This year’s college graduates are entering the best job market in years. That’s the good news.
But here’s the bad news: finding an affordable place to live as you start your career is getting harder to do.
A new study by HotPads, a rental marketplace, found the median rent in the U.S. is $1,535 per month, up almost 30 percent over the last decade. When you break it down for renters early in their careers, rent has grown nearly 15 percent. Now, factor in the amount of student loan debt most college grads carry. You’ll quickly see that putting a roof over their heads can be a daunting task.
Students coming out of college with less marketable majors are having an especially tough time. HotPads examined 45 majors – including U.S. history, music, biology, and early childhood education – and found the rent burden for grads with those degrees has grown faster than for renters without a four-year college degree.
Graduates with history degrees have seen one of the largest changes in rent affordability in the past 10 years. Their rent burden has soared by 22 percent as their early-career median annual income dropped 14.5 percent.
Recent grads with music, biology, and early childhood education degrees have seen a less than 10 percent increase in their incomes over the past 10 years, and their rent burden grew 10 percent during that time.
30 percent of annual income
Personal finance experts usually suggest spending no more than 30 percent of annual income on housing, but that is becoming increasingly rare for people fresh out of college. On a national basis, only early-career graduates with one of 17 majors analyzed – including computer science and various engineering degrees – have a rent burden of 30 percent or less.
"As rent prices and student debts rise, affordability concerns for recent college graduates have garnered attention on the national stage," said Joshua Clark, an economist at HotPads. “Graduating from college still typically pays off in the long run, but slower wage growth for college graduates and rising costs have dampened the immediate financial benefits associated with a four-year degree.”
As a result, what students specialize in while in college, and where they live afterward, has a bigger impact on their finances than ever before.
Living with mom and dad
An unrelated study by real estate marketplace Zillow shows how this is affecting many recent graduates. It found that nearly 22 percent of millennials -- those between the ages of 23 and 37 -- are living with a parent.
While it was very common for recent graduates to be living in their parents’ basement in the wake of the financial crisis a decade ago, the Zillow study found the number of people moving back home is at its highest level since 2000.
And it’s not because they can’t find a job. Only 10 percent of millennials living at home are unemployed. It was nearly 20 percent in 2010.