11/28/2009 05:12 am ET Updated May 25, 2011

Debt for a Diploma

It has been six months since Federal Reserve Chairman Ben Bernanke stated that "we'll see the recession coming to an end probably this year" in an interview on CBS' 60 Minutes. With the end of 2009 approaching, it remains to be seen: for whom? Certainly not for Americans 25 and younger who are experiencing an unprecedented 18.5 percent unemployment rate, thereby branding this generation with the dubious honor of shouldering the burden of decades of economic laissez-faire policies that began before some of them were even born.

The last quarter century in the U.S. has seen the cost of living rise faster than income, pushing more Americans to rely on credit. A 2008 survey by Demos, The Plastic Safety Net, of low and middle income Americans found that young people under 35 years-old carried an average of $9,111 in credit card debt and more than half of these households used their credit cards to pay for basic living expenses last year because they did not have enough savings. Even the means for acquiring better paying jobs -- post secondary education -- has become costlier. As a result, many young Americans enter adulthood with massive amounts of debt, jeopardizing their ability to achieve financial security and growth.

Unlike a generation before, young families are carrying far more debt at a younger age. According to the Survey of Consumer Finance, the average debt for families 35 years old and younger in 1989 was $50,000. By 2007, the average debt carried by the same age group doubled to an astounding $100,000. To say debt is the result of poor choices and frivolous spending fails to capture the reality of the economic state of young people today.

At a time when the necessity for a college degree has become universal, costs have risen dramatically, forcing young Americans to take on greater levels of debt to fund their post-secondary education. From 1982 to 2007, college tuition and fees increased by 429 percent as financial aid shifted from grant-based aid toward loans. And according to a recent College Board report, about 60 percent of 2007 college graduates had student debt, each taking out an average of $22,700 in loans.

The recession has certainly not helped. Recent data from the U.S. Education Department shows that the 2008-9 academic year saw a 25 percent increase in the total of student-loan disbursements to $75.1 billion, making it the largest increase in recent memory.

These onerous levels of debt have dire implications for the financial mobility of young households. In a 2006 survey of college graduates under 35, more than a third of college graduates say it will take them more than 10 years to pay off their household's education-related debt. And add to that the burden of credit card debt. As young families dedicate an increasing amount of their income and limited assets to paying off debt, they must often delay "rites of passage" such as starting a family or purchasing a home.

The end of the recession Mr. Bernanke heralds for 2009 and "leading the way to recovery in 2010" will still leave young Americans in economic limbo. Demos' A Better Deal Conference, slated for October 15th and 16th in Washington DC, will focus on the economic reality of young people today and what steps are needed to ensure their economic security tomorrow. Until policies focus on them, we are leaving the future of our country to the mercy of the invisible hand.