Dismal job market for college grads made worse by student debt

Median starting salary for college grads now is $27,000, if they can find a job. Only 56% of 2010 grads held at least one job by this spring. Even worse, median salaries are down 10% from 2006-2007, an appalling statistic. Assume a relatively modest $60,000 in student loans, and 25% of gross income for a student making the median salary will go for debt payments.

27,000 = $2250 a month
633    = monthly payment on $60,000 student loan

2250 (monthly gross income
-337 (15% estimate for federal and state tax)
-633 ( loan payment )
1280 remaining income

Someone making that could not live on their own by themselves and would have to be either living with their parents or in an apartment with several others. (Or say the Hell with it and deal drugs.)

Worse, your debt cannot be discharged in a bankruptcy. A high school graduate who takes on debt like this and gets in trouble can file a Chapter 7 (being well under the median household income) and shed it. You, as a graduate, cannot. You’re stuck with it, and if you lose your job you’re instantly hosed, as that $60,000 will have penalties and interest immediately added to it.

Bank make these loans, which are guaranteed by the federal government and can only be discharged by death. It’s quite a racket, in effect creating indentured servants. All with the happy full approval of the government.

College is frequently a “good investment” when paid for in full at the time you take it (that is, you’re investing time and current income) it almost never is when you have to finance that alleged “education.”


  1. Wooah! Slow down!
    $970 is the amount you need to SUBTRACT from $2,250, not the amount remaining to live on!

    $1,280/m to live on is actually do-able, I’d argue. Though you’d be living without car insurance, or a bigger apartment than 700 sq ft in an metropolitan area.

  2. I have chastised my apparently dismal addition, subtraction, and proofreading skills and made the corrections. Thanks to all!

    And I shall endeavor to be fully caffeinated before posting in the early AM

  3. I hear you Bob. I had about that in debt coming out of college and my first job paid around $30K. I’ve lived through it, and paid off all my college debt, though there were some lean years in there. For most of them I was sharing a place and had a clunker of a car. Happily I was able to climb the pay ladder a bit as I moved along. In todays economy, I would probably just be finishing off those loans about now.

    Your math may be a little funny, but not in the way you’d expect. Your $970 number is closer to what you’d actually live on. Realistically, you’re calling out 15% for Federal, when there’s a lot more to it than that. Federal all by itself would be about 13.5%, using 2011 tax tables (10% up to $8,500, 15% on the rest). Then add 6% for Social Security, 3% for Medicare, and THEN any State/region taxes in. And that’s also not including things like sales tax… which is some areas can be as high as 8 or 9%.

    Add all THAT up, and you’re talking closer to 30%, which would leave you with just under a grand per month. There are places where that’s livable, but they’d definitely be sharing an apartment with someone. That OK though, since it encourages couples to shack up and both work, right? But then that’s “Uniquely American, isn’t it?” as Bush Jr. would say? 😛

    • However places where a grand a month might be livable tend to be out in the country, but then you get whacked with gas prices. Here in Cedar you can rent a house for $650 a month but if you want multiple big box stores, that’s 50 miles each way. And people here commute that distance too. If your truck gets 20 miles a gallon, that 5 gallons or about $19 a day for gas.

      Yes, my tax estimate was way too low. Thanks for the update

    • Actually sorry to point this out but Woody’s tax estimate is off a bit because of deductions and exemptions. Presuming that the student is single and not a dependent, the first $9,500 of income is offset by the standard deduction and the personal exemption. Then, figure (at the 2011 rate of 6.8%) that $4,080 of the loan payments are for student loan interest, which is also deductible. So the first $13,580 of income isn’t taxed. The next $8,500 is taxed at 10%, while the final $4,920 is taxed at 15%, for a total of $1,588 in federal income taxes or 5.9%. Add to that 7.65% for FICA taxes, which is 2,066, for a total of $3,654 in federal income taxes, or 13.5%. State tax will of course vary. In California, it would be about $441, bringing the total tax to $4,095 or 15.2%. Bob was pretty close with his first estimate.

      Sales taxes vary from zero in states like NH and OR, to 10.75% in parts of California or 11.5% in parts of IL – and they don’t apply to everything you buy (in CA, food is exempt; in UT food is taxed at a reduced rate). So sales taxes are an issue but not really calculatable without more specifics.

      But Bob’s point is well made: disposable income of $15K per year is well below the poverty line, and it’s virtually impossible to live on that in many metropolitan areas. A quick search of apartments available in Los Angeles shows that a studio can cost up to $1200 per month, with a 1BR in a decent part of town running over $1400. On $1,280 a month, you’re not just sharing an apartment – you’re sharing a bed!

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