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01
The Class of 2020: unemployed, taking on debt and struggling to pay the bills
CNBC's "College Voices 2020" is a series written by CNBC summer interns from universities across the country about coming of age, launching new careers and job hunting during a global pandemic. They're finding their voices during a time of great social change and hope for a better future. What money issues are they facing? How are they navigating their student loans? How are they getting work experience, networking and applying for jobs when so many opportunities have been canceled or postponed? How important is diversity and a company's values to Gen Z job seekers?
2020 is undoubtedly a difficult time to graduate college. The seniors who may have assumed that they'd have things figured out by the time they got their diplomas are, for the most part, coming to terms with the effects of the pandemic on the job market, all while juggling the stress of student loans, family layoffs, and the devastating health impacts of the coronavirus.
In an April 2020 survey conducted by Student Loan Hero, 72% of graduating seniors reported that the Covid-19 crisis had already impacted their post-graduation plans. And, while the unemployment rate has improved since then, 18.6% of people between the ages of 16 and 24 are still unemployed, according to the Bureau of Labor Statistics.
And, with all the uncertainty in the economy due to the coronavirus pandemic, there are more layoffs and hiring freezes, which means it's even harder to find a job if you're right out of college. In a survey of 132 organizations, employment research platform Talent Board found that 74% of companies were reducing hiring in some capacity, 32% of which were freezing hiring completely.
A financial and emotional struggle
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Emergency grants provide short-term relief
So many students lost their jobs this summer and are having a hard time finding work that it has increased their financial stress. More than a third of students have taken on debt, with 17% taking on credit-card debt and 16% borrowing additional student loans, according to a survey by Student Loan Hero.
Graham Curry, a recent graduate of Miami University of Ohio, shares the common concerns about paying off loans and making ends meet.
Graham Curry, recent graduate of the Miami University Ohio, has taken on freelance design and a local tech internship to remain proactive during the pandemic
Photo: Mark Curry
"I'm still figuring out how that's all going to work out," said Curry, who had received a small refund from the university for on-campus fees and had relied on a four-year scholarship for tuition. Curry is also one of the many students who returned home at the onset of the pandemic, but still had to pay his apartment rent through the final months of the lease.
"It really sucked paying for a place that I wasn't living in. That fee has definitely drained my resources," Curry said.
Curry hopes to use his degree in interactive media studies to work in game design. However, canceled in-person conferences and industry networking events this spring meant he was unable to meet other developers and secure a full-time role. His mother was laid off in March and several family members have contracted and died from coronavirus, so this has been an emotional struggle for him as well as a financial one.
"It's hard to deal with your family struggling in such a huge manner, but we're getting through it as best we can like everyone else is."
Universities have tried to provide financial support to students during these times through decreases in tuition, grants, and aid programs.
The University of Maryland, among other colleges and universities, received a $21 million grant from the Higher Education Emergency Relief Fund, part of the $2 trillion dollar implementation of the CARES Act. This $21 million grant was distributed to students seeking financial assistance, specifically those who were impacted by the coronavirus pandemic. More than 5,000 students have been awarded funds from the grant so far.
Hannah Roseme, a rising junior at the University of Maryland, said the grant was a big help.
Hannah Roseme, rising junior at the University of Maryland hanging out on the quad prior to the coronavirus pandemic.
Photo: Mia Fillipine
"The grant program at Maryland has provided extensive assistance to students like myself, friends and many others I know. We were facing so many concerns financially due to the semester ending so quickly — rent costs, meal plan expenses and obviously job-related losses due to the pandemic. I was unable to continue with my babysitting job which helps finance my time at school — the grant program really provided me with some much needed relief during this time so that I wasn't incredibly stressed regarding my finances, in addition to worrying about online school, my well being and the safety of my family," said Roseme, who is originally from Westport, Connecticut.
Alternative work solutions: internships, unpaid opportunities and freelancing
For graduates like Curry, taking an internship rather than a full-time job provides a short-term solution to maintaining income, work experience, and connections. Curry will spend the next three months interning at a local tech company in Dayton, where he hopes to learn coding languages and software-development skills.
"I feel like there's a bit of a bubble right now, which in some cases is pretty helpful," Curry said. "I plan to build up my skills so I can hopefully find further success later on."
Freelance design work is another route for graduates to secure additional income and stay proactive. "My motivation to find supplemental income through freelance or making some other business has skyrocketed," said Curry. "Financial independence is so crucial right now, so exploring those avenues of income is something else I do in my free time."
Rachel Kivo, who graduated from the University of Kansas with a degree in journalism, has applied to multiple jobs every day since graduation. She recently secured an internship with the Q Project, a platform that finds creative ways to provide technology for low-income people.
"I did expect to get a job after graduation, but offers aren't coming so easily so taking an internship is something I can fall back on," she said. Although it is unpaid, Kivo is grateful to be able to work from her family home and save money over the next few months while taking on this unique opportunity. "This is the best option for me because I really like what the Q Project stands for, so I'm excited to be a part of that."
