Get outta my basement you Millennial!

Millennials – aren’t they the worst?  They do seem to get a lot of attention.  From their coffee bars to their start-ups, to video games and smart phones, and their incessant belief that they know a thing-or-two.  And don’t get me started on those “participation trophies” – I mean what kind of kid thinks they deserve a trophy for just trying.  They just live at home with their parents because they can’t afford their own place.  Take my neighbor’s daughter, Jane Millenial.  She graduated two years ago and has a degree in computer science and a minor is business management.  She even works at one of those start-up gigs.  Yet she still lives at home with her parents.  And I don’t want to hear that student debt nonsense.  Didn’t she know what she were getting into?  In my day <insert bootstraps story>…

Okay…so there is a lot to unpack there.  First, this isn’t the narrative of anyone in particular I know.  Essentially it is a stereotype of a stereotype – the curmudgeon who disdains a newer generation.  Rest assured these folks have always existed and will likely continue to exist.  I’m fully expecting to have some level of disdain for a younger generation.  The trick is to catch yourself before you do it.  To have your own,  “And Then it Hit Me,” moment.   And that brings me to the current post.  One piece of this narrative that resonated with me was the conversation around student loan debt.  Specifically, the idea that Millenials should be able to somehow avoid the student loan conundrum.  Now there are a lot of angles I could discuss to take on this narrative but I’d like to approach one that I personally have repeatedly heard.  It is a bootstraps sort-of story:  the idea that if Millenials just worked hard, they could pay for their college costs and avoid the need for taking on debt.

Now a caveat needs to be made here.  My aim isn’t to undervalue the hard work of any person or generation.  If I say something is hard for one person it does not imply that it was easier for another.  The hope is that with a little bit of data and a simple visualization one thing will become clear:  at one point the ability to pay for college with a hard summer’s work was possible.  However, that time has long past and the continued rising cost of education is poised to make the story seem more myth than legend.

Lastly I, like many individuals my age, have student loans.  I’ve done a lot to pay them down and have less than one year left until they are gone.  I obviously have an opinion on the matter and felt it important to disclose my situation in case my feelings on the matter seem to impact my analysis and interpretation (this is what the comment section is for folks).  Okay, let’s get to it!

The Analysis

The purpose of this analysis was to compare a hypothetical situation (working 12 weeks – intended to simulate a summer job) across a period of time and compare expected income from the summer job (based on the federal minimum wage) to the average yearly tuition of a public, four-year school.  This strategy was chosen for two reasons: 1) it mapped on to the original narrative pretty well and 2) I wanted to make this analysis as simple as possible to make the visualization intuitive and interpretation easy.  However, ensuring such ease usually that means a lot of assumptions have been made.  I discuss the main assumptions here:

  • Using minimum wage to aggregate to a summer job income:  It is possible that students earned more than minimum wage during their summer jobs.  My strategy here was to use minimum wage and assume that the possibility of making more than minimum wage was constant across the time period;  if a construction job earned more than minimum wage in 1975, it was assumed that the same would be true in 2016.  Thus, the issue would be constant across time.  Further, minimum wage was selected as many of the jobs tied to this narrative are entry level service-oriented and manual labor type jobs (see below for the minimum wage data source).1 Additionally, I elected not to consider employment opportunities across the year.  I know this means that I am excluding a potential source of income, but again this was done across time periods so the effect is assumed to be constant.
  • College tuition data:  I needed to find yearly tuition data that was not adjusted for inflation across a decent period of time.  I did find a great data source but the data was sliced only by two year and four year programs for both private and public colleges.2  I selected to use the data for four-year public colleges.  Ideally, I would have preferred to find in-state vs. out-of-state college tuition data.  Thus, the average I am using doesn’t differentiate between in-state and out-of-state costs – if you happen to find the data broken down in such a way, let me know!  Further, an average is just that, an average.  You will find schools with tuition that is higher and lower than this number.  I would have preferred median tuition but I was unable to find such data.  Lastly, this figure is tuition only:  I did not include estimates for other fees and costs such as college fees, room and board, books, food, etc.
  • Exclusion of Federal Grant funds (e.g., Pell Grant):  Federal grants are a great resource for qualified college applicants.  The Pell Grant is a great resource for those students whose cost of attendance exceeds their expected family contribution.  The U.S. Department of Education states that the, “Federal Pell Grants usually are awarded only to undergraduate students who display exceptional financial need” with the maximum amount available varying across time (this graphic displays how the maximum amount available has changed over time in 2017 dollars3).  The reason I excluded these funds is that the criteria required to receive funding as well as the number of individuals who receive Pell Grants demonstrated that Pell Grant recipients are a small population (compared to the overall college enrollment population).  Thus,  I chose not to include them.  I similarly decided not to include other grants and scholarships.  Again though, the argument could be made that impact of scholarships is constant across time – but that is a question for data to answer.

Alright – those are the big things I wanted to disclose…with all that said here we are!

As you can see, from the 1970s to the late 1980s, your summer job could pay for your yearly tuition.  In fact, in 1974 and 1979 the income to tuition ratio was 1.5/1 meaning that your income would pay for 150% of your tuition.  You have a summer income surplus!  However, in 2016 that ratio is markedly different.  As shown in the chart, your summer income will only pay approximately 29% of your tuition.  What’s going to cover the difference?  You guessed it – loans.  Even if a student in 2016 worked full-time for a summer, they would still be about $6,200 short for covering their full tuition.  Extrapolate this out four years – a student needs loans to cover almost $25,000 in loans for tuition alone.  Throw in fees, books, room and board, and other cost of living fees, the number comes very close to the average student loan held by Class of 2017 students – estimated to be $39,400.4

The key takeaway here is this:  even if Millenials (or subsequent generations) held a summer jobs like previous generations, the bootstrap story just isn’t possible for them.  Of course there are exceptions to every rule, but in my opinion we can applaud the exceptional while still focusing on and recognizing a problem for the average student.  Finishing college with any debt, especially close $40,000, is a major hurdle to starting the traditional post-graduate life.  Trust me, if a Millenial is living in your basement, they want to move out as much as you want them to move out.

I hope this gave you a real “And Then it Hit Me” moment or at least made you think about an important issue in a new way.  Regardless, here’s your participation trophy.

Image result for dundie

  1. https://www.dol.gov/whd/minwage/chart.htm
  2. https://trends.collegeboard.org/sites/default/files/cp-2018-Table-2.xlsx
  3. https://trends.collegeboard.org/student-aid/figures-tables/maximum-and-average-pell-grants-over-time
  4. https://studentloanhero.com/student-loan-debt-statistics/

And Then It Hit Me…

And Then It Hit Me… is written for the truth seeker, the curmudgeon, and the self-deprecator in all of us who tinker in the details, live in the data, and nourish the truth.

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