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.