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gener@tion DEBT
By Carmen Wong Ulrich

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 gener@tion DEBT

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gener@tion DEBT
By Carmen Wong Ulrich
ISBN: 0446695432
Genre: Business & Money

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Chapter Excerpt from: gener@tion DEBT , by Carmen Wong Ulrich

Chapter 1

Why Do We Have So Much Debt, Anyway?

The Costs of Trying to Make It

In order to master your enemy, it’s best to get familiar with its MO.

So before helping you tackle, manage, and come out on top of the eight-hundred-pound gorilla of your personal money situation, let me offer you a quick tour of the confluence of events that have gotten many of us stuck in this tight financial spot in the first place.

Worst-case scenario, the following section will make you look supersavvy at your next cocktail party. Best-case scenario, it will piss you off, make you wise, and get you moving.


Notice how there is less and less mention these days of “upper class” or “lower class”? How marketers and advertisers (and politicians) now segment Americans with phrases such as hippie boomers, soccer moms, NASCAR dads, tweeners, bobos,* and urban singles?

Lifestyle has replaced the old-fashioned concept of social class. The very positive power of lifestyle as the standard of social segmentation is that lifestyles can be built by choice, not by birth. And the rest of the world is rapidly following suit. (Hooray for that!)

But here’s the kicker: For most Americans, education is the key to lifestyle. And as we all know only too painfully well, education costs.

The shiny side of this penny—and what we can pretty much deduce on our own—was confirmed recently by the U.S. Department of Labor in its report Working in the 21st Century: College graduates age twenty-five and over earn nearly twice as much as workers who stopped their education with a high school diploma.

Many folks got that notice. The Census Bureau reported in June 2004 that Americans are more educated than ever before, with 85 percent of all adults twenty-five and older completing high school that year and 27 percent having a bachelor’s degree in 2003—a historic high.

For comparison, in 1975, 18 percent of men and 11 percent of women had a college degree. In 2000, those numbers rose to 28 percent of men and 24 percent of women. Nice catch-up job, ladies and gentlemen.

Then again, I still (unfortunately) hear ranting justifications like “College is nothing more than a piece of paper.” Or another favorite, “I’ll learn on my own and start my own business—Bill Gates didn’t finish college!” Well, I see men wearing leather sandals, too, but that don’t make them Jesus. I digress.

Straight entrepreneurship is a challenging, potentially lucrative, but extremely risky way to go. If you can do it without getting a college degree, more power to you, all the luck in the world. However, if you are planning on joining the workforce and getting a good j-o-b, that “piece of paper” is your key. Why? Because as those of you who have completed college, are in college, or have had any college know, to succeed in undergraduate and especially graduate school, it takes discipline, motivation, dedication, book learnin’, and a major dose of experimentation and growing up, not to mention a big chunk out of your and your parents’ wallet. So an employer is much more likely to take you (college-educated person) seriously as a job candidate than someone who chose a different path.

Another reason a college education has become de rigueur in the workplace is the shifting focus of the economy over the last several decades.

There are many of us who can say that we are either the first generation in our families to get a higher education, or that our parents were the first to go to college. Alongside the parental (that’d be me) or recent immigration factor, after the 1950s a fundamental shift in the economy and the job market took place. (Before then, if you could imagine, a high school diploma was all you needed to land yourself a good white-collar job—with a pension, no less!) The glory days of behemoth industry and manufacturing are over. Smarty-pants are in. Popular writer-economist Peter Drucker sums this up by saying we’ve shifted into a “knowledge economy.” The Bureau of Labor Statistics (BLS, a division of the U.S. Department of Labor) more generically calls this a “new economy.” In 2001, the BLS reported that the importance of a college education in this “new economy” is made salient by the fact that despite a shrinking college population, there has been a tremendous increase in college enrollments.

Census data show that between 1987 and 1997, the college enrollment of twenty- to twenty-four-year-olds increased 30 percent despite the fact that the actual number of twenty- to twenty-four-year-olds in the country decreased by 1.3 million in the same ten years.

