If you are a college student, a recent college graduate or the parent of either category, you have my condolences. The economy has decimated your wages, tuition is ballooning and good loans are harder to attain. The private sector has been no help and austerity measures in the public sector have only compounded the problem.
Cheryl Russell at Demo Memo reports on new Census data released today that puts numbers to a situation many Americans are already painfully aware of:
Who are the biggest spenders on education? Householders under age 25 and aged 45 to 54: college students and their parents. Those two age groups account for 56 percent of all household spending on college tuition, according to the Consumer Expenditure Survey.
These are the age groups that have experienced the largest declines in household income over the past decade, according to numbers released by the Census Bureau. Householders under age 25 saw their median household income fall by a stunning 20 percent between 2000 and 2010, after adjusting for inflation. Those aged 45 to 54 experienced a 14 percent decline–a loss of more than $10,000. No other age groups have been hurt as badly by the Great Recession as these.
The downward spiral in the incomes of college students and their parents explains why nonrevolving consumer credit (a figure that includes student loans) is growing at an annual rate of 11.2 percent, according to the Federal Reserve. It also explains why the percentage of student loans in default reached 8.8 percent as of September 2010–up from 7 percent a year earlier, according to the U.S. Department of Education.
The college market is a bubble about to burst. What will colleges look like after the implosion?
Earlier this year, Rutgers University researchers released a study of just how hard the economy has hit recent graduates. “Unfulfilled Expectations: Recent College Graduates Struggle in a Troubled Economy” found the following, according to a media release:
A new nationally representative survey of 571 graduates from four year colleges
and universities from the classes of 2006 through 2010 documents the difficulties
young people encountered as they entered a volatile labor market that
eventually plunged into a deep recession. While graduates are satisfied with
their decision to complete a four-year degree, a large percentage reports they
are struggling to find full-time, permanent jobs with benefits that will lead to
Fifty-three percent of the graduates in the survey are working full-time, and 21
percent are attending graduate or professional school. Fourteen percent are
either unemployed (7%) or employed part-time looking for full-time and work
(7%). The median salary of all employed recent graduates in their first full-time
job after finishing school is $30,000. College graduates who obtained their first
job during the recession in 2009-10 suffered a 10% “penalty” in reduced starting
salaries compared to those who entered the workforce in 2006 and 2007.
The survey also shows that half of all recent graduates are working in jobs that
did not require a BA or BS degree. Yet, 62% believe they will need even more
formal education if they are to be successful in their chosen career.
The release goes on to say that:
The survey also found that the majority of college graduates believe that their
generation will not do better than the one that came before them. Not even
half expect to have more financial success than their parents; one in five expect
to do less well than their parents and another 31 percent say they expect to do
Professor Carl Van Horn, Director of the Heldrich Center and a co-author of the
“Young college graduates entering the labor market between 2006 and
2010.are competing with millions of unemployed college graduates —
who may be just slightly older — in one of the worst economies in a
generation. They are struggling to find full-time work and many are
working in jobs that do not require a four-year degree. Most wish they had
taken a different major, done another internship, or started their job
search sooner. The majority of recent graduates are convinced that they
will need even more education if they are to succeed in a highly
Among the other main findings of the survey:
• Between a quarter and a third of graduates made significant
accommodations in order to get their first job — taking a position that
paid a lot less than expected; working below what they regarded as their
level of education, or accepting a job outside their area of interest.
• Despite some concerns, two thirds of recent college graduates were
satisfied with their first jobs, even if it was not what they had hoped for
when they entered college.
• Among first generation college graduates, 62% say they expect to do
better financially than their parents; but only one third (34%) of those from
families where both parents completed college expect to do better than
• Slightly more than a quarter said they took their first job just to get by while
looking for a better opportunity in the future. The same number said they
have started their careers, with the remainder in stepping stone jobs to a
At the current rates, the math (at least in the short term) will no longer add up for many people. How will that affect the prospects for the economy and an America on the forefront of technology and innovation?