12 career challenges facing graduates with debt and little experience

The cap and gown come off fast. Then reality walks in with loan reminders, rent listings, job alerts, and the gut punch of seeing “entry-level” attached to “three years of experience.”

Handshake’s Class of 2025 report found that job postings on its platform fell 15% from the year before, while applications per job jumped 30%. The Federal Reserve also found that in 2024, 20% of borrowers with outstanding student loans for their own education were behind on payments or in collections.

That is why this season feels so heavy for many graduates. They are not just starting careers. They are trying to find a door in a crowded hallway, with debt already sitting at the kitchen table.

Entry-Level Jobs Now Demand “Non-Entry” Experience

The cruel joke of the modern job hunt is that “entry-level” often no longer means entry. Coursera’s 2026 career guide, citing Zippia, says 38.4% of entry-level job postings require at least 3 years of experience, even though Coursera also defines an entry-level job as one that usually requires little or no prior experience.

Handshake adds another squeeze: the Class of 2025 faced 15% fewer postings and 30% more applications per job on its platform. For a graduate with loans, that creates a loop that feels almost designed to frustrate them. They need a job to gain experience, but they need experience to get the job.

So they apply, refresh their email, tweak the resume again, and watch the first rung of the ladder hover just above their fingertips.

Underemployment Is Becoming the Norm

Landing work is not always the same as launching a career. The St. Louis Fed reported in 2025 that as many as 52% of college graduates are underemployed when they first enter the labor market, and 45% remain underemployed even 10 years after graduation, according to the Talent Disrupted report.

Natalia Leukhina of the St. Louis Fed described the trap with a warning that sticks: “Maybe you get it because you didn’t have some of the required skills, but then you’re not going to gain them if you’re just staying in that kind of job.” That is the hidden cost of taking any role just to survive.

The job may pay rent, but it may not build the skills, network, or career story needed for the next step. For indebted grads, underemployment can make the loan balance feel less like a bill and more like a shadow following them into every shift.

Debt Steers Graduates Away from Public-Interest Careers

Debt can narrow a graduate’s dreams before their career even starts. Jesse Rothstein and Cecilia Rouse found in their Journal of Public Economics research that “debt causes graduates to choose substantially higher-salary jobs and reduces the probability that students choose low-paid ‘public interest’ jobs.”

That finding helps explain why a graduate who wanted social work, teaching, public health, nonprofit advocacy, journalism, or the arts may suddenly start scanning for roles that simply pay more.

The Federal Reserve found that 57% of borrowers with student loan debt were required to make payments in 2024, up from 37% in 2022, and 20% were behind or in collections. Passion matters, but loan servicers do not accept passion as payment. Debt does not just sit in the budget. It edits the menu of careers a graduate feels allowed to choose.

Cost-of-Living Makes Starter Salaries Feel Tiny

A first paycheck can feel smaller once the real world starts taking bites out of it. Rent, utilities, groceries, car insurance, gas, transit, work clothes, medical costs, phone bills, and student loans can crowd around a starter salary before the graduate has even bought decent groceries.

The Federal Reserve found that in 2024, 20% of student loan borrowers with outstanding debt for their own education were behind on payments or in collections, with the rate rising to 27% among borrowers earning less than $25,000.

Handshake’s Class of 2025 survey also found that 73% of seniors were more likely to apply to a job in their desired location, compared with 63% who said the same about a high starting salary. That tells a real story. Graduates want a life, not just a paycheck. Yet the cost of that life can make even a respectable starting salary feel like a paper umbrella in hard rain.

Geographic Lock-In

Opportunity has a moving cost, and many graduates cannot pay it. Relocating for a job can mean first month’s rent, a security deposit, moving costs, travel, temporary housing, new work clothes, and several weeks of waiting before the first paycheck clears.

Handshake’s Class of 2025 report found that location ranked above salary in student job preferences, with 73% of seniors more likely to apply to roles in their desired location. But debt changes the map. The Federal Reserve found that 57% of borrowers with student loan debt were required to make payments in 2024, and 20% were delinquent or in collections.

That can keep a graduate near home, even if the best jobs sit in another city. Two people can leave school with the same degree, but one can afford to chase a stronger market while the other has to bloom where the bus line reaches.

Minimal Mentorship Leave Grads Drifting

Getting hired does not mean getting guided. Robert Half’s 2025 survey of nearly 1,000 U.S. professionals found that 45% lacked a mentor early in their career, 39% struggled with managing workloads and priorities, 36% felt unprepared because of weak onboarding and training, and 35% entered the workforce without an internship or other relevant experience.

Dawn Fay, operational president at Robert Half, said, “Your first job isn’t just about a paycheck. It’s about building a strong foundation and fostering a productive relationship with your employer that will pave the way for future growth.” That is exactly what many debt-carrying grads need.

A job should be a runway, not a cliff edge. Without training, feedback, and someone to explain the unwritten rules, talented graduates can feel one missed email away from being exposed.

Skills Mismatch and Rapidly Shifting Job Requirements

The classroom and the workplace do not always move at the same speed. NACE’s Job Outlook 2025 survey found that nearly 90% of employers look for evidence of problem-solving skills on college students’ resumes, nearly 80% look for teamwork, and at least 70% value written communication, initiative, a strong work ethic, and technical skills.

