Thursday, April 5, 2012

Choosing your major

by Ryan Law


We have written in the past about the costs and benefits of a college education[i][ii], and I feel strongly that most people can benefit from a good education – after all, college grads make more than high school grads[iii] and have lower overall unemployment rates, but the data researched has generally been for college graduates as a group. Georgetown Center of Education and the Workforce[iv] recently did a study to determine unemployment and earnings for recent college graduates. Here is a summary chart:

Getting a college degree is generally smart, but if you financing it on student loans, it’s important to realize that it may be difficult to make the payments on $50,000 worth of debt if you are making $30,000 as an Arts or Recreation major. If someone is making $55,000 as an Engineering major or $46,000 as a Computers major the payments will probably be more manageable.


The authors of the report feel that for most, college is a good investment, but conclude that “Today’s best advice, then, is that high school students who can go on to college should do so — with one caveat, they should do their homework before picking a major because, when it comes to employment prospects and compensation, not all college degrees are created equal.”


Michelle Singletary wrote about this report[v] and said, “A college education is not an investment in your future if you are taking out loans just for the college experience. It’s not an investment if you’re not coupling your education with training. It’s not an investment if you aren’t researching which fields are creating good-paying jobs now and 30 years from now.”


I completely agree with Singletary – students, parents and advisors should be careful about the amount of student loans they take out and get practical training along the way. Here are two quick stories to illustrate the point:


1.       One student had a combined federal and private debt load of about $150,000. She had majored in the Arts and had lived in nice apartments during school and had travelled abroad a few times, all financed with student loans. She came to get help because she was graduating and had no job yet. Her dream was to work with horses and travel the world. Unfortunately, with that debt load and no job she was moving back in with her parents and taking whatever job she could find. She might have enjoyed her time in college, but will likely spend the rest of her life paying for it.


2.       Another student had been going to school for years and had gone to law school but dropped out because he didn’t like it. He then tried medical school but also didn’t like that. He tried out a number of different majors and had multiple degrees. He finally realized that he really wanted to teach History at the college level so he got a Ph.D. in history. He had about $180,000 in private and federal student debt, and was worried that he was only going to make a salary of about $32,000. When asked why he wouldn’t make more as a professor he said “because history teachers are so plentiful they can pay that little.” He actually didn’t have a job offer yet, and figured that he would end up working any random job to make ends meet. This student, too, will spend the rest of his life paying for his education and may never get to work in the field he really wants and spent so much to get.

Obviously these two stories are extreme examples – after all, most students graduate with about $24,000 in debt and many will find a job and make their payments. If you are a student, though, you can maximize your chances for getting a high-paying job my choosing the right major and getting experience in your field as you go through school. Even if your major doesn’t require an internship you can still try to find work in the field. If you are a parent or advisor you would be wise to sit down with the students you are working with and help them understand the realities of how much people in certain majors make and the realities of paying off debt.


I don’t want to leave the impression that you should choose your major based solely on earnings potential – after all, we would all be doctors or lawyers if that were the case, but considering earnings potential is an important part of the evaluation process.


Ryan H. Law, M.S., CFP(r), AFC


Personal Financial Planning Department

Office for Financial Success Director

University of Missouri Center on Economic Education Director


162 Stanley Hall

University of Missouri

Columbia, MO 65211


573.882.9211 (office)

573.884.8389 (fax)


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