CHICAGO (Reuters) - A college diploma has long been the ticket to a good job, but the deepest economic slump in decades has dampened the dreams of many U.S. college seniors.

Graduates celebrate receiving a Masters in Business Administration from Columbia University during the year's commencement ceremony in New York in this May 18, 2005 file photo. A college diploma has long been the ticket to a good job, but the deepest economic slump in decades has dampened the dreams of many college seniors. REUTERS/Chip East/Files

They face a hard reality upon graduation this spring: stiff competition from the growing ranks of the unemployed, from those forced out of retirement or delaying it because of the collapsing stock market, and from graduates of past years who are still searching for jobs in their chosen field.

“You’re graduating into this world and being thrown out of the college bubble and you’re supposed to be able to get a job, which just doesn’t exist,” said Andrew Heber, 24, of Chicago, who graduated from New College in Florida in 2007.

The U.S. Census Bureau says 1.6 million college degrees will be awarded this year, a figure that has climbed steadily. Many depart school with expectations of making it on their own and with hopes of repaying student loans that average $22,500.

For seniors like Amanda Haimes at Clark University in Worcester, Massachusetts, the drumbeat of bad news about the weak job market is worrying, even scary.

“People are saying this is the worst year to graduate, ever,” she said in a telephone interview.

Haimes, 22, plans to move back home with her parents in Atlanta and will make $3,000 this summer as a political party canvasser. “After that, I’m not 100 percent positive” of her future, the sociology major said.

LOSING COVERAGE

Many seniors like Haimes face the added worry of losing health insurance coverage for the first time in their lives. Some 20 U.S. states have passed laws mandating that adult children can get coverage under their parents’ health insurance plans until they reach their mid-20s, but usually must remain unmarried dependents.

Some see few options other than living at home.

Confronted by a prolonged recession and a rising 8.5 percent unemployment rate, the highest U.S. rate in a quarter-century, some college seniors have grown “so anxious and worried they are paralyzed” and are not looking for a job, said University of Wisconsin, Madison, career services director Leslie Kohlberg.

Kohlberg and other college counselors said there are jobs to be had, but stamina is needed for the search.

What needs to happen -- and will, according to college job counselors -- is for students to migrate from training in sectors that are losing jobs like finance to fields gaining jobs like health care, education, engineering, and computer technology.

Still, there is desperation in the air, based on anecdotal comments from counselors, students and recruiters.

Wall Street recruiter Kurt Kraeger said he had to take down an online advertisement for three internships when he was flooded by 200 resumes. Other employers tell him of overqualified graduates appealing for any job they can get.

Many seniors plan to go straight to graduate school to get a leg up while waiting for the recession to end, in some cases creating a glut of applicants, counselors and students said.

Heber, an artist who has been unable to get into crowded art schools, is scraping together monthly expenses of $800 in rent and his health insurance premium out of savings from a previous job and earnings from free-lance graphic design work and computer consulting. He cooks dinners for his parents to save on his food expenses.

“Most people I know my age still live at home because they can’t even get it together to make enough money to pay rent,” he said. “Each class piles up against the ones before it. I know so many people who are looking for jobs, and have been since they graduated. There’s this sense of ‘No hope.’”

His sister, Alana, 21, is set to graduate in May from Knox College in Illinois, and expects to live at home and go back to her old summer job in an ice cream shop -- far from her chosen field of library science.

A surging number of graduating seniors are vying for paid and unpaid internships and positions with nonprofit groups, and applying to the government-run Peace Corps, Teach for America and Americorps.

All the programs have more applicants than available spots, President Barack Obama said in a speech April 21 in which he signed legislation to quadruple to 250,000 the number of position in Americorps.

“They’re going to be making subsistence wages, but they’re doing something very gratifying until the job market improves,” University of Wisconsin career counselor Randy Wallar said.

Graduates also satisfy a criteria many prospective employers insist on: don’t remain idle.

David McDonough, a Clark University career counselor, reminds seniors to make sure every cover letter and resume is letter-perfect, and to network, network, network.

“What I have tended to see more recently is people who graduated in the 1980s who have gone through everything that they can and have turned to us for whatever advice we can give,” McDonough said. “Some are in their 50s.”

TOO MANY GRADUATES?

Rumblings that U.S. colleges and universities pump out too many graduates who are ill-equipped for the available jobs echoes sentiments expressed in Britain and China, he said.

Obama frequently urges access to college be expanded.

U.S. government data shows jobs secured by college graduates on average pay almost double, or $20,000 more a year more, than those held by high school graduates; and college graduates’ jobless rate at 4.3 percent is about half the national rate.

At campus job fairs, some students come away disappointed at the few positions offered as employers have cut back recruiting budgets. But employers make an effort to have a presence so as to be in position to compete for workers once the economy recovers, Kohlberg said.

The huge American baby boom generation will be retiring in coming years -- if they can afford to -- and the generation emerging from college is only one-third the size so competition for their services promises to be fierce, she said.