College Statistic: Median Starting Salary

"The median starting salary for students graduating from four-year colleges in 2009 and 2010 was $27,000, down from $30,000 for those who entered the work force in 2006 to 2008, according to a study released on Wednesday by the John J. Heldrich Center for Workforce Development at Rutgers University. That is a decline of 10 percent, even before taking inflation into account.

Of course, these are the lucky ones — the graduates who found a job. Among the members of the class of 2010, just 56 percent had held at least one job by this spring, when the survey was conducted. That compares with 90 percent of graduates from the classes of 2006 and 2007. (Some have gone for further education or opted out of the labor force, while many are still pounding the pavement.)"

Wow, from the report, 44% of college graduates do not have a job.  However, I would bet to say that they have debt.  Ok, let's assume that you do have a job at the median salary of $27,000. (Remember that the median is the middle value.  That is, 50% will have a salary above the $27,000 and 50% will have a salary below the $27,000.)  But, you have $60,000 in student loans, which is very realistic. 

Let's analyze the numbers.  If you make $27,000, your monthly gross income is $2,250.  If we amortize the $60,000 in student loans over a ten-year period at 5%, your payment is $636/month.  In other words, close to 30% of your gross income is consumed by your student loan payment.

Your imputed pretax income (that is, the effective purchasing power of your "degree" when you subtract out the debt service) is $19,368, which is $9.31/hour.  (Minimum wage is $7.25/hour.)  Worse, your debt cannot be discharged in a bankruptcy.  (By the way, I don't advocate bankruptcy.)  A high school graduate who takes on debt like this and gets in trouble can file a Chapter 7 and eliminate it.  You, as a college graduate, no such luck.  You are saddled with the $60,000 debt; and if you lose your job, you are immediately in more trouble, as that $60,000 will have penalties and interest immediately added to it.

Now, I still believe that a college education is usually a good investment; however, not if you have to indenture yourself for life.