Navigating the World of Unpaid Student Internships: Benefits, Drawbacks, and Legal Considerations

College students are often encouraged to pursue internships as a way to gain experience and explore potential career paths. Internships serve as an important bridge from college to career. They are used widely by companies across the United States and are readily replicable. These professional experiences offer training to college students and recent college graduates. While many internships are paid, unpaid internships present a complex landscape with both potential benefits and significant drawbacks. This article aims to explore the various facets of unpaid student internships, including their legality, advantages, disadvantages, and impact on career prospects.

The Rising Importance of Internships

College internships are becoming increasingly important for US job seekers. Internships are one of the most effective recruiting tools employers use to identify and hire early careers college graduates. Internship experience is often the deciding factor when employers are evaluating two otherwise equivalent candidates. NACE’s annual survey of internship employers has consistently found that 50% to 60% of eligible interns convert to full-time employees. Converted interns offer significant additional benefits for employers.

Paid vs. Unpaid Internships: Understanding the Difference

There are two types of internships. Paid internships compensate interns for their work, whether with wages, stipends, or college credit. Unpaid internships, on the other hand, do not provide any direct financial compensation to the intern.

The Legality of Unpaid Internships: The Primary Beneficiary Test

By now, you may be wondering: how is it legal for interns to work for free? The loophole in the Fair Labor Standards Act allowing for unpaid internships didn't come about until the 1940s. The Supreme Court made a ruling in 1947 that legalized unpaid work in certain situations. The FLSA requires “for-profit” employers to pay employees for their work. Courts have used the “primary beneficiary test” to determine whether an intern or student is, in fact, an employee under the FLSA. In short, this test allows courts to examine the “economic reality” of the intern-employer relationship to determine which party is the “primary beneficiary” of the relationship. The extent to which the intern and the employer clearly understand that there is no expectation of compensation.

Courts have described the “primary beneficiary test” as a flexible test, and no single factor is determinative. If analysis of these circumstances reveals that an intern or student is actually an employee, then he or she is entitled to both minimum wage and overtime pay under the FLSA. The FLSA exempts certain people who volunteer to perform services for a state or local government agency or who volunteer for humanitarian purposes for non-profit food banks. WHD also recognizes an exception for individuals who volunteer their time, freely and without anticipation of compensation, for religious, charitable, civic, or humanitarian purposes to non-profit organizations.

The Primary Beneficiary Test requires employers to exercise broad discretion and judgment in determining whether interns should be paid. Where judgment and discretion are used, mistakes can and will be made, or more troubling, employers will intentionally classify an individual as an unpaid intern simply to save money.

Potential Benefits of Unpaid Internships

Even if you do not receive compensation for your work, you will still get training and education. Despite the financial drawbacks, unpaid internships can offer several benefits:

Career Advancement: Students with internship experience get 26.3% more interview requests, 16% more job offers, and 12% higher salaries than their less experienced peers. As you can see, the main reason to do an internship is for career advancement. Even more importantly, some paid internships require internship experience to apply.
Networking Opportunities: The age-old adage "it's not what you know, it's who you know" holds now more than ever. And networking with just anyone isn't enough. An internship is an amazing way to do just that. Strive to make a good impression on your bosses and colleagues. Unpaid internships are no different. Working hard and showing off your problem-solving skills is the best way to impress.
Career Exploration: Are you stuck between two different career paths? There is no better way to try out different jobs than with an internship.
Reduced Competition: Unpaid internships are much less competitive. They are becoming increasingly common these days, meaning there is more supply. Additionally, employers are more likely to respond to unpaid internship opportunities. This is especially common among small businesses. Smaller companies may not have the budget to pay you. But they may still be good options.
Less Pressure: Yet, paid internships can put on pressure. You may feel obligated to perform well since your employer is compensating you. With an unpaid internship, there are no obligations. There should never be any pressure on you to perform.

Drawbacks and Challenges of Unpaid Internships

Unpaid internships are problematic for many reasons. Unpaid internships don't just not compensate interns. They may actually end up costing you to do the internship. The financial stress of getting unpaid experience is not worth it for many. Others are forced to live at home or dig into their savings to afford an unpaid internship.

