Starting Salaries for College Grads Suffering During Recession
It seems as if everybody is going through hard times. Unemployment is up, while stock portfolios are down. Graduating from college is normally a time for celebration, but for millions of college graduates receiving their Bachelor’s degrees during the recession, the starting salaries that they are being offered are leaving something to be desired, if they can get a job. Lower salaries will mean that more graduates will have problems with student loan repayment.
The Salary Survey
The National Association of Colleges and Employers (NACE) issues a report each September, giving details on the starting salaries that are offered to recent college graduates receiving bachelor’s degrees. The Salary Survey that was released for 2009 shows that recent bachelor’s graduates were offered an average starting salary of $48,633. Last year, the average offer was $49, 224. For several years prior to 2009, the salaries generally increased on an annual basis. What makes the news even worse is that fewer than 20 percent of graduating seniors were even able to find a job before they graduated.
Who Wins, Who Loses
Not all graduates saw their salaries decline. Some graduates, especially in technical and engineering fields, saw their salaries go up. Computer science graduates saw a slight salary increase. Electrical, chemical, and mechanical engineers saw modest salary gains, ranging from three to five percent. The biggest winners were those that majored in petroleum engineering. They saw a salary increase of 13 percent. On average, engineering majors received a starting offer of $59,670, and will probably have an easier time with student loan repayment than their counterparts who saw their salaries decline.
On average, business majors saw their salaries decline slightly. Although accounting, finance, and marketing majors saw slight increases, graduates who majored in business management, economics, or management information systems saw their salaries fall. Average offers for business majors ranged from $42,260 to $50,573. On the whole, liberal arts majors saw their average salaries dip slightly, to $36,624. Graduates who majored in English, political science, psychology, and history majors went up. Sociology graduates saw their starting salaries fall, as did visual and performing arts majors. These graduates may have a harder time with student loan repayment.
Salaries and Student Loans
Although the average starting salary for new graduates has gone down, the amount of debt that they will be saddled with has actually gone up. New graduates have a tough challenge. Their starting salaries are lower, fewer of them have jobs, and the amount of student loan debt that they carry is going up. Times will be tough for many of these new graduates during the recession. Some may even default on their student loans. The student loan default rate is already going up. It was 6.9 percent for fiscal year 2008, and is likely to go up for fiscal year 2009, as the economic picture hasn’t gotten any better in the past year.
A student that is having trouble paying their student loan has choices. New graduates have a six month grace period before they have to start paying off their student loans, although unsubsidized student loans will continue to accrue interest during that time. After the grace period is up, they will need to make loan payments. If they are having trouble making their payments, they can choose the graduated repayment option, which starts with smaller payments and increases, or the income-sensitive repayment option, which bases the loan payment on the graduate’s income. In cases of financial hardship, the new graduate can apply for forbearance, which will defer the payments.
Many graduates that are having trouble paying off their loans find student loan consolidation to be an attractive option. Student loan consolidation combines all of their student loans into one loan, and often allows the borrower to extend the repayment term. Many borrowers find this attractive because a longer repayment term gives them lower monthly payments, which can be very helpful during recessions, when salaries are lower and jobs are scarce.