Memo to the class of 2012: Your life may be about to get very hard. Graduates will leave campus to discover the worst job market in more than a decade, according to a recent report by the Associated Press.
Meanwhile, rising tuition, soaring student loan debt, and potentially serious problems with the government’s system of collecting unpaid student loan debt could make it particularly difficult for 2012 graduates to transition from school to work.
“Simply put, we’re failing kids coming out of college,” Andrew Sum, director of the Center for Labor Market Studies at Northeastern University, told the Associated Press.
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The problem is rising student loan debt on the one hand, and rising unemployment on the other. Only 53 percent of recent college graduates hold full-time jobs, according to a recent study by Rutgers University’s John J. Heldrich Center for Workforce Development.
Unlike in years past, when many graduates could expect to find work as bank tellers or low-level corporate employees, today many of those higher-paying, full-time jobs have been lost to corporate downsizing. What’s left are part-time jobs, things like tending bar or working in retail stores, which pay substantially less.
That’s part of the reason why the median wages for 2012 graduates will be at their lowest levels since 2000, Sum found. The two recessions of the 2000’s shed 8 million jobs from the economy, according to recent research by Northeastern’s Center for Labor Market Studies, and recent grads face some of the highest hurdles in competing for those jobs that remain.
“Part of this is due to the lack of quality jobs for those unfortunate enough to graduate during a recession of historic force,” according to the Heldrich Center study.
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But the need for a good-paying job after graduation is higher than ever, now that total student loan debt has topped $1 trillion, higher even than mortgage and credit card debt. As debt soars and incomes drop, more graduates find themselves unable to pay their college debts; $67 billion worth of college loans are now in default, according to reporting by Bloomberg.
That has led to increased scrutiny of the private companies used by the U.S. Department of Education to collect those bad debts. After allegations arose that private debt collectors often try to intimidate defaulted debtors into paying more than they can afford, the education department announced it would mandate changes that would require debt collectors to offer income-based repayment plans, Bloomberg reported.
Some consumer advocates believe the administration’s plans don’t go far enough to protect graduates. A report published this week by the National Consumer Law Center calls on the education department to pay private debt collectors based on the quality service they provide, replacing the current model that incentivizes contractors to collect as much money as they can.
The center also called on the administration to create a new system to field complaints of alleged abuse by school debt collectors.
“There is a balance between the need to collect student loans and the need to assist borrowers,” according to the center’s report. “At this point, the balance is tilted overwhelmingly in favor of high collections and collection agency profits.”