Sociologist-economist poobah Professor Richard Florida became very popular recently with his more encompassing stance that not only is the economy knowledge-driven, but it is also—and will continue to be—driven by a combination of knowledge, information, and creativity, fueling a rapidly growing innovation economy. Now, according to Professor Florida, because creativity is valued as much as, if not more than, just knowledge and information on their own, we’re heading toward the formation of two interdependent classes of society: the “Creative Class” and the “Service Class.”*

Florida states that the problem is that those that are left behind (non-college-educated) are going to end up getting sucked into the Service Class because the members of the dang Creative Class make so much money and work such long, encompassing hours that someone is going to have to take care of all the day-to-day stuff (now, who’d that be?). The more money we make and the more educated we become, the stronger the need for a service economy to support us. And so the wheel turns . . . Pick a side.

Another raison d’être for the education push is the upcoming rapid retirement rate of baby boomers. Millions of those boomers will be retiring in the next ten years, leaving heaps of empty job slots. Great news! Lots of jobs! But the majority of these positions require a college degree. According to our friends at the BLS, in the ten-year span from 1998 to 2008 college-level jobs are projected to grow more than 27 percent. And as the Occupational Outlook Quarterly online reported in 2000, “For the first time in years, openings for college-level jobs are expected to nearly equal the number of college-educated labor force entrants.”

But it’s no time to get lax. The BLS report mentioned above also states that because of this job-exits-equal-job-entries trend, expectations for high salaries and job satisfaction will also increase. This brings about an even more competitive environment not only for the best jobs on the totem pole, but hopefully for employers to satisfy their employees as well.


“Universities share one characteristic with compulsive gamblers and exiled royalty: there is never enough money to satisfy their desires.”*

So we’ve established that to make a good buck in this grande land called America, we need at least a college education. And to get this education, what is required of us? Money. Lots of it.

Why does it cost so damn much if it’s basically a requirement? We can go to public high schools on our parents’ tax dollars because it’s required. So why is a college education getting exorbitantly—almost prohibitively—expensive the more we need it?

Well, you can refer to Prof. Bok’s dead-on quote above for a quick answer. A bit of a longer, more involved answer is that universities are moneymaking and increasingly commercialized private institutions (even the public ones)—some are even corporations (University of Phoenix, anyone?).

Since the late 1970s, when Pell Grants from the federal government covered up to 84 percent of the costs of a four-year college, the bankrolls and operations of higher education have taken a big, hard right turn. A combo of the feds pulling back on their support of college students and the schools themselves (an energy crisis, crime, and war gobbled up most of the government to-do list in the 1960s and 1970s), universities needing to find alternative funds to support their growth and research (hint: athletics) and a ratcheting up of competition among institutions have created a rising spiral of college costs.

According to, the reason tuition costs rose between 4.5 and 11 percent for the 2004-05 school year was a combination of labor costs and health care for staff, student aid (since fewer can afford to go, schools are giving more and more aid—whaaa?), and, as I already mentioned, competition among schools in the battle for the best reputations, best faculties, and best student body (gotta pump out more rich, successful alums).

You can’t blame them, really. We’ve already established that job competition requires higher education levels and training, so universities and colleges are under more pressure than ever to attract top students, athletes, and funding. However, institutions have become so skilled and entrepreneurial in their approach to moneymaking—including corporate sponsorship of research facilities and top students—that they are, for the most part, richer than ever. So again you ask, why the mind-blowing costs?

Well, just how bad is it? (Humor me here.) It got bad enough that in 1998 Congress created an amendment to the Higher Education Act ordering a study of the costs paid by institutions and the prices paid by students. (Just to make sure there wasn’t some price gougin’ goin’ on, no doubt.) The commission that ran this study found that the amount students pay for their college education is increasing faster than inflation (both private and public), and that institution costs are also increasing fast, but not as fast as the payouts made by students.

Our friends at the BLS break it down farther: From 1987 to 1997, the Consumer Price Index for goods and services rose 41 percent, while during the same decade college tuition and fees rose 111 percent! The U.S. Department of Education reported in 2002 that between 1981 and 2000, in both public and private colleges and universities, the average tuition (adjusted for inflation, of course) more than doubled, while the median family income rose only 27 percent in that same time period. Hmm. Quite the gap to close there.

So just at a time where you gotta gotta have that degree, it gets harder and harder to pay for it. And though at least half of students get some or all their tuition paid by their parents and almost a third live at home, too, Mom and/or Dad are becoming less and less likely to help out. Why the tighter wallets? Because parents are living longer and longer, and their retirement accounts got hit hard by the previous recession. Thus, they now have bigger and bigger retirement costs and needs.

So we get resourceful. The Census Bureau says that 75 percent of all full-time college students worked while in college. A staggering 40 percent of these worked full time. (Good Lord—you guys are amazing . . .) The BLS puts this number closer to 30 percent, with 53 percent of students working twenty-five or more hours a week.

