College graduates say they’re struggling to get ahead due to soaring rental costs that are draining the bulk of their newly earned paychecks.
The National Association of Collects and Employers’ most recent complete data shows that in 2020, the average starting salary for college grads was around $55,000, up more than 14% from ten years prior.
However, rents are rising faster than those paychecks. According to Apartment List’s data, the median apartment rent has risen by more than 16% in the last year alone. Rents are up by 28% since 2017.
“That's pretty astronomical rent growth,” said Chris Salviati, a housing economist at Apartment List, in an interview with the Wall Street Journal. “When we're talking about recent grads entering the market right now, in many cases these are folks who are going to be struggling more than those who graduated just a couple years ago.”
According to financial advisers, it’s inadvisable to spend more than 30% of your monthly income on rent. However, in many parts of the U.S., college grads find it almost impossible not to do so. In the Nashville metro area for instance, the median price to rent a one bedroom apartment is $1,264, which is around 28% of someone’s pre-tax earnings if they’re making the median $55,000 salary. Apartment List says there are at least 20 large metro areas where rents are more expensive than Nashville.
In addition to expensive rents, grads are also facing competition for what units are available as demand outstrips supply in many areas. As such, many have turned to living with roommates to reduce their living costs. The Roomster platform, which hooks renters up with potential housemates, has seen queries rise by around 40% in cities such as Nashville, Austin and Atlanta, the Journal reported.
However, even if a renter does find a roommate they still have to show property owners they can afford the place they rent. Property owners often want to see cash savings, lengthy and stable work histories, and previous work experience, which new college grads typically lack, the Journal said. Some renters may be asked to have a guarantor, a person who will agree to take responsibility for lease obligations in case the renter is unable to pay.