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Improved Job Market Will Not Spare Parents -- Solution STEEP DEBT FORCES GRADS BACK TO NEST; SIGNED CONTRACT MAY HELP LIMIT STAY
NEW YORK -- Despite this being the best entry-level job market in several years, a surprisingly large portion of this year's college graduates plans to return home to live with their parents - nearly two out of three by some counts.
It is a decision that undoubtedly is being influenced by the growing mountain of debt these young adults face, according to a report released Monday by Challenger, Gray & Christmas, Inc., the global outplacement firm.
There are no exact figures on the number of children returning to live at home after college, but in a recent online survey by MonsterTRAK.com, an employment website for entry-level job seekers, 62 percent of the 6,933 respondents said they planned to live with their parents for at least one month. Twenty-one percent expected to reside with their parents for more than a year.
"In recent years, college graduates were compelled to return home primarily due to weakness in the job market. This year, with an improved employment situation, the biggest factor could be cumbersome debt," said John A. Challenger, chief executive officer of Challenger, Gray & Christmas.
According to a study by student lender Nellie Mae, the average undergraduate student loan grew to $18,900 in 2002, the latest year for which data were available. That figure was 66 percent higher than the $11,400 in 1997.
Additionally, college students are amassing an increased amount of credit card debt. Nellie Mae found that the average credit card balance owed by college students is about $2,700. One in eight owes more than $7,000, according to estimates from the Federal Trade Commission.
"Saddled with high levels of debt, many graduates are returning to their parents' home in order to save on rent, food and other expenses, while trying to put a dent in their debt load," said Challenger.
The danger is that overly accommodating parents can quickly turn a brief layover into an indefinite stay by sapping the child's incentive to find work. Challenger suggests that the solution may be found in what he calls a Post-Graduation Residential Limitation Contract, which limits a graduate's stay at home.
"Asking a son or daughter to sign such a contract may seem harsh, but tough love is sometimes the only way to spur these young people to take action," said Challenger. "The alternative to such an agreement, particularly for otherwise empty-nester parents, might be having a permanent roommate.
"Without any type of restriction on their length of stay, jobless children sometimes become complacent, sleeping until noon, limiting their job search to periodically checking the help wanted sections, internet job boards and mailing resumes," warned Challenger.
"What they should be doing to find a job is getting up and out of the house early each day to go to interviews, calling hiring managers for more interviews and networking. Finding a job should become the graduate's full-time job. "If the child honestly spends a full day, five days a week focused on job hunting, there is no reason he or she should not find a job in 90 days. Most people do not dedicate that much effort to the job search, which is why the average length of unemployment nationwide remains at nearly 20 weeks," said Challenger.
This year's graduates will be helped by an improving job market. An August survey of employers by the National Associate of Colleges and Employers found that they plan to increase the number of new college graduates hired in the 2004-2005 academic year by 13.1 percent. In a follow-up survey last December, 62.5 percent of employers stayed with their original projection and 25 percent said they planned to hire more than they originally projected.
Meanwhile, among the top 500 entry-level employers in 2005, ranked by the online job search site CollegeGrad.com, hiring is up 14.2 percent over 2004.
"However, even in a strong job market, finding a position takes a lot of work. Parents can help their sons and daughters in many ways, such as letting friends, acquaintances, fellow worshipers, etc., know that their child is graduating from college this spring and is seeking a job.
"The other way parents can help is by not coddling their kids. Instead, provide them with the proper motivation to get out there and pound the pavement for a job," said Challenger.
"It is not good enough to simply tell your son or daughter that they have a 90-day limit. It should be in writing -- in the form of a contract -- so the terms are clear. If a job is found within the allotted time, parents may want to renegotiate the contract, allowing their sons and daughters to remain at home, but now as a paying renter. Similar terms could be set for graduates who leave school with a job offer, but still need some time to get their finances in order," Challenger suggested.
Following is a sample contract which parents can use to encourage a full-time job search effort by their newly graduated children:
POST-GRADUATION, AT HOME
LIMITATION CONTRACT
The undersigned hereby agrees to the following terms regarding the living arrangements of the GRADUATE in the residence of the PARENTS, following the completion of the GRADUATE'S college education.
The GRADUATE will be allowed to reside in the home of the PARENTS free of financial obligation for a period of 90 days from the date of graduation.
Following the 90-day period, the GRADUATE becomes the LESSEE and must compensate the PARENTS for the cost of room, board and any other expenses incurred by the PARENTS as a result of his/her habitation. If unable to meet these financial obligations, alternate living arrangements must be found, regardless of his/her employment status.
If the GRADUATE becomes employed before the 90 days has expired, he/she will be allowed to continue living in the home of the PARENTS rent free for the remainder of the period.
While living in said residence during the 90-day grace period, the GRADUATE agrees to the following stipulations:
· He/she will contribute at least four times a week to the preparation and/or clean up of family meals. Failure to do so will result in the cessation of meal privileges for a to-be-determined period. · He/she will be responsible for doing his/her own laundry, room cleaning ironing, etc. · He/she will be awake, showered, dressed and ready to leave the house each day by 8:00 a.m. for full day of job interviewing and other job search activities.
He/she will respect the PARENTS' desire for a clean and quiet residence and will make every effort to ensure such an environment is maintained.