But there are only so many hours in a day and for now, self-cloning is prohibitive, so loans are rapidly becoming the number one method of paying for a college education (that’s not including the wonderfully lucky bunch who just write checks—bah).

Back in the day, the federal government straight up gave money to college students (in the form of grants), but now the government has instead become the biggest lender to college and graduate students. Well, at least they’re subsidized loans (see chapter 3 for an explanation of why this is a good thing).

It doesn’t really seem to matter too much in dollar amounts due whether you go to public or private schools. Nellie Mae (she probably visits your mailbox every month, or maybe her sister Sallie?) reported in 2003 that the average debt incurred by a graduating four-year college student was $21,200 for private schools and $17,900 for public schools. Yee-ouch.

Let’s juxtapose those digits with what Nellie Mae reports as starting salaries after graduation: $26,400 (private) and $26,800 (public).

A moment of silence to digest the shock.

Do I dare even venture into the land of graduate and professional school costs? Heck, as I’m writing this, I’ve got a supergrand five-figure total for my master’s degree. Why not . . .

According again to Ms. Nellie Mae, the average debt a graduate student leaves school with—along with that diploma—is $45,900. This same graduate student will average a starting salary of $42,100 a year. That shade of red does not exist in nature.

It’s been awhile now since credit cards have become a substantial way of life for graduate students, even just for day-to-day expenses. Undergrads have caught on. The average undergrad now leaves school with $1,843 in credit card debt.

It’s a love-hate relationship we have with the debt we incur for our higher education. The bills are a tremendous burden—yet without them, we wouldn’t have been able to get that degree that got us that well-paying job, right? Quite the Faustian bargain. But I’ll get to show you how to get the upper hand on this smooth devil called debt soon. Stay tuned.


Internships. They can be paid or unpaid, a genuine training and recruiting program, a glorified temp job, or, worst-case scenario, just another form of indentured servitude. For the most wanted, cool jobs and careers, the latter two types tend to be the norm.

According to the National Association of Colleges and Employers (NACE), in 2004 internships were the top recruiting method used by employers to find new full-time employees. The Financial Times recently reported that half of U.S. college graduates hired have gone through internship programs. Some good news for those on the internship track comes from Business Week online, which says that as we’re pulling ourselves out of an economic slump, the classes of ’04 and ’05 will get 25 to 35 percent more internship offers than in the past several years, and that the number of full-time job offers after completion of an internship will rise the same amount.

Here’s the problem I—and a growing, vocal group of others—have with the practice of internships: They remain fairly unregulated, and many continue to be unpaid (especially in the more creative, hot fields such as publishing and music or film production design).

I had a couple of internships. One in my undergrad years did not pay, but I did get full course credit; a quasi-internship after graduate school barely paid a minimum salary. I’m very glad I had these experiences, and there is no doubt that my undergrad internship was a huge factor in getting my first job out of college. However, as the practice of not paying interns grows, and as it becomes more and more important to have an internship—well, let me relay an anecdote:

Several years ago, I caused quite a ruckus at my ridiculously low-paying post-graduate internship when I walked away from a prestigious offer from the top dog to return instead to the world of earning a fair wage. Thankfully my job switch was a good idea for many reasons, not just because I couldn’t pay my rent where I was at, but also because as I walked out, looking behind me, what did I see?

At one of the most prestigious institutions in its field, I did not see behind me the crème de la crème of thinkers, healers, and researchers. No. What I saw was the mediocrity left over from the sieve that is formed by the need to survive at a job and profession that leave you with loans up the wazoo, then pay you near nothing for the internships and fellowships required to even officially enter the career. These folks weren’t the best and brightest. They were simply the ones who had parents and/or family who could help them financially survive the process. What a shame.

Writer Laura Vanderkam recently agreed with this in her USA Today column on how unpaid or low-paying internships eliminate many of the best-qualified candidates from the hiring pool. The system doesn’t get you the best candidates. What you get is the 20 percent or so of the total available candidates whose parents or family are able to bankroll their living expenses. She wrote, “If the interns who would make my life easier are working construction jobs because their parents can’t bankroll their unpaid summers doing my research, then I have a problem.” Right on, Ms. V.

