College students have “seriously unrealistic expectations” for their starting and mid-career salaries, according to a new report commissioned by Clever Real Estate and conducted by online polling software Pollfish.
“In particular, we labeled business students as the most ‘delusional majors’ because they overestimate how much they'll be making out of college by $14,585 and how much they'll make 10 years into their career by $47,070,” Tommy O'Shaughnessy, head of research at Clever Real Estate Analyst and the author of the report, told Yahoo Finance.
The report, which asked 1,000 college undergraduates about their salary expectations, stated: “It seems the next generation of college graduates might be in for a rude awakening … the average college student has seriously unrealistic expectations for both their early and mid-career salaries.”
The average Gen Z college student pursuing their bachelor’s degree expects $57,964 just one year out of college. The national median salary on the other hand, is nearly $11,000 lower at $47,000 for recent graduates with zero to five years of work experience.
Computer science majors on the other hand, actually underestimated their potential, as seen in the graphic below:
The average undergraduate also overestimated their mid-career salary by about $15,000.
The disconnect between expectation and reality was “definitely due to a lack of information,” O'Shaughnessy explained.
And while “college graduates [who] get further along in their education… learn more about different job opportunities and can start to estimate how much they'll earn, … there's a phenomenon known as ‘illusory superiority,’ which is the tendency for people to overestimate their qualities and abilities,” O'Shaughnessy added. “I think we're seeing that tendency come through in this study.”
The student debt factor
Part of this may also have to do with the need to pay off student loans.
The cost of college has been rising steadily over the last 30 years while wages for graduates with a bachelor’s have largely stagnated, as seen in the chart below:
With millions of Americans having taken out student loans to finance their higher education, many borrowers are now facing tough repayment deadlines with the average debt load hovering around nearly $30,000 according to Student Loan Hero — together contributing to about $1.6 trillion in outstanding student loans.
Borrowers in the South (i.e., south of the Mason-Dixon line and east of the Mississippi River) are facing even more stress with high levels of debt, coupled with relatively low earnings.
Women more realistic than men
O'Shaughnessy also pointed out that women were more realistic than men when it came to earnings potential.
Women holding a bachelor’s or graduate degree expected $4,338 less than men with similar degrees early on in their career. That expectation gap increases to a gaping $10,836 difference when it came to mid-career expectations.
The differences were most obvious in male-dominated fields like economics, engineering, finance, and accounting, the report stated.
But notable exceptions were in less male-dominated fields like nursing, life sciences, and communications. “This implies that women expect higher salaries when they go into professions that aren’t dominated by men,” the report noted.
Aarthi is a writer for Yahoo Finance. Follow her on Twitter @aarthiswami.