Anya Kamenetz is a leading voice in the debate about young adults who try to use credit to get ahead.
In 2006, she broke ground at the ripe age of 25 with her first book “Generation Debt: How Our Future Was Sold Out for Student Loans, Bad Jobs, No Benefits, and Tax Cuts for Rich Geezers – And How to Fight Back.” Kamenetz was nominated for a Pulitzer Prize for her contribution to a series on the same topic for the Village Voice and quickly became a leading speaker on the personal finance issues that today’s young adults face.
Kamenetz is also the author of “DIY U: Edupunks, Edupreneurs, and the Coming Transformation of Higher Education.” In this interview, she sat down with CreditCardGuide.com to share some advice for young adults.
CreditCardGuide.com: When you wrote “Generation Debt,” you first subtitled it, “Why Now is a Terrible Time to be Young.” Why did you choose that subtitle, and do you still feel it’s a terrible time to be young?
Anya Kamenetz: Well, it’s increasingly recognized that we are the first American generation that won’t do as well materially as our parents did. I think that’s a very important turning point to make note of because America’s identity has always been based on being the land of opportunity.
CreditCardGuide.com: In your book, you point out that young people are not only less likely to reach the same standard of living as their parents, but they may even end up with excessive debt loads. Why is that?
Kamenetz: Well, the financial crisis showed us that the American economy is extremely dependent on very high levels of consumer debt. Although our economy continues to make gains in terms of corporate profits and the wealth of the very rich, we’re not spreading those gains equally. As a consequence, the median income has remained pretty much flat. In order for Americans to keep up with the rising costs of necessities like housing, health care and education, many people have to go into debt.
So, for young people, that means student loans, and it often means credit card debt as well. At the same time, young adults are struggling with a greater amount of uncertainty. It takes longer to find your first job, and there is a much greater proliferation of part-time jobs and short-term jobs. So all of this adds up to a life that doesn’t have the same kind of security that has been presented as the American Dream, at least in the post-war era.
CreditCardGuide.com: It seems like the formula that used to work, you go to college, graduate and get a well-paying job, doesn’t quite cut it anymore. Is an undergraduate college degree just getting to “square one” these days?
Kamenetz: That’s a good way of putting it. There is still a strong economic advantage to a college degree. However, that advantage comes from the fact that those graduating only from high school have a dismal outlook in the job market. Their wages have really come down since the 70s. So it’s not that the return on the college degree has increased. It’s that the penalty for not getting a college degree has gotten more severe.
CreditCardGuide.com: Last August, the total amount of student loans surpassed the total amount of credit card debt for the first time ever. You have called the mounting student loan burden that young people carry a betrayal of trust. Why is that?
Kamenetz: A lot of young people go to college on the assumption that education is a universal good that will pay off for them in the future and give them equal opportunity in the workplace. In other words, if you work hard and you study hard, you’re going to have a chance to be part of the American Dream, no matter where you come from.
But, in reality, college is the least affordable for the students from the lowest socioeconomic classes. We’re promising a meritocracy, but we’re not delivering it. Ultimately, money is what determines whether or not people are going to enroll in college, or even whether they are going to stay in college.
CreditCardGuide.com: Another issue that has been widely debated is student credit card debt levels. A recent study showed that only 55 percent of college seniors graduating this year had a credit card, compared to 78 percent in 2008 to 2010. Do you feel the provisions of the Credit CARD Act of 2009 regarding student credit cards are starting to have an effect? Or is there just more awareness among students about the downsides of credit card debt?
Kamenetz: Probably both. The tightened rules have decreased students’ access to credit, which I think overall is a good thing. But the awareness has grown as well. I frequently give talks on college campuses about money, and the conventional wisdom has changed. A few years ago, the whole country was credit mad or debt mad. Everybody was talking about flipping houses and debt almost seemed like a fun thing to take on. Now, conventional wisdom is changing, and students are definitely picking up on that.
CreditCardGuide.com: What would you recommend for young people today to avoid getting into a debt trap and still stack the cards in their favor, education-wise and credit-wise?
Kamenetz: It’s still important to build a good credit history. However, you need to balance it, and you need to make sure that credit isn’t your only involvement with the financial world.
In other words, yes, have a credit card and use it for emergencies or for recurring expenses that you can pay off every month. But, at the same time, have a savings account, make a monthly budget and track your expenses. Don’t let the credit card bill be the only interaction that you have with your money.
Your use of credit and credit cards should be part of a broader relationship where you look very carefully at what’s going in and what’s going out. You have to be smart about your use of credit. There’s just too much at stake otherwise.