Staying hopeful during these tumultuous times
Without a clear light at the end of the tunnel, it has been challenging for students to try to stay optimistic.
"Honestly it's been rough and it takes a toll on your mental health," said Baylor University graduate Saloni Khushal, who also feels disheartened by the lack of job opportunities. "The job market is so saturated and you have to remind yourself that everyone is on a different path," she said.
"But we have to just keep on keeping on. No one planned for this and it's out of our control so we can't get mad at ourselves," added Khushal. In the meantime, she is helping with marketing and operations at her family's hotel business as well as working in a part-time unpaid social media position for online-dating platform Blind Love Letters.
Saloni Khushal, graduate of Baylor University, is using this time to help with her family business and take on a part-time social media role
Photo: Margaret Carissa
"It was especially hard to feel motivated every day when I felt I had no structure," said Kivo. "To create structure, I would write a to-do list and apply to a certain number of jobs every day. It's also comforting to know that everyone else is in a similar situation."
For Curry, self-care and productivity help him remain positive. "I'm trying to use this time to focus on myself. I'm teaching myself guitar, working on my web design skills, taking care of plants, and even working out more often."
Narbeh Minasians, director of social and digital at Nickelodeon and a 2008 graduate who entered a similarly bleak job market during the financial crisis, notices the similarities in the sentiments of 2020 graduates, but more importantly, the added pressures this new generation is facing.
"Graduating in a crisis provides an opportunity to really pause and reset a very tumultuous timeline. For this generation, however, there's information overload everywhere and that can be overwhelming for your mental health," he said. "Find ways to unplug and not consume negative information all the time. Find other productive uses of your time and put energy into more positive things."
Minasians also encourages recent grads to make the most of their family and community support, including living at home and taking time to assess your career options. "When you lift the pressure of having to pay rent and pay for bills and 'adult,' it really does allow you to see what your options are and try things you normally wouldn't be able to try."
"Think abstractly about the skills you want to accumulate," he added. "There are things that you will need in your future job that can potentially be learned and accumulated through different avenues. Focus on and sharpen those skills while you have this time and think about new opportunities from an abstract point of view."
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02
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How Do Personal Loans Work?
Credit cards aren’t the only option when it comes to financing purchases or consolidating debt. Personal loans are a popular choice thanks to digital offerings that make it easy to apply and get approved.
But before you sign on the dotted line, you have to make sure a personal loan is right for you. To do that, you have to understand the inner workings of this borrowing tool. You don’t want to end up with an expensive loan you didn’t understand or one you’re ill-equipped to pay back.
Rewind ten years when consumers had fewer options when it came to borrowing money. They could use a credit card, which usually meant paying high interest rates, or apply for a bank loan, which was hard to get without top-notch credit. The 2008 recession changed that.
With little in the way of consumer lending being done by the banks, a crop of financial technology startups (or FinTechs) emerged to offer consumers personal loans. Using different underwriting data and algorithms to predict risk, they created a market that’s now booming.
According to TransUnion, the credit scoring company, unsecured personal loans reached $138 billion in 2018, an all-time high, with much of the growth coming from loans originated by FinTech companies. The average loan size in the fourth quarter of 2018: $8,402. Fintech loans account for 38% of the overall activity in 2018; five years ago, it was just 5%.
How Personal Loans Work
Personal loans come in many flavors and can be secured or unsecured. With a secured personal loan, you have to offer up collateral or an asset that’s worth something in case you can’t pay the money you owe back. If you default, the lender gets that asset. Mortgages and auto loans are examples of secured debt.
With an unsecured loan, the most common type of personal loan, you aren’t required to put up collateral. If you don’t pay back the money the lender can’t garnish any of your assets. That’s not to say there aren’t repercussions. If you default on an unsecured personal loan it will hurt your credit score, which raises the cost of borrowing, in some cases dramatically. And the lender can file a lawsuit against you to collect the outstanding debt, interest and fees.
Unsecured personal loans are typically used to finance a big purchase (such as a wedding or vacation), to pay down high-interest credit card debt or to consolidate student loans.
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Personal loans are issued as a lump sum which is deposited into your bank account. In most cases, you’re required to pay back the loan over a fixed period of time at a fixed interest rate. The payback period can be as short as a year to as long as ten years and will vary from one lender to the next. For example, SoFi, an online lender, offers personal loans with terms between three and seven years. Rival Marcus by Goldman Sachs offers loans with terms from three to six years.
Borrowers who aren’t sure how much money they need can also take out a personal line of credit. This is an unsecured revolving line of credit with a predetermined credit limit. (In that respect, it’s a lot like a credit card.) The interest rate on a revolving line of credit is typically variable, meaning it changes with the prevailing interest rate in the market. You only pay back what you draw down from the loan plus interest. Lines are commonly used for home improvements, overdraft protection or for emergency situations.
Your Credit Score Dictates the Cost to Borrow
When weighing whether a personal loan makes sense, you have to consider your credit score. It’s a number ranging from 300 to 850 that rates the likelihood of you paying back your debt based on your financial history and other factors. Most lenders require a credit score of 660 for a personal loan. With credit scores lower than that, the interest rate tends to be too high to make a person loan a viable borrowing option. A credit score of 800 and above will get you the lowest interest rate available for your loan.
