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Ten years after earning their bachelor’s degree, 86 percent of college graduates had a retirement account and 63 percent owned a home, according to a new report from the National Center for Education Statistics.
Despite the often-held assumption that well-educated but indebted millennials can't afford to buy homes, the new NCES report paints a different picture. That picture may reflect more on the housing market than on higher education, but economists said the new data are a good sign for colleges and universities that might be worried bachelor's degrees provide lesser value to graduates during a recession.
“I think what we’re seeing here is that even though the Great Recession was driven somewhat by a financial bubble and somewhat associated with the housing bubble, interest rates have just been at a historic low,” said Jeff Strohl, director of research at the Georgetown University Center on Education and the Workforce. “That could be a big, important factor.”
The new report is part of a longitudinal study that examines financial and career outcomes for a group of graduates that earned bachelor’s degrees during the 2007-08 academic year and entered the workforce at the beginning of the Great Recession. More than 137,000 students were surveyed for NCES’s National Postsecondary Student Aid Study, and 17,100 of those students were eligible to be included in the new longitudinal study. Those students represent roughly 1.6 million students who completed a bachelor’s degree between July 1, 2007, and June 30, 2008, according to the report.
In the decade following their graduation, 2007-08 bachelor’s degree holders were, on average, employed for 85 percent of months, unemployed for 7 percent of months and out of the workforce for 9 percent of months. Among those who were part of the workforce in 2018, about 85 percent held full-time jobs. More than 90 percent of employed men and 81 percent of employed women were working full-time jobs in 2018.
The study's findings reveal that graduates during the Great Recession are about on par with graduates from other nonrecession years, Strohl said.
"These numbers meet roughly the historic norm," Strohl said. "I'm thinking that the recession just wasn't as hard-hitting on the [bachelor's degree-holding] portion of the population."
To assess exactly how the Great Recession impacted these graduates’ careers and financial lives, the cohort must be compared with a control group of graduates that did not enter the workforce during a recession, said Till von Wachter, a professor of economics at the University of California, Los Angeles.
He examined similar comparisons in a 2019 paper, finding that people who graduate during a recession typically catch up to others who didn't graduate during a recession within 10 years, the same time frame used in the new NCES report.
“While Great Recession entrants had lower entry wages because of the large recession, they also faced an increasingly positive labor market that likely helped their recovery process,” von Wachter wrote in an email.
The new report’s findings could be good news for recent graduates who are entering the workforce during the current economic downturn caused by the ongoing pandemic. By and large, bachelor’s degree holders have not lost jobs during the pandemic at the same rate as workers with high school diplomas and workers in the service industry. Despite a “scary as hell” initial labor market, today’s graduates will likely be OK in the long run, said Strohl, of Georgetown.
“If the experience as we see here is indicative, they will land on their feet,” he said.
Still, von Wachter wonders if the long-term effects of entering the workforce during a serious recession remain unclear.
“Even though recovery in earnings seems complete after 10 years, when we looked at graduates from the last big recession, in 1982, we found they suffered from increased mortality and worse family outcomes in their 40s,” von Wachter said. “The 10-year mark might not be sufficient to assess the long-term outcomes.”
Not all of the NCES study’s 2007-08 graduates were doing well at the 10-year check-in. In 2018, almost 14 percent of graduates reported they could not pay essential expenses -- such as mortgage or rent payments, utility bills, or medical care -- within the past year. About 9 percent of science, technology, engineering and math majors reported not being able to meet essential expenses, compared to 15 percent of non-STEM majors.
One in five 2007-08 graduates had negative net worth in 2018, according to the report. The report considered graduates to have negative net worth if they would still be in debt after selling major possessions, including a home, turning investments and assets into cash, and paying off as much debt as they could.
Of the graduates that were still paying student loans in 2018, public college graduates paid the least per month, putting an average of $393 toward loans. Graduates from private nonprofit colleges paid $469 on average toward monthly loan payments, and graduates from private for-profit colleges paid $485 on average per month.
Homeownership Varies by Race, and Other Findings
Homeownership varied by race and ethnicity. About two-thirds of white 2007-08 bachelor’s degree program graduates owned a home in 2018, compared with 47 percent of Black graduates, about 52 percent of Hispanic or Latino graduates, and 53 percent of Asian graduates.
About 60 percent of 2007-08 graduates that enrolled in an additional degree program after completing their bachelor’s degree owned homes in 2018. About two-thirds of graduates who didn’t pursue an additional degree owned homes in 2018.
Graduates from 2007-08 who were married, with or without children, were about twice as likely to own a home in 2018 than 2007-08 graduates who were not married.
Among graduates in the study, 43 percent earned another degree or certificate by 2018. More than a quarter of 2007-08 graduates had earned a master’s degree; 6 percent completed an undergraduate certificate, associate’s degree or additional bachelor’s degree; 5 percent earned a professional or other doctoral degree; 4 percent completed a post-bachelor’s or post-master’s certificate; and 2 percent completed an academic doctoral degree.
In 2018, a quarter of graduates from private for-profit colleges were unable to meet essential expenses in the past 12 months, compared with 13.2 percent of public college graduates and 12.6 percent of private nonprofit college graduates.