Student Loans, Low Entry Level Salaries Put New Grads on a Shaky Path
As an employer, I’ve noticed an interesting dynamic over the past several years. I interview a fair number of candidates right out of college and my impression of late has been “boy, these kids seem to think they deserve incredibly high salaries – in total conflict with their lack of experience!”
I have come to appreciate, however, that graduating students today have a financial situation that many of us …ahem… more experienced people, didn’t have. According to the “How America Pays for College” study conducted by Sallie Mae and Gallup, the average student covers 33% of the cost of their education; two thirds of that through student loans totaling about $15-20,000 (anecdotally, I’ve heard about some with tabs as high as $80,000). With a quick calculation on Sallie Mae’s handy education planner tool, this translates into a post graduation monthly payment of about $250-300.
Now, let’s address those “entry level” salaries. According to Salary.com, an entry level salary is $10,000-30,000; let’s be generous and use $35,000 (by the way, Salary.com puts the national average for an outbound call center representative at $20-37,000). After taxes, net pay would be $2,500/month. Okay, now I’m beginning to understand.
I did have student loans when I graduated, but if I remember correctly I spent about 7-8% of my disposable income on my payment (don’t ask me how I remember this). I didn’t have to spend a material amount on gasoline for my car; I certainly didn’t have cell phone bill, cable television, and internet access bills; and I also didn’t have to consider how much I was going to have to contribute from my paycheck for health insurance!
I see this as a brewing disconnect between employers and entry level candidates. As an employer, I feel that I can only pay so much for someone who brings to the table nothing but a (hopefully) good attitude and basic skills. However the reality is that young people – inexperienced as they are – still have to be able to pay all of their bills. I suppose they could work several jobs, but then how much will my company sacrifice because they are tired and stressed?
How does this relate to collections? Time will tell, but I see the potential for a generation of new professionals starting out their careers already behind the eight-ball, with more debt than their salaries will cover.
Stephanie Eidelman is the publisher of insideARM.com.
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Comments
Comment from Wes Baldwin on September 12, 2008 at 12:59PM EST
In my opinion, the problem lies with the employers because there is too much emphasis placed on requiring higher education for entry level positions. You said it yourself, "As an employer, I feel that I can only pay so much for someone who brings to the table nothing but a (hopefully) good attitude and basic skills." Higher education provides nothing but the basic skills, and you can train the basic skills yourself as long as you have a person with a good attitude toward learning. You can pay them less because they are trainees. Is that a win-win? They get a good job with good advancement prospects, substantial merit based pay increases for learning and do the job well. Most people with four year degrees are not working in the discipline in which they were educated, so how relevant is the degree?. When I have asked other hiring managers that question they respond with, "It proves to me that the candidate can put up with four years of pressure." Guess what, they put up with the pressure to get the degree, which means money, but they won't put up with pressure in the work environment, they'll quit your company, get another job with higher pay and less responsibility (pressure). The candidate would have enough money to pay for the "luxuries" that the --ahem-- experienced people did not have if they didn't have to pay the $250-300 per month in school loans.
Comment from Jackie Compton on September 15, 2008 at 9:14AM EST
As someone who is currently dealing with old student loans and a hiring manager, I can say with certainty that student loan present a major problem to not only the graduating students, but to potential employers as well.
What I have noticed when hiring recent graduates is that they are more focused on the starting salary than what their overall potential is with the company. What concerns me when hiring (which I have experienced) is that the new hire is not committed to the company and will accept a hiring paying position when offered. This costs countless dollars in wasted training to the hiring firm. Now when hiring we must be more careful in the screening process than ever before because of the lack of dedication/commitment on the part of the new hire.
While student loans may be the only resort for some students in securing a higher education, the backlash that these loans are causing a crippling debt for young people who frankly are not mature enough to handle such a debt load.
There has to be another solution to educating our citizens that does not leave them burdened with debt in a job market that doesn't offer the financial solutions needed to repay these loans.