In determining your credit score a lot of factors are taken into account. Some factors carry more weight than others. For example, 35% of a FICO score (the kind used by 90% of the lenders in the country) is based on your payment history. (More FICO facts are here.) Lenders want to be sure you can handle loans responsibly and will look at your past behavior to get an idea of how responsible you’ll be in the future. Lots of late or missed payments are a big red flag. In order to keep that portion of your score high, make all your payments on time.
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Coming in second is the amount of credit card debt outstanding, relative to your credit limits. That accounts for 30% of your credit score and is known in the industry as the credit utilization ratio. It looks at the amount of credit you have and how much is available. The lower that ratio the better. (For more, see The 60 Second Guide To Credit Utilization.) The length of your credit history, the type of credit you have and the number of new credit applications you have recently filled out are the other factors that determine your credit score.
Outside of your credit score, lenders look at your income, work history, liquid assets and the amount of total debt you have. They want to know that you can afford to pay the loan back. The higher your income and assets and the lower your other debt, the better you look in their eyes.
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Having a good credit score when applying for a personal loan is important. It not only determines if you’ll get approved but how much interest you’ll pay over the life of the loan. According to ValuePenguin, a borrower with a credit score between 720 and 850 can expect to pay 10.3% to 12.5% on a personal loan. That increases to between 13.5% and 15.5% for borrowers with credit scores from 680 to 719 and 17.8% to 19.9% for those in the 640 to 679 range. Under 640 and it will be too cost prohibitive even if you can get approved. Interest rates at that level range from 28.5% to 32%.
There’s A Trade-Off
Personal loans can be an attractive way to fund a big purchase or get rid of credit card or another high-interest debt. Terms are flexible, allowing you to create a monthly payment that fits into your budget. The longer the term, the smaller the monthly payment.
But there’s a trade-off. You pay interest for a longer period. What’s more, the personal loan interest rate increases the longer the term of your loan.
Take a personal loan from SoFi as an example. On a $30,000 loan, a borrower with the best credit will pay 5.99% for a three-year loan. That jumps to 9.97% for a seven-year loan. At Citizens Financial Group the interest rate is 6.79% for a three-year loan and 9.06% for a seven-year loan. At LightStream, a unit of SunTrust Bank, the interest rate on a three-year loan starts at 4.44%. For seven years, expect to pay 5.19% in interest.
In addition to the interest rate, some lenders charge a loan origination fee, which is the cost to process your application. That can make the cost of borrowing more expensive. The good news: origination fees are starting to disappear, particularly on digital platforms. Some of the online lenders that don’t charge borrowers origination fees include SoFi, LightStream, Marcus By Goldman Sachs and Earnest. All require at least a 660 credit score. When shopping for a personal loan, compare the annual percentage rate or APR. It includes the interest rate and fees to give you the full picture of how much you’ll pay.
If you have a good credit score, a personal loan is a reasonable option to finance a big purchase or consolidate debt. If your credit score is less than stellar, paying a higher interest rate may be worth it if it means getting yourself out of even higher rate debt. Before you make the leap do the math. Consider the interest rate, fees and terms. If you end up paying thousands of dollars to consolidate your debt, it’s not the best option for you.
Forbes adheres to strict editorial integrity standards. To the best of our knowledge, all content is accurate as of the date posted, though offers contained herein may no longer be available. The opinions expressed are the author’s alone and have not been provided, approved, or otherwise endorsed by our partners.
03
White House models predict up to 240,000 fatalities — as it happened
Demetri Sevastopulo in Washington
The US death toll from coronavirus has overtaken the number of people killed in the September 11, 2001 terror attacks, as top government scientists warn that the total number of fatalities could rise to as many as 200,000.
According to data compiled by Johns Hopkins University, 3,170 people in the US have died from the virus, surpassing the 2,977 victims who were killed in the 9/11 attacks. The number of confirmed cases has risen to just under 165,000, far ahead of Italy which has almost 102,000 cases.
The grim statistic comes one day after President Donald Trump said the decision to extend strict social distancing guidelines until the end of April “could save 1m American lives”. Mr Trump, who originally wanted to reopen the economy by Easter, was persuaded to extend the guidelines after being briefed on the number of possible deaths.
Anthony Fauci, the widely respected head of the US National Institute of Allergy and Infectious Diseases and member of the White House coronavirus task force, at the weekend said that the US could see deaths in the range of 100,000 to 200,000. Deborah Birx, another doctor on the task force, on Monday told NBC News that the US could contain the number of fatalities within that range if the overall response was done “almost perfectly”.
In addition to surpassing the 9/11 count, the number of deaths exceeds the almost 2,500 Americans killed in Afghanistan, and is approaching the almost 4,500 who lost their lives in the Iraq war, according to Pentagon data. The two George W. Bush-era wars claimed the lives of a much higher number of Iraqi and Afghan citizens.
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