Explore the Role of Underemployment in the Student Debt Crisis

Joblessness and underemployment are affecting the ability of college graduates to repay student loans.

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The poor job outlook for recent law school grads and undergraduates could affect the wider student debt picture.

There's been a lot of press recently about the un- and underemployment of college graduates, but the phenomenon is not limited to undergraduates. 

Graduates of law schools are arguably in an even more perilous situation, and their plight could be the proverbial canary in a coal mine of a student debt crisis to come.

At the undergraduate level, a recent analysis of government data by the Associated Press concluded that "half of young college graduates [are] either jobless or underemployed in positions that don't fully use their skills and knowledge."

The underemployment problem is particularly severe: A January 2013 paper from the Center for College Affordability and Productivity, "Why Are Recent College Graduates Underemployed? University Enrollments and Labor-Market Realities," concluded about 48 percent of employed U.S. college graduates work in jobs that require less than a four-year college education and 37 percent are in jobs that require only a high school diploma.

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Outcomes for graduates of law school are not rosier despite the additional three years of education, and the money it takes law students to get a degree.

Law School Transparency's figures for the law school class of 2011 show only 52.6 percent were employed in full-time, long-term legal jobs (excluding solo practitioners), while 26.3 percent were employed in part-time or short-term jobs, were pursuing an additional degree, or were unemployed and looking for a job. NALP—the Association for Legal Career Professionals, estimates that 12.1 percent of 2011 law school graduates are not working, the highest rate since 1994.

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Unfortunately, it does not look like these numbers are going to turn around anytime soon. That authors of "Why Are Recent College Graduates Underemployed?" calculate based on U.S. Bureau of Labor Statistics (BLS) that by 2020 "[t]he number of college graduates is expected to grow by 19 million while the number of jobs requiring a bachelor's degree is expected to grow by fewer than 7 million." This would result in nearly 30 million underemployed college graduates over this decade.

Law School Transparency has run similar calculations for law school graduates with similar results. Its Jobs Tracker notes that, according to BLS estimates, 21,880 new legal jobs will be created per year between 2010 and 2020. Even with a decline in enrollment, almost 50,000 first-year students still enrolled in law school in 2011. If these ratios continue, so will the difficulties law school graduates face finding legal jobs.

All of this is occurring, of course, in an inflationary student debt environment. The average student debt for graduates of four-year colleges who had debt in 2011 was $26,000, up 5 percent from the previous year and continuing a long-term trend.

For law school graduates, the average amount borrowed in 2010–2011 is almost $76,000 for graduates of public law schools and $125,000 for graduates of private law schools. The inevitable result has been a spike in delinquencies and defaults and—as encapsulated in a chart by Campus Progress—a student debt crisis for millions of Americans.

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What's a young person to do? Now more than ever, it's important that students find the value in a college degree. While in school, avoid private student loans as much as possible so you can fall back on the important borrower protections of federal loans.

And students should have a clear understanding of exactly how protections like deferments, forbearances, and income-driven repayment plans work. Those graduates in nonprofit and government jobs should also know the details of Public Service Loan Forgiveness in order to take advantage of the potential to have their loans forgiven in 10 years.

Isaac Bowers is a senior program manager in the Communications and Outreach unit, responsible for Equal Justice Works's educational debt relief initiatives. An expert on educational debt relief, Bowers conducts monthly webinars for a wide range of audiences; advises employers, law schools, and professional organizations; and works with Congress and the Department of Education on federal legislation and regulations. Prior to joining Equal Justice Works, he was a fellow at Shute, Mihaly & Weinberger LLP in San Francisco. He received his J.D. from New York University School of Law.