The New York Times chimed in with a piece titled “Crucial Unpaid Internships Increasingly Separate the Haves from the Have-Nots.” The article wondered: If it’s becoming more and more important to join the workforce not only with an advanced degree, but with an internship in your industry as well, is there a discriminatory class system being created that undermines potential interns from less wealthy families—who have to turn down these unpaid posts for jobs that pay, but may not be where their career interests lie?

And according to the career information web site, unpaid internships tend to be most common in the most competitive career slots, such as media and politics. Shoot, even the White House doesn’t pay the hundred or more interns who work the halls every summer. And if the White House is basically discriminating in its choice of interns by siphoning out those who can’t afford to work for free, where does that leave the other 80 percent of us? (And what kind of elitist roster of Capitol Hill clones does that perpetuate?)

The Fair Labor Standards Act says that employers must pay a minimum wage. However, there is a legal window in the law that says that it’s okay not to pay someone who doesn’t contribute directly to the company’s operations. Now, we all know that that loophole gets stretched.

So employers have an already fairly well-trained pool of potential entry-level employees who are of minimal expense. Meantime a group of potential employees—who want to be there so bad they work for free—know that their chances of getting a full-time post are much higher because their foot was in the door first. Sound like a win-win situation?

That’s the bittersweet joy of internships. There is no doubt how important they are, and they do give you invaluable experience (that is, if you use your time there wisely—my advice is, read everything you photocopy, treat everyone with respect, and make yourself indispensable—worked for me). The conundrum is that you may have to work harder to get one that pays, or have to work another job to pay the rent, or, like I did, end up in more debt in the short term.


Workplace competition has become fierce. Our economy has become more global, technologically advanced, and complex, ratcheting up contention in the American job market and workplace. All this fueled by our increasing levels of consumption—supersize me!

So we have to work more and harder to pay for the cars, bigger homes, better clothes, electronics, travel, and an upgraded American lifestyle. We have to look good because now more than ever, how you look communicates who you are and what you can deliver. As my mother always said, “Don’ dress for de job ju haf. Dress for de job ju want!” Ma was ahead of her time. When you enter the job market and the workforce now, you are a brand—the brand of “me.” It’s time to sell yourself as the best man/woman for the job. And you must have e-mail access and a cell phone, printer, and Palm Pilot.

Our consumer society creates a battle for the best-paying jobs, and an education becomes just one facet in the package of “you.” As the economist Pierre Bourdieu stated years ago, cultural capital—which consists of not just level of education but also family upbringing and economic resources—is indispensable in order to get ahead in the workplace. We live in a time when it’s increasingly important not only to get the best education, but also to consume well. Levels of taste and consumption create distinctions in the workplace that add a very difficult and sometimes unfair measure of how far you’ll go in life. We take our economic, cultural, and social capital and compete in the workplace.

For example, as we all know, if you have two job candidates equal on paper, but one is more likely to look, act, and speak smoothly and well at a client dinner—knowing which wine to choose, what branzino is, and how long it takes to fly to Shanghai—this guy or gal is probably going to be the one to get the job.

Writer Stuart Ewen noted back in 1988 that style has become a sort of “legal tender.” Because we live in a land of marketing, packaging, advertising, and democracy, we’ve created a very real pressure to have an image, a personal brand. We don’t distinguish ourselves just by our accomplishments but very prominently by our appearance. Nice packaging is the American way.

So you graduate from college in debt but then need to have the latest equipment—cell phone, laptop, BlackBerry—and look great while interviewing and on the job, and again, how does all this get paid for? Just one generation back, young adults were still using typewriters and everyone simply had a land line. Now it’s a grand or so for a good computer, plus internet access, a cell phone, and an organizer. You’re already in the hole for another $2,000 and you haven’t even shopped for your interview outfit.

Getting a job is a form of competition, and the standards of this competition have only gotten higher and harder, with no signs of slowing down.


So how’s a young upstart to pay for all this stuff?

BankFirst now has an Usher debit MasterCard. There’s a Hilary Duff card, too. Who would want a credit or debit card with the face of their favorite pop star on it? Even better, Visa now lets you put your own face on your credit card, or any other picture you’d like. (Ah, the ultimate brand promotion—you!) Disproportionately, it’s young people who are interested in these custom jobs. Junior Achievement says that 13 percent of teens age thirteen to eighteen have credit cards now. Teenagers barely know how to manage cash, let alone a credit card. But that doesn’t stop credit card companies from approving lines of credit to someone too young to have a job.

