Fearing recession, young people in US are heading to grad school

It is a classic recession move: When the job market looks bleak, head to grad school. That is what happened after the global financial crisis, and early signs suggest it could be happening again.

Admissions consultants who guide students through applications, essays and test prep say interest is climbing fast. Official numbers will not be in for months, but firms like Kaplan, Ivy Coach, IvyWise, Top Tier Admissions and Cambridge Coaching all expect a big year.

“The No. 1 influencer of students thinking about grad school is either an economic downturn or economic uncertainty,” said Mr Jayson Weingarten, senior admissions consultant at Ivy Coach. “Students think that will be a good relaunch when the job market picks up.”

Top-line figures for US employment remain solid, but a “low hiring, low firing” job market has made it harder for younger workers to find employment. The jobless rate for those aged 20 to 24 was at 7.5 per cent in March, up 2 percentage points from a low in April 2023, and anxieties are running high.

Many fear artificial intelligence (AI) is making scores of white-collar jobs obsolete, while others anticipate a trend towards degree inflation in job postings could be on the horizon if the economy were to fall into a recession from President Donald Trump’s trade war. 

“Having a master’s degree is becoming an entry-level job requirement,” said Ms Sarah Thornton, an online MBA student at Louisiana State University (LSU). The 2023 graduate of Coastal Carolina University spent almost a year applying to more than 50 roles before enrolling at LSU – and that was after she switched her major from marine science to accounting, expecting it would make her more employable.

“I couldn’t even get a phone call back,” she said. “I was hitting a wall.”

Frozen out

As uncertainty over inflation, interest rates and the economy has led employers to scale back on new hires, younger workers are bearing the brunt of a largely frozen labour market. While a lot of college grads might prefer to work for a few years, build up their resume, and then apply to grad school, it can make sense for them to go straight to their next degree, said Ms Kristen Willmott, graduate school admissions director at Top Tier Admissions.

Ms Shyanne Martinez, a 25-year-old grad student at New Mexico State University, said part of the reason she enrolled was to also get ahead of advances in AI.

Despite years of experience as a social media coordinator, Ms Martinez said she has had trouble getting a new role in marketing – which she suspects could be due to the rise of AI. 

“We’re competing with AI now,” Ms Martinez said. “Businesses like to cut back and save money, and they can have AI do something and it’s cheaper.”

Debt gamble

Still, heading to grad school is not without financial risks, especially if debt is involved. 

Tuition at law and business schools can easily result in more than six figures of loan debt. Plus, the interest rate on grad school loans can be higher. For the 2024-2025 school year, they carried an interest rate of up to 9.08 per cent, compared with 6.53 per cent for undergrad loans. 

“It’s really important that you have a clear long-term plan,” said Mr Amit Schlesinger, an executive director at Kaplan, an education services firm. “You don’t want to go to one of these programmes and walk away with hundreds of thousands of student loans and not have a real plan.”

That said, many feel they have few other options.

Ms Claire Speredelozzi, 26, said she spent years trying to get a job in communications after graduating from the University of Massachusetts Boston in 2022.

When the best job she could get was as a waitress, she decided to take out about US$30,000 (S$39,000) in loans to go back to school this autumn for a degree in public archaeology from Binghamton University. She is hoping that afterwards she will be able to land a job in cultural resource management.

“For entry-level jobs, they want years of experience and skill sets that people coming right out of college don’t really have,” she said. “Having a bachelor’s degree means nothing.” BLOOMBERG