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Degree #2

Joshua Dwyer/MEDILL

Recent graduates are finding it increasingly hard to find jobs that fit their skill sets.

New college grads face daunting challenges

by Joshua Dwyer
March 13, 2012

National Student Loan Default Rate

Joshua Dwyer/MEDILL

The default rate is rising as tuition continues increasing and more and more students are entering low-paying jobs.

Unemployment Rate - Bachelor's Degree or Higher

Joshua Dwyer/MEDILL

In their calculation of the unemployment rate, the Bureau of Labor Statistics does not look at what type of job an individual is doing.

The Unemployment Rate for Bachelor's Degree Earners Differs Widely Between Majors

Recent graduates with a degree in architecture are currently experiencing an unemployment rate of 13.9 percent - the largest of any other group.  The lowest unemployment rate is in health care, at 1.9 percent - in fact, other than a graduate degree in the physical sciences, no other degree has as low an unemployment rate.

Beth Bowman knows she’s not the only college graduate not working in the field she received her degree in – still, she feels disappointed. 

“I pictured myself living in New York, doing cultural consultancy work for a non-governmental organization that works in the Middle East,” said the 2010 Brandeis University graduate.  Bowman earned a dual degree in Islamic and Middle Eastern Studies and International and Global Studies and carries $25,000 in student loan debt. 

The 24-year-old currently lives with her parents in Rochester, NY and works five days a week at Excellus Blue Cross Blue Shield as a policy administration specialist – a job that does not require a college degree – and two-days-a-week at Staples – where she got her first high school job. 

Before graduating, she sent out nearly 500 applications to various organizations across the country and “got no responses.” From there, Bowman took a job as a horse trainer in Syria -- a position she found on an equestrian website. Six months later, she was back in U.S. for an interview with an organization she had worked with in college, but she didn't get that job.  

She now worries about whether she will ever get the job she wants.

Bowman’s experience with malemployment, working at job that does not require the knowledge, skills and abilities associated with earning a college degree, along with carrying significant student loan debt, should be an aberration.  Unfortunately, it isn’t as more students are coming to terms with the fact that earning a college degree isn’t what it used to be, especially when entering the worst post-recession job market since the 1940s.

Nearly half of all recent college graduates are either malemployed or unemployed – and the number is growing, according to Andrew Sum, Professor of Economics and Director of the Center for Labor Market Studies at Northeastern University. 

Data he collected shows that between September 2010 and January 2011 about 1.94 million recent graduates were malemployed.  This has increased significantly in the past decade.  In 2000, 75 percent of college graduates held a job that required a college degree.  In 2011, 60 percent did. 

A 2011 report by the Center for College Affordability and Productivity corroborates this data.  More than one-third, or 5.06 million current working graduates are in jobs that do not require a bachelor’s degree.  This is significantly higher than in 1967 – the first year the Bureau of Labor Statistics started tracking the data.  That year, only 10.8 percent of graduates, or 953,000 individuals were employed in below-college level jobs.

Unfortunately, malemployment numbers are not captured by the unemployment rate – a statistic that is released monthly by the Bureau of Labor Statistics.  In order to be considered unemployed by the Bureau of Labor Statistics, a recent college graduate cannot have worked for pay or profit during the week the survey is administered, but must have searched for a job in the last four weeks. 

Even though the unemployment rate for individuals with a college degree or higher – 4.2 percent – is well-below the national average of 8.3 percent, this statistic does not adequately explain the difficulties recent graduates are having finding jobs that utilize the skills they learned in college.

In addition to having a hard time securing jobs that require a college degree, recent graduates are being asked to pay back their loans.

The average college graduate now has $25,250 in student loan debt – 5 percent more than students that graduated in 2009 and 47 percent higher than students that graduated in 2001, according to a study released by the Project on Student Debt. 

The rise in debt is directly linked to the increased cost of attending school.  The price of college has increased 63 percent since 2001 – more than double the rate of inflation.  Most of the rise is due to states cutting back on funding during the economic downturn, though some critics suggest that colleges are doing little to cut costs since billions of dollars of federal student loan money is still available.

Because half of recent graduates are working at jobs that pay lower wages than if they were working at jobs that required a bachelor’s degree, more of them are defaulting on their loans.  The default rate rose from 7.0 percent in 2008 to 8.8 percent in 2009.  The increase in defaults is growing more rapidly when compared with rates before the financial crisis – default rates from 2000 to 2007 averaged just above 5 percent a year. 

Private for-profit colleges led the pack, with a default rate of 15.0 percent in 2011, up from 11.6 percent the previous year.  Next in line are public colleges, with a default rate of 7.2 percent in 2011 compared with 6.0 percent last year.  Private, non-profit colleges have the lowest default rate – 4.6 percent in 2011 – up from 4.0 percent in 2010. 

According to the Federal Reserve Bank of New York, today’s graduates owe more money – $1 trillion – to their creditors than do individuals with credit card debt.  And there’s no easy way out.

Under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 – signed into law by then-President George W. Bush – student loans can be discharged only if a bankruptcy judge finds that repayment would impose an “undue hardship” on the graduate.  In order to be eligible for this, a graduate must not be able to maintain a minimal standard of living if she/he has to make student loan payments.  The courts have not interpreted these cases liberally. 

Fortunately, some companies, like Sallie Mae, have eased some of the rules for paying back student loans.  It didn’t do so willingly, however.  The company eliminated a $50 fee it used to charge recent graduates to take advantage of forbearance only after Stef Gray – who received her Master's degree in geography from Hunter College – complained about it.

Recent college graduates also face long-term effects from having entered the workforce during a bad economy, according to Yale School of Management Professor Lisa Kahn.

For each percentage point increase in the unemployment rate, students graduating during a recession earned 6 percent to 8 percent less in their first year of employment compared with students who graduated in good economic times.

The effect decreased in magnitude by approximately a quarter of a percentage point each year after graduation, but even 15 years out of school, the recession graduates earned 2.5 percent less over their lifetimes. In some instances, this can amount to more than $100,000.

Bowman is taking steps to make sure that she remains relevant in the job market.  She currently volunteers as the director of outreach at the Nawal Foundation, an organization that promotes American unity against any violence in the name of Islam and the poison of extremism.  She hopes that staying connected to the field she is interested in will yield dividends in the future.

“All I can do is keep working hard and hope that an opportunity comes my way,” Bowman said.