If you're in college and graduating soon, you probably expect to start earning decent money as soon as you land your first job. You're likely aware of the extensive research showing that college graduates out-earn non-graduates by a large margin over their lifetimes. Unfortunately, a new study shows, you probably expect to earn substantially more than you actually will.
The study, conducted by Pollfish and commissioned by Clever Real Estate, surveyed a sample of 1,000 representative college students about their salary expectations, both right out of college and at the mid-career point. Then the researchers compared those salary expectations with data from the salary information site PayScale and Census Bureau data to determine what salaries graduates in various majors actually are getting in the real world.
There was a depressingly large gap between the two. On average undergraduates across all majors expected an annual salary of $57,964 in their first jobs after college. In fact, the average salary for college graduates is $47,000. That means college students overall are expecting to be paid 23 percent more than they will get when they first join the work force.
Business majors are truly deluded.
Not all college students are equally over-optimistic. In some majors--engineering, finance/accounting, and the liberal arts--students' predictions for their entry-level salaries fell pretty close to what those salaries really are. In two of them, nursing and computer science, students actually expected average salaries that are lower than they will probably get, based on average salary information. But in a few majors--life sciences, psychology, political science, economic, communications, and journalism--students expected salaries that are substantially higher than what's out there in the marketplace. Business students were the most unrealistic of them all, expecting an average $61,085 in their first jobs out of college, when the actual average salary for a new graduate with a business degree is only $46,500.
Interestingly, women in every major had lower salary expectations than their male counterparts. They're probably being realistic since there's every likelihood they really will earn less than their male colleagues once they get into the work force. Having a college degree widens the pay gap. New Census Bureau research shows that female college graduates earn on average 74 cents for every dollar that male graduates earn. Women without a college degree earn 78 cents for every dollar that men without one earn.
College students are just as uninformed when you ask them to imagine what their mid-career salaries might be. On average they expect mid-career salaries of $95,400, whereas the average mid-career salary for a college grad is $80,450. That's a difference of about 19 percent. Here again, business majors are by far the most unrealistic of the bunch. They expect average mid-career salaries of $127,470, when the actual mid-career salary for a business major is $80,400.
It could be that some of these unrealistic predictions amount to desperate hoping, because most of today's college students really need big salaries if they hope to stay current on the student loans they must begin repaying as soon as they land that first job. Average student debt is $36,000, with well over half owing more than $100,000, and one third of student debtors believing they'll never be able to pay it all back. Earning less than they're expecting could make it particularly hard for college graduates to get out of debt.
What should you do if you're about to graduate yourself? Take a good look at the numbers in the survey. Do some first-hand research about typical salaries for new graduates in your major. Talk to other recent grads who are now working. Get a realistic view of what you can expect to earn during your first years on the job, and then figure out a budget that will work for you. Graduation is a time for big dreams and big speeches about a limitless future. But when it comes to your earnings, at least for the first few years, they may not be that limitless after all.