NEW YORK (MainStreet) Student loan debt continues to be a big problem for college graduates, their families and the economy, including this wrinkle: Students may take on so much college debt in pursuit of better jobs that they actually may drive away good employers.
According to an August study by Fidelity Investments:
- 70% of the Class of 2013 is graduating with debt, averaging $35,200.
- 59% report they chose a specific major in hopes of securing a higher-paying job.
- One-half say paying off their student loan debt is now their the top financial goal.
- 39% would have made different choices related to college planning had they understood the total cost of college.
The problem gets much worse with a report from the public policy group Demos that says about half of U.S. companies check a potential employee's credit before making a job offer and about one in seven job applicants are turned down for a job based on a "blemished" credit score.
College grads that fall behind on student loan payments, then, flirt with career disaster. According to the credit reporting agency FICO, a college loan borrower who falls behind on payments can expect a credit score decline of 100 points a drop that could well prove problematic in landing that post-college dream job.
Jared Pickens, a senior lecturer in finance at the University of Texas at Dallas, says that the goal with student loans is to make sure they don't exceed 5% to 6% of the gross salary a college student expects to make after graduation.
In real-world terms, that means not taking out a loan that will set you back more than $200 per month if you expect to land a job that pays $50,000 per year, Pickens says.