The World Economic Forum’s 2025 Future of Jobs Report adds that employers expect 39% of workers’ core skills to change by 2030. That means a graduate may be educated and still feel underprepared for the tools, platforms, workflows, and communication style of a real office.

It is a strange double bind: too qualified for some jobs, not practical enough for others. The degree opens a gate, but the job may demand a toolkit that the graduate has to build after graduation, at night, between applications and loan payments.

Mental Health Strain From Career Uncertainty

Debt and rejection can grind down confidence in quiet ways. TICAS reported in 2025 that 42% of surveyed federal student loan borrowers in repayment made tradeoffs between loan payments and basic needs, and 20% said they were in delinquency or default. The Federal Reserve found the same broad warning signal: 20% of borrowers with outstanding student loan debt for their own education were behind on payments or in collections in 2024.

Add hundreds of applications, ghosted interviews, automated rejection emails, and social media feeds full of people announcing promotions, and the stress starts to feel personal. Graduates may blame themselves for a market that is giving fewer clear answers.

Sleep gets thinner. Confidence starts leaking. The job search becomes a daily referendum on worth, even though the numbers show that many graduates are fighting a crowded, uneven field.

Delayed Adult Milestones

Debt can turn the twenties into a waiting room. The Federal Reserve found that the median education debt among borrowers was between $20,000 and $24,999 in 2024, and that 57% of those borrowers were required to make monthly payments.

The St. Louis Fed also reported that young college graduates ages 23 to 27 had an average unemployment rate of 4.59% in 2025, up from 3.25% in 2019. Those numbers spill into life outside work. Moving out gets delayed. Saving for a house becomes foggy. Dating costs money. Having children feels distant.

Retirement savings wait for some future version of the graduate who is supposed to be more stable. It is not laziness. It is math with a pulse. Many grads are working hard, but the big adult markers keep sliding across the calendar like furniture on a tilted floor.

Gender and Field Gaps

The early-career squeeze does not hit every graduate the same way. New York Fed labor-market data show outcomes vary widely by major, including unemployment, underemployment, early-career wages, and mid-career wages.

The St. Louis Fed’s underemployment analysis provides a clear example: criminal justice majors had a 67.2% underemployment rate in 2023, performing arts had 62.3%, and liberal arts had 56.5%, while nursing had 9.7% and computer science had 16.5%. That gap matters when graduates carry similar loan balances into very different labor markets.

A graduate in a lower-paying or oversupplied field may need more time, more networking, and more financial support to reach stable work. First-generation graduates and students from families with fewer safety nets may feel every misstep more sharply. For some, a bad first job is a detour. For others, it is rent, credit, and debt all wobbling at once.

Pressure to Pivot Away From “Dream Careers.”

Many graduates are learning to rename their dreams before they even get a chance to live them. Handshake’s Class of 2025 report found that 57% of seniors entered college with a dream job in mind, but fewer than half still had the same goal by graduation.

The same report found that more than a quarter of computer science students described themselves as “very pessimistic” about the job market, compared with 6% of students in the health care field. That shift fits the debt story too.

Rothstein and Rouse found that student debt pushes graduates toward higher-salary work and away from lower-paid public-interest jobs. So the journalism hopeful becomes a content marketer. The arts graduate learns analytics. The future teacher scans corporate training roles. Sometimes that pivot brings growth. Sometimes it feels like grief in business casual.

Fragmented Career Ladders

The old career ladder had rungs. Many graduates now get stepping stones through internships, contract gigs, freelance work, part-time jobs, side projects, and temporary roles.

Handshake’s 2026 labor-market review found that early talent full-time job postings were down 15% year over year, and the Class of 2026 had submitted 23 applications per full-time job, up from 20.8 for the prior senior class and double the 11 applications per job from the Class of 2023.

Robert Half’s 2025 survey also found that 35% of professionals entered the workforce without an internship or relevant work experience, which makes patchwork experience more tempting and more necessary.

This kind of portfolio career can build range, grit, and proof. It can also lead to uneven income, weak benefits, no clear promotion path, and a resume that older hiring systems may misinterpret. Graduates keep stitching scraps into a sail, hoping it catches the wind.

A Short Reflective Close

Graduates with debt and little experience are not asking for a golden road. Many are asking for the first rung to sit low enough to reach.

The numbers show the squeeze clearly: Handshake found 15% fewer postings and 30% more applications per job for the Class of 2025; Robert Half found that 45% of workers lacked early mentorship; and the Federal Reserve found that 20% of student loan borrowers were behind or in collections in 2024.

The degree still matters. But the bridge from classroom to career has cracks, and the people crossing it are often carrying loan balances, thin resumes, and a brave face they put on before every interview.

Key Takeaways

Early-career instability is widespread. St. Louis Fed reporting found that as much as 52% of graduates are underemployed when they first enter the labor market, while Handshake found job postings fell 15% and applications per job rose 30% for the Class of 2025.

Student debt shapes more than monthly budgets. The Federal Reserve found 20% of student loan borrowers were behind or in collections in 2024, and Rothstein and Rouse found that debt pushes graduates toward higher-paying jobs and away from lower-paid public-interest work.

The graduates who fare best often have internships, mentors, networks, family support, and room to make mistakes. Robert Half found that 45% lacked early mentorship, 36% had weak onboarding, and 35% entered the workforce without an internship or related experience, which shows why the first job now depends on far more than a diploma.

Disclaimer – This list is solely the author’s opinion based on research and publicly available information. It is not intended to be professional advice.

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