Generation Y, or the Millennials, is the successor to Gen X, resulting from a "baby boomlet" in the late 1980s and early 1990s. Now in college or recently graduated, Gen Ys are running into the stark reality that there are more people competing for fewer jobs in today's tight economy. They'll need every advantage they can get to land high-paying jobs that can finance their anticipated life path.
One obstacle standing in the way is their high amount of student debt. According to The Project on Student Debt analysis, data from the school year 2007-2008 showed that 67 percent of students graduating from a four year school had incurred student loan debt. The average debt load for seniors graduating in 2008 was $23,200, up 24 percent from 2004, and expected to continue increasing.
This debt is important because potential employers may take a job candidate's financial background into consideration. Under the federal Fair Credit Reporting Act (FCRA) and many state laws, employers may request a modified financial report as part of the job application process. Applicants must provide written consent and potential employers must provide a copy of the report and notify candidates if they will be rejected for employment based on the report's results. In 2010 the Society for Human Resource Management published "Background Checking: The Implications of Credit Background Checks on Hiring Decisions," which stated that 47 percent of organizations surveyed conducted credit background checks on select job candidates.
Potential employers may use this information to assess the candidate's level of debt in relation to the anticipated salary offer. If the potential employee has a high debt-to-income ratio, that may raise a caution flag about their financial stability. Even if employers do not check credit, student loan debt may affect job hunting flexibility. Lower debt means some college graduates could take a lower paying job they love in place of a higher paying job they hate. A high debt load may mean they cannot afford the cost of living in certain areas. Gen Y adults may want to switch jobs more frequently, but could find this hard to do because of financial constraints.
Take Steps Now to Lower Student Loan Debt Burden
Students in college now can still take steps to make their student debt burden as low as possible by continuing to search for scholarships, grants and work study programs. Although primarily thought of as something a student seeks before entering college, many programs are still available for students entering their junior and senior years.
Students are also advised to make sure their FAFSA (Free Application for Federal Student Aid) form is current. If their family's financial condition has changed it may affect their financial aid package. Talking to a professionally trained college financial aid advisor is recommended to make sure the student has made the best financial choices and is getting the most possible aid.
If money is needed for college costs, the student should look to low-cost federal student loans in place of high-cost financing, such as credit cards. The often easily-available cards usually come with extremely high interest rates. Unlike student loans, credit cards may require immediate payment or have interest that starts accumulating as soon as money is received.
Once students have graduated they won't be able to shirk the responsibility of repaying student loans. The federal government can and does garnish pay, which is another potential negative for prospective employers. Members of the Millennial Generation need to take action now to improve their career prospects and show prospective employers how financially responsible they can be.