By Michelle Chapdelaine
Fact-checker

Meg Bookless always worked part-time while attending St. Michael’s.  Now the ‘08 graduate is living in New York City and getting used to hearing the words “we don’t have any open positions” at her job interviews.            

A reliable income is needed for rent and living costs.  Graduates also face the stress of starting payments on their student loans soon after they leave school, Bookless says.  “I think when I graduated I had about $20,000 in loans,” she says.

On the job hunt

Bookless, who has been interviewing for positions in public relations and advertising agencies, says people in her graduating class knew the job search in a weak economy was going to be hard.

 “You hear about the economy all the time, whether you’re in Vermont or New York,” Bookless says.  “A lot of the people I hang out with are accountants or work at banks, and they’re worried about their jobs.”                    

Bookless says many unemployed people are desperate and will take low-paying positions with no benefits.  This makes it difficult for those who are looking for a decent salary and health insurance to find work, she says.

Confidence crisis on Wall Street

The country’s credit crisis has consistently been headline news in recent months.

Wall Street bank failures are something we should be concerned about here on Church Street, says Professor John Carvellas. (Photo by Megan Davin)

Economics professor John Carvellas says while there have always been cycles in the economy, the current situation makes him worry.

 “I’m a ‘what, me worry?’ type of guy, but my usual optimism is being strained a little,” he says.  “Without sounding too apocalyptic, I’m not sure we will even have the best case scenario of a few lousy years of recession.”

The foundations of the current financial crisis were laid about 10 years ago, when it became easier for individuals with bad credit to get loans, says Patrick Walsh, an economics professor.

Mortgage brokers would sell these subprime loans to large investment banks such as Merrill Lynch and Bear Stearns, and the brokers made a commission, Carvellas says.  If the borrowers did not make payments, government sponsored enterprises Fannie Mae and Freddie Mac could pay back the banks, Walsh says. The government assumed this bailout would never need to happen, Walsh says.

As it turned out, none of the borrowers were making their payments, Walsh says, so the banks were holding worthless I.O.U.s. Because of the severity of the situation, the government took over Fannie Mae and Freddie Mac.

 “What we really have is a crisis of confidence,” Carvellas says.  “No one knows what’s really on people’s credit sheet, so everyone’s afraid about who to lend their money to.  The market becomes frozen.”

Walsh says the crisis on Wall Street has not completely trickled down to Main Street.  Regular people shouldn’t have too much trouble getting loans for cars or houses, he says.

However, college students may feel the impact when trying to get student loans, says Irene Racz, public affairs director of the Vermont Student Assistance Corporation.

As a result of the confidence crisis Carvellas describes, lenders are having trouble raising the capital to fund student loans.

While VSAC found a safe partner in Key Bank and was able to continue its service, other education lenders were not as successful, Racz says.  In July, the Massachusetts Education Financing Authority announced it was unable to secure funding for student loans.

Carvellas says he also knows students whose parents have been affected by job layoffs and stock market uncertainty. 

“A couple kids have come up to me and said their parents are anxious because people at their companies are getting laid off,” he says.

Living more carefully

Paying for college has become more of a burden in recent years, and Racz expects it will only get more difficult, she says.

 “Federal programs haven’t increased in proportion to the rising cost of higher education,” she says.      

Business and accounting professor John Ambrose gives seminars on financial health for college students during the school year.

 “We need to learn to live more carefully, with fewer extravagances,” Ambrose says.  “Don’t own a car, if you can get away with it.  Pay off your credit card debt first because of the high interest rates, and then your student loans.”

Bookless says the high cost of living in New York City has made her more aware of her spending habits.

“I’ve always been a good saver, but I’m definitely more conscious of money now,” she says.  “Rent is really steep here, and the cost of living in general is more expensive.”

While Bookless says her unemployment has her “a little freaked out,” she is keeping the advice of St. Michael’s career development counselor Donna Atwater in mind.

Donna Atwater holds resume workshops for St. Michael's students. She encourages students to visit the Student Resource Center at any step in their job search process. (Photo by Cailey McDermott)