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College grads are getting ready to start their careers, but they’re finding soaring rental costs could quickly zap away most of their newly earned paychecks.
In 2020, the average starting salary for college graduates was about $55,000, up more than 14% about a decade ago, according to the National Association of Colleges and Employers’ most recent complete data.
But rents are rising faster than paychecks. The median apartment rent has jumped more than 16% in the past year alone. Rents are up 28% since January 2017, according to Apartment List data.
“That's pretty astronomical rent growth,’ Chris Salviati, a housing economist at Apartment List, told 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.”
Financial advisers often suggest that consumers not spend more than 30% of their monthly income on rent. But in many places, college grads find that nearly impossible. For example, in the Nashville metro area, the median rental price for a one-bedroom apartment is $1,264, which on a $55,000 salary means rent takes up 28% of pretax earnings, The Wall Street Journal reports. Apartment List cites 20 large metros that are much more expensive than Nashville.
Many renters also are now facing increased competition for rental units as demand outstrips supply in many large markets. Read more: Renters Facing Bidding Wars
Many college grads may turn to living with roommates to try to lower costs. The housemate-finding platform Roomster has seen roommate queries jump about 40% over one year in cities like Nashville, Tenn.; Austin, Texas; and Atlanta, The Wall Street Journal reports.
But even with a roommate, renters also must show property owners that they can afford the 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 Wall Street Journal reports. 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.