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For millions of college graduates, the promise that a bachelor’s degree would lead to stable, meaningful work is slipping further out of reach. As of March, federal data shows that about 42 percent of recent college graduates (those between the ages of 22 and 27) were underemployed, meaning they were working in jobs that do not typically require a college degree. Among all college graduates (those between ages 22 and 65), the underemployment rate was 34 percent. Depending on the source, some research studies show higher rates and some lower rates, depending on the methodology and definition of underemployment.
For a significant share of young adults today, though, college is not an automatic path to social mobility. Once college graduates become underemployed, some research suggests they often remain so years later, indicating that early career choices can have long-lasting effects.
Moving beyond (under)-employment to (un)-employment, the U.S. unemployment rate in April sat at 4.3 percent, up from 3.9 percent a year earlier. Among all college graduates, the unemployment gap between high school and college graduates has been narrowing for decades, not because high school graduates are doing dramatically better, but because more college graduates are struggling to find appropriate work.
One recent article in The Chronicle of Higher Education described the conclusion of some economists that “the number of college graduates is outpacing the supply of jobs that require a bachelor’s degree.” Adding artificial intelligence to the mix, analysts at J.P. Morgan have suggested that AI may be contributing to hiring challenges for recent graduates, particularly in technology sectors that once absorbed large numbers of new graduates.
In this context, it is not surprising that many unemployed or underemployed graduates look to graduate school as a way out. Historically, higher education enrollment rises during recessions, and the pandemic was no exception: When jobs became unstable, graduate enrollment increased, with much of that growth driven by Latinx and Black students (who also typically take on more debt).
The Georgetown University Center on Education and the Workforce even recommends enrolling in school when faced with low job prospects due to a recession. For those who cannot find work, applying to graduate school can feel like the only viable path to securing future employment, enabling them to rebuild momentum or simply buy time in an unforgiving labor market. On average, people with graduate degrees earn higher wages and experience lower unemployment.
However, that option, too, is narrowing, once new caps on federal loans go into effect in July. According to research from the Postsecondary Education and Economics Research Center, about 28 percent of recent graduate students borrowed beyond the new federal limits, and about 40 percent of those borrowers have low or insufficient credit that could make it difficult for them to qualify for private loans.
This study echoes findings from the Consumer Bankers Association, which estimates that many prospective graduate borrowers may be denied large private loans because they lack sufficient credit or a qualified co-signer. There is already a clear divide between students who rely on federal loans and those who can access private credit; these new caps are likely to widen that divide along socioeconomic lines.
The question remains: What should someone with a bachelor’s degree do if they cannot find work, or if they are stuck in a low-wage job that does not require their level of education? In an unstable job market shaped by economic uncertainty and AI-driven disruption, relying on public assistance while juggling a low-paying job and endless job applications does not feel like a sustainable or dignified long-term solution.
Graduate school should not be the only lifeline available to unemployed and underemployed college graduates, but if it is going to remain one of the few, we should ensure it is accessible, affordable and worth the risk.