As you’re all too aware, college campuses are huge credit card recruitment centers, with sign-up kiosks all over campuses and credit offers stuffed in mailboxes. Creditors are eager to get you started borrowing early and young, and they know that college is probably the best place to begin. Bank of America has a “CampusEdge” debit card that can be linked to a credit line that offers monthly fees for only the first six months, or free for five years if a parent has an account.

They just keep making it easier and easier to borrow money. And what a growing amount of money it is.

CardData reported in late 2004 that in the month of July, $5.6 billion was added to the total of revolving credit Americans have, most of it in credit card debt. That’s compared with $1 billion a year ago.


Debt has been normalized. Everyone has it, right? So what’s the big deal?

Now, who do you think makes money off promoting the idea that debt is okay? That it’s a normal part of life? Well, banks make money off lenders and borrowers, credit card companies make money all around, stores, too—any store, actually, since debt tends to occur when you buy something—the government, the stock market, the hospitality business, and on and on. And heck, the economy in general goes up when we spend, so maybe it’s in everyone’s best interest but our own?

Do you remember a weird time after 9/11 when the buzz out of Washington was that if you were not out spending, spending, spending, you were being almost un-American? We were told to go on vacation, buy clothes, eat out, and stock up. It was bizarre. Instead of the usual sacrifices asked of Americans during unstable times in the past, we were asked to support America by spending money. And for most of us, it’s money that we don’t have.

What kind of culture supports such a seemingly backward and potentially crippling way of life for its citizens? A consumer culture.

When did America become such a culture of consumers? Well, according to Lendol Calder in his 1999 book Financing the American Dream: A Cultural History of Consumer Credit, before the 1920s the practices of installment payments and loans to make purchases were not held in high esteem. The popularization of the automobile changed a lot of that. Detroit knew that it had to sell cars on credit since they were too expensive for most of the population. Pre-1920s, America was being told by critics that it was promoting “consumptive” behavior. But soon enough, that word with all its negative connotations (tuberculosis used to be called consumption) was changed by marketers and economists to the bright and shiny consumer. In a conflagration of events stemming from banking, Wall Street, Detroit, the government, and the Depression, mounds and mounds of consumer debt was encouraged all around. Consumer debt not only became something to be unembarrassed about, but almost became the norm. Who are we kidding? It is the norm!

How many people do you know who don’t have any debt of any kind? I’m thinking your answer is close to zero. Me too. When a rite of adult passage is getting a credit card, you’re backward for not having the latest tech gadget, and entry-level pay is lower than it was in the 1970s (adjusted for inflation), we’ve come to a time and place where debt has lost its stigma.

Extensive debt is a way of life. If it’s everywhere and nearly everyone’s got it—we’re all living beyond our means—why fix it?

Because too often, it hurts. Because it squeezes and wrings until your hard-earned money is unable to breathe, or even see the light of day. Because as you’re teetering on that precipice of losing what you have and just squeaking by, it doesn’t feel good—it makes you tired. If debt is not managed well, it can become your prison. But if you take control of your situation as soon as you can, you can prevent that multiple-year sentence for overspending. Instead you have every power to nip it in the bud, start up new and better habits, and actually maybe enjoy that raise you got this year.

Best of all, soon again, you’ll be able to breathe.

Web Links The original “Generation Debt” site, with information, blog, and commentary on the state of young people and debt. Another good site to commiserate with other young folks in debt. The official web site of the Government Accountability Office, it studies how the federal government spends taxpayer dollars. An alternative web site for New York City and the nation: news, features, fashion, gossip, arts, opinions, classifieds, personals, entertainment listings, restaurant reviews. The site of the U.S. government’s Bureau of Labor Statistics, with more info on workers in America. The U.S. Department of Education web site, with good info for students on financial aid, research and statistics, and many other programs. The site for our government-lending lady friend Nellie Mae, with info on loans, money management, and more. A job information site with career services, job management, and company information. An info-based web page for the job-hunting site, with connections for students to employers and career centers. Find and apply for internships in multiple fields, and get more info on your rights. Info from Money magazine on cars, real estate, personal finance, and many other areas to help you in building your future. The Business Week magazine site with the latest news, investing tips, business schools, and a career section.

Excerpted from gener@tion DEBT , by Carmen Wong Ulrich . Copyright (c) 2006 by Carmen Wong Ulrich . Reprinted by permission of Little, Brown and Company, New York, NY. All rights reserved.

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