Millennials may be typecast as an entitled, unmotivated and lazy generation that choose to crash in mom’s basement after college because they can’t find a job they like, but even those who fight the narrative and pound the pavement are facing massive post-college debts as they struggle to earn their independence in entry-level jobs.
Today, college graduates spend nearly a fifth, or 18 percent, of their salaries just on student-loan payments, according to a recent report from Citizens Bank. And those debts are likely to grow old with them. Three in five graduates, who belong to the Millennial generation, expect to keep paying their college loans into their 40s.
With college graduation season upon us, the personal finance website WalletHub on Tuesday released its 2016 report on the Cities with the Most & Least Student Debt where it compared the average student-loan balance against the median income in each of 2,513 U.S. cities to determine where Americans are most overleveraged on their college-related debts.
Unfortunately for some Alabama students, the debt burden is devastating.
In Selma, students are graduating with an average debt of $28,035. With a median income for ages 25 to 44 at $17,610, that means these graduates have a ratio of student debt to median income of a crippling 159 percent — the fifth worst in the nation.
But Selma’s not alone, Talladega’s student debt to median income ratio ranks in the top two percent nationwide at 116 percent, followed close behind by Birmingham with 109 percent.
According to Sandy Baum, Professor of Higher Education Administration in the Graduate School of Education & Human Development at George Washington University, and Senior Fellow at the Urban Institute, part of the problem is that college-bound students make the wrong choice about where to go to school and what to study.
“Too many people make the wrong choice about where to enroll and what to study,” explained Baum. “That means they may be financing an endeavor in which they are unlikely to succeed, that leads to weak employment prospects even if they do succeed, or that is much more expensive than alternatives of equal or higher quality.”
The other issue: some students borrow too much.
“They take all the loans for which they are told they are eligible,” continued Baum. “Instead, they should think hard about what their needs will be over the course of the school year. This is particularly an issue for part-time students, who are eligible for the same amounts as full-time students … borrowing moderately is important.”
To identify the cities that are most overleveraged on their student-loan debts, WalletHub’s analysts divided the average student-loan balance (based on TransUnion data from September 2015) by the median income of residents aged 25 to 44 in each of 2,513 U.S. cities.
According to WalletHub, the most overleveraged cities include Voorhees, N.J.; Opa-locka, Fla.; College Park, Ga.; Bastrop, La.; and Selma, Ala. The least overleveraged cities include Lake Forest, Ill.; Sammamish, Wash.; Severna Park, Md.; Winchester, Mass.; and Scarsdale, N.Y.