College Graduates

24/7 Wall Street on the fate of the current crop of college seniors looking to graduate sometime in 2010/2011.  All I can say is that I'm glad I don't have anybody graduating this year.  {Excerpt with my comments at the end.}

 

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.....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.....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.......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.....

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.

My comment:  I believe that this generation of college students is likely to be the last to experience the traditional four year liberal arts experience.  Here's why.  Incomes have stagnated over the past 15-20 years but college costs have appreciated at something like 7-10% annually.  A state school like the University of Illinois all in is close to $17,000 for in state residents.  Private universities are in the $38,000-$50,000 a year range!  Parents have been willing to pay for this, believing it gives their children a leg up the economic ladder.  That propostion is becoming increasingly questioned.  

You are starting to see the first instances of colleges offering three year education programs.  I think this will begin to accelerate in this decade and I think you are going to see more concentrated degree programs beginning at the freshman level for kids who have a pretty good idea what they want to do with their lives.  Colleges will have no choice because parents are increasingly unable to afford what they offer. 

Link:  College Graduates Are Really Screwed!