Financial Burden: Participating in an unpaid internship is much harder, and often impossible, for students who cannot forgo a paycheck for a significant period.
Lower Earning Potential: On average, paid interns earn $50,000-$55,000 per year after graduation. The average unpaid intern earns $5,000-$15,000 less.
Lack of Employee Benefits: As an unpaid intern, you are not an employee of the company you intern for. You do not get to enjoy the perks of full-time employment. Paid interns, on the other hand, may receive employee benefits.
Inequity and Access: Unpaid internships are a barrier to achieving equity and opportunity for all college students: Students who can afford to work for free gain access, opportunity, and success for participating students; help fill critical roles throughout the employment landscape; and lead to needed diversification of the workforce.
Devaluation of Work: Not compensating interns communicates to them and their organizational colleagues that their contributions are somehow less valuable than the work of paid interns. This contributes to a negative perception of the value of internships, to which unpaid internships directly contribute.
Legal Risks: Federal laws against employment discrimination do not extend to unpaid interns because they do not receive compensation. Reduced legal protection could be problematic for universities.

The Impact of Unpaid Internships on Diversity and Inclusion

Particularly troubling, NACE research has also found that all college students are not equitably represented in internships. White, male, and continuing generation students are disproportionally overrepresented in paid internships. The bifurcation of paid and unpaid internship opportunities causes a disparate impact on student outcomes and furthers systemic inequities. These students then go on to receive more job offers and higher starting salaries, which perpetuates and exacerbates the disparate impact over time.

Unpaid internships can contribute to a lack of diversity and inclusion within various industries. Unpaid internships can effectively exclude talented individuals who need paid work to support themselves. Students who reside in expensive urban areas or those from low-income families may be especially impacted.

Read also: Guide to UC Davis Student Housing

Career Services Response and Advocacy

Career services professionals have an opportunity to advocate for access and compensation. Career practitioners can seek system change to help students avoid unpaid internships. Professional communities of practice have called for modifications to public policy. Career practitioners need to get engaged at local, state, and federal levels to educate others on the unintended consequences of unpaid internships. Assist students by researching or maintaining a list of funding sources to offset living expenses for students in unpaid internships. If students find unpaid internships they wish to pursue, career practitioners could support students as they negotiate for other things besides pay.

Call to Policymakers for Action

NACE not only recommends increased usage of these funds, but also encourages the government agencies that oversee these funding streams to provide detailed guidance to help facilitate this usage along with increased investments to support paid internships. If an employer cannot afford to pay an intern, they could access these various funding streams.

NACE advocates for legislation to eliminate unpaid internships and provide support for employers in converting unpaid internships to paid internships. Congress should pass legislation requiring internships to be paid. Modern legislation is needed to resolve this inconsistency.

Until legislation exists requiring internships be paid, Congress should immediately pass the Federal Intern Protection Act to extend legal protections to unpaid interns in the federal government. States should pass legislation to prohibit discrimination against unpaid interns in the private sector as well. These could serve as models for other states and the federal government.

Alternatives to Unpaid Internships

Have you decided that an unpaid internship is not for you? If so, we want to help you land the paid opportunity of your dreams. Some sectors tend to pay their interns more often than others. For example, technology, consulting, and finance tend to offer paid opportunities. If you start applying for summer internships at the end of the school year, you are already behind. Strong applicants start applying as early as the fall of the previous year. 59.4% of students who did not undergo an internship cited not knowing how to find opportunities as a major barrier to entry. You may have your sights set on a single company or role. But if you want a paid opportunity, it may be better to cast a wide net. As mentioned, some of the most competitive internships want applicants to have experience already. Alumni, personal contacts, and even social media can help you land the internship you want most. At Honor Society, we can connect you with a nationwide network of hard-working individuals like yourself.

Read also: Investigating the Death at Purdue

Paid Internships: Focus your search on paid internships, even if it means being flexible with the industry or company.
Part-Time Jobs: Consider taking a part-time job in a field related to your interests to gain experience and build your resume.
Volunteer Work: Volunteer opportunities can provide valuable skills and networking connections.
Academic Projects: Take on challenging academic projects that demonstrate your abilities and initiative.

tags: #unpaid #student #internship #benefits