Attention college seniors: it’s an awful year to graduate college. Anyone with a brain knows that given the state of the economy but the Brookings Institution recently spelled it out in frightening detail.
For these young adults just entering the labor market for the first time, the impacts of the recession will last well into the future. According to one study (Kahn 2010), young people graduating from college during today’s severe recession will earn approximately 17.5 percent less per year than comparable peers graduating in better labor markets. This lower wage effect is highly persistent, fading away only after 17 years of work.
What does this mean in terms of lost income? For the average college graduate this year, this translates into approximately $70,000 (in today’s dollars) in lost earnings over the next decade. For the 2008, 2009, and 2010 classes combined that amounts to over $330 billion in lost earnings over 10 years. The projected losses are even larger for graduates who cannot find a job upon graduation.
It’s even more depressing when you consider that graduates with student loans carried an average debt of $23,200 in 2008, up 25 percent from 2004. The figures probably have worsened since then as unemployed parents were no longer able to provide for their children’s education. Graduates of professional and graduate schools often have six figure debt loads.
Young people have been hit especially hard during the economic slowdown. Unemployment among workers aged 16 to 24 is at record levels. Older, more experienced workers are now willing to do entry-level jobs that the young people had expected to get following graduation. That situation will not improve much until the economic turnaround finally happens.
More attention than ever is being paid to the rising cost of higher education. Students at public four-year colleges pay average, $7,020 per year in tuition and fees for schools in their state, according to the College Board. Out-of-state students at these institutions pay $11,528. Community colleges charge $2,544 per year in tuition and fees. Not surprisingly, enrollment in community colleges is soaring.
Given the uncertainties surrounding the economy, it makes less sense than ever for anyone to go into huge debt to earn a 4-year college education because graduates may not be able to earn it back. Employers are also taking less notice of fancy college brand names. A recent survey the Wall Street Journal of recruiters surprisingly ranked Pennsylvania State University, Texas A&M University and University of Illinois at Urbana-Champaign ahead of their Ivy League counterparts.
“Recruiters say graduates of top public universities are often among the most prepared and well-rounded academically, and companies have found they fit well into their corporate cultures and over time have the best track record in their firms,” the paper says.
The saying that a fancy college degree helps you land a first job is still true the extent that there are jobs to be had. Unfortunately, the Ivy Leaguers may not be able to afford to live on their own until they are 30. By then, their fancy pedigree will matter less and those state school graduates who could afford to live in the real world will have the advantage.