate school to obtain a better future and to ride out the recession. Historically, graduate school applications spike during economic downturns, and already, many U.S. universities have seen significant increases.
Applications to the University of Texas' Masters in Business Administration program have soared by 24% for the spring semester, George Washington University graduate programs experienced a 7% hike and the University of California, Berkeley, saw an overall 6% rise in applications to its graduate academic programs, in which engineering and computer sciences dominate with an 11-point increase, according to Corinne Kosmitzki, director of graduate admissions at U.C. Berkeley.
Graduate school's expensive; so who's paying? Not the parents, most likely."I'm kind of thinking my future husband will pay it off," Miriam jokes. "Just kidding," she says after a short pause. "I'm paying for the loan."
And her situation isn't unique.
More and more young adults in the 22-26 demographic are taking on a financial burden in order to make themselves more marketable in an unstable economy. After paying for their children's undergraduate education, struggling to put food on the table post-layoffs or saving for a near-approaching rainy day, mom and dad are all tapped out, notes Catherine Williams, vice president of financial literacy for Money Management International, a non-profit, Houston-based credit-counseling organization.
Williams says many students she speaks with realize that taking out loans during an economic crisis "is crazy;" however, they choose to take on more debt in order to acquire degrees that would bring them sustainable income. However, Jeremy Vohwinkle, About.com's financial planning specialist warns, "Students need to be sure they are pursuing the degree for the right reasons with a high likelihood of maximizing the return on that money spent. Getting a degree for the sake of getting it because it's hard to find a job could do more harm than good."
Reader Comments (Page 1 of 1)
2-11-2009 @ 4:11PM
Andrew Connor said...
I think it is a great idea for kids to continue on to graduate school soon after completing an undergrad degree, especially if the economy isn't the greatest. It is important to make yourself as marketable as possible, and to do this while the economy is taking a breather is perfect timing. You might as well pad your resume with grad school achievements while you still have good study habits and time on your side.
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2-13-2009 @ 1:29AM
Andrew Flagel said...
Perhaps a better point would be to be smart about selecting institutions and loan packages. Perhaps about.com's financial expert missed out on graduate school himself, but the idea of graduate school while searching for a job, even with reasonable loans, is anything but crazy. It may be that going deeply into debt at one of the highest priced institutions is bad financial planning if one doesn't have a job in mind, but 'm sure most would agree that there are reasonable levels of debt, even in an economy like the one we have. Given my job I have an obvious bias towards college, but I think Miriam, after perhaps some not-so-wise purse and jewlery purchases, is now on a far sounder financial plan, and is showing tremendous taste in her choice of institutions.
Dr. Andrew Flagel
Dean of Admissions
George Mason University
www.notjustadmissions.com
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2-13-2009 @ 9:19PM
Rema said...
I was in the same shoes as Miriam, working at a high end department store, racking bills on luxury items and paying off college loans while searching for a post-grad job. After getting that job pre-market conditions (completely unrelated to my Government/IR degree, by the way), I researched endless nights different graduate programs and used the "Return-on-Investment calculators" (which I think everybody should do before applying/entering a graduate program) to calculate the debt I would be accruing. Post-market conditions, judging from the qualifications many government and non-government jobs have set forth now, the standard has been set higher and without any type of graduate degree, it seems nearly impossible to be able to aquire a high paying job, save the money post-grads are making now (the ones who were able to get jobs!) or pay off any kind of debt. I am now 24 and turning to graduate school after 2 years of working and not being able to save for the future or forseeing a high-paying, high-level government job coming my way. What is another 2-4 years in educational debt as opposed to another type of debt? We are ALWAYS in some type of debt, buying cars and houses, and unless we are celebrities, we are not paying all in cash for those. Personally, education is a debt I can live with, knowing one day it will pay off as the economy comes out of the slump. Looking for any job now without a specific degree is not always fun... and I know I can always count on my favorite word "defer" as I look for that dream job post grad school...
Rema W.
George Mason University, 2007
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2-14-2009 @ 10:59AM
Marina said...
On one hand its a great idea to get master's degree right after the bachelor's and continue to pursue your dream job. However, these days no one knows if this will help you to get the job you are dreaming of. Therefore, personally I would not take a risk by paying the loan without knowing where this degree will take me.
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2-15-2009 @ 12:00PM
n'stuff said...
I know Miriam personally, and I am so proud of her. She has so much integrity and is one of the kindest people I know. I think when your young like her, it's easy to get caught up in the business of cosmetics and glamour. Yes, she does have beautiful things, but knowing her, she would gladly give it ALL up for her dream job. I'm glad she got it out of her system and just spent a year to enjoy and pamper herself! But NOW, she's focused and determined and I can't wait to see this beautiful young woman reach for the stars!
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