Class of 2015 Earns Dubious Distinction of Being the Most Indebted
May 19, 2015

As college graduates leave their schools this year, many of them will be preparing for becoming a part of the workforce. Graduation day is typically a day for felicitations and celebrations. But as the class of 2015 prepares to leave school, it must be mindful of the fact that the tag of being the most indebted class has passed on to them. The good news though is that if current trends hold, they will retain this title only for the next 12 months.

Class of 2015 Most Indebted Ever

In his article, Jeffrey Sparshott refers to an analysis of government data by Mark Kantrowitz, publisher at Edvisors. The analysis reveals that the average graduate from the class of 2015, who has a student loan to repay, will need to repay a little more than $35,000. Adjusting the figure for inflation means that these borrowers will need to repay more than twice the amount that student borrowers needed to about 20 years earlier.

But it’s not just the average debt taken by borrowers that is on the rise. A larger number of students are taking out student loans to pay for college. The data shows that approximately 71 percent of bachelor’s degree recipients will graduate with a student loan this year. Ten years back, the corresponding number of graduates with student loans was 64 percent, while the number was less than 50 percent in 1993.

College Education – A Necessity that is Increasingly Becoming Less Affordable

The rising costs of college are undoubtedly responsible for the higher amounts of student loans that borrowers are taking out. In addition, even as college costs continue to rise, the avenues for student aid (such as grants), are not increasing on a commensurate basis. As a result, more students are taking out student loans than ever before. Moreover, the increase in the average amount borrowed by students is a direct consequence of the stagnation in the quantum of student aid that students typically receive.

Yet, not many students will want to miss the benefits of a college education. Figures released by the Labor Department show that the median weekly earnings for full-time wage and salary workers with a high-school degree stood at $668 last year. In contrast, the median weekly earnings for people with at least a bachelor’s degree was $1,193. Unemployment rates also tend to be significantly lower for students having at least a bachelor’s degree.

As a result, college graduates can look forward to brighter job and earnings prospects once they leave school. At the same time though, they will need to contend with the enormous amounts of debt that they took on in their quest for a college education. It is worth noting though, that the value of a college education will typically depend on two factors such as:

  • The degree that a student acquires and,
  • The institution a student enrolls in

But the value of having a college degree remains undisputed. This is despite the fact that borrowers will earn their degrees while incurring a significant amount of debt.

Parents Also Taking on Bigger Shares of College Costs

Kantrowitz’s analysis also highlights that parents are taking on a big share of college expenses to pay for their child’s education. For instance, parents who took out loans to pay for their child’s education in 2015 had an average debt amount of $30, 867. The corresponding figure for 2014 was $29,684. Nearly 17 percent of college graduates are paying for college with some help from their parents.

Estimates suggest that the total education debt for graduates with a bachelor’s degree and their parents will amount to nearly $68 billion this year. This amount is inclusive of federal and private education loans. Given that the figures for total education debt in 1994 were only a tenth of what they are at present, one can well understand why the class of 2015 holds the dubious distinction of being the most indebted class.

First Job Paychecks Expected to Shock Class of 2015

If the prospect of being the most indebted class ever was not enough, there’s another shock lurking around the corner for the class of 2015. When new college graduates head into the real world, the experience can be quite unpleasant. However, a recent survey released by the consulting firm Accenture, shows that the amount that new graduates expect to earn in their first job is quite different from what the classes of 2014 and 2013 have been earning.

The survey polled 1,002 US students graduating college in 2015 as well as 1,001 graduates from 2013 and 2014. Conducted online in March, the survey revealed that:

  • The Expectation: Only 15 percent of the class of 2015 expects to make $25,000 or less after graduating
  • The Reality: Around 41 percent of the classes of 2013 and 2014 were earning $25,000 or less after graduating
  • The Expectation: Approximately half of the class of 2015 expects to make $40,000 or more in their first job after graduating
  • The Reality: Only a quarter of the classes of 2013 and 2014 were earning that much in their first jobs

Katherine LaVelle, a managing director at Accenture Strategy, stated that 21 percent of the classes of 2013 and 2014 work on a part-time basis. This is because they could only secure part-time jobs or because they opted for part-time employment. Therefore, it is likely that the average salary for graduates working on a full-time basis might be much higher.

Class of 2015 Better Prepared than Its Predecessors for the Job Market

On the upside, the survey revealed that the class of 2015 was much better prepared for the job market than the class of 2014. For instance, the Accenture survey revealed that:

  • About 72 percent of the class of 2015 held internships while in school, as compared to 65 percent of the graduating class of 2014
  • Approximately 82 percent of graduates from the class of 2015 said they decided on a major after considering the availability of jobs, as opposed to 75 percent of graduates from the class of 2014 and 69 percent of graduates from the class of 2013
  • In addition, 28 percent of the class of 2015 has majored in Science, Tech, Engineering and Math (or STEM fields) as opposed to 26 percent of graduates from the classes of 2013 and 2014

LaVelle believes that the class of 2015 typically comprises individuals who grew up in the midst of the financial crisis and entered college as the economic recovery began to take place. Therefore, getting their timing right has helped these individuals to assess the ground realities at a critical time in their careers.

Underemployment on the Rise Among Young College Graduates

Emily Peck reports that job prospects for college graduates has been in a bad shape for a fairly long time. Data from the Economic Policy Institute shows that the average college graduates, between 21 and 24 years of age, earns just under $18 per hour (or $36,000 per year). Yet, trends reveal that the hourly pays for graduates has slipped from $18.41 per hour in 2000 to $17.94 per hour at present.

Peck also mentions that the unemployment rates for young college graduates was 8.5 percent in 2014, but the underemployment rate was nearly double that figure. This is because several college graduates end up working in jobs that do not require a degree. For instance, several college graduates work as baristas in coffee shops today. Interestingly, the Accenture survey highlights that 49 percent of graduates from the classes of 2013 and 2014 consider themselves underemployed.

Starting Salaries for Class of 2015 Expected to be Better than Starting Salaries for Class of 2014

A recent report by Kelli B Grant mentioned that starting salaries for new college graduates are climbing. Referring to a survey of 2,175 hiring managers by, Grant mentions that:

  • About 26 percent of hiring managers said that they planned to offer starting salaries under $30,000
  • Another 26 percent of hiring managers said that they planned to offer at least $50,000

Grant also mentions that class of 2015 could look forward to an average starting salary of $62,998. This figure comes from initial estimates of a survey of 316 employer members of the National Association of Colleges and Employers. In comparison, an association salary survey of 45,370 graduates from the class of 2014 computed their average starting salary amounted to $48,127.

The difference in starting salaries from their predecessors will certainly come as a shot in the arm for the class of 2015. However, they would do well to note that these figures are merely averages. Until they secure a job offer, they will not be able to feel comfortable about the situation they find themselves in at present. This is because the tag of being the most indebted class can be heavy to bear. The only way they can rid themselves of this cumbersome yoke is by securing gainful employment. Their moment of truth is at hand.