This site is no stranger to wandering into controversial topics like… well, anything college-related:
- We asked if you should get a degree or become a truck driver
- We discussed whether today’s college graduates are better off than graduates of a generation ago
- We even asked if certain majors should cost more
With all of those minefields successfully navigated, it’s a travesty we haven’t addressed one question at the heart of it all. In light of a weak job market, massive student loans debts, increasing loan defaults, more 20-somethings living at home, and, on top of it all, spiraling college costs… it’s far past time to ask:
Should you care about potential earnings when you choose a major?
We touched on some of the sobering statistics behind the Education Industry in our previous expose when we asked if a four year degree in Photography was worth it. Let me re-share those facts with you today:
- 9.2% (!) of students graduating in 2011 had defaulted on their student loans by the end of the year
- The average 2011 graduate borrower was $26,600 in student loan debt.
Let’s go a bit further, and look at some quick facts about college cost (tuition, room, board, etc.):
- Normalized for 2010 dollars, four year public schools have increased in cost from $6,381 to $15,605 since 1980.
- That same stat for private four year schools? $13,995 to $31,975.
Multiply all that by 4 years… if you’re lucky and can get out on time!
Let’s go even further (PDF from the New York Fed):
- Student loan debt is the only type of consumer debt that rose through the Great Recession.
- As of December 2012, there was an estimated $966 billion in outstanding student loan debt. Some estimates in 2013 put that number over $1 trillion.
- Student loan debt is the largest non-mortgage household debt category.
- 6.7 million student loan borrowers are delinquent – 17% of all borrowers. Note that 44% of borrowers aren’t even paying currently, due to forbearance and deferments.
Internalize that last part for a second. Another way of stating it?
A full 30% of student loan borrowers who are in repayment have either fallen behind on their payments or are technically in default.
It’s fair to say that the United States has a crisis brewing in student loans – 30% of our borrowers can’t handle the payments!
The Problem with Serendipity
One of the major issues most people have is too much stock in serendipity. Serendipity, of course, is the belief in the “happy accident” – the idea that the only thing that matters is dreams and time. “All you need is love”, “do what’s in your heart”, “follow your interests and the money will follow you”. Or, if you prefer – the Disney-style imagery of two soul-mates meeting in interesting circumstances – you don’t even have to try, it’ll fall in your lap!
The problem with that? Well, if you skipped over that last section, let me reiterate that 30% of student loan borrowers are behind on their payment or in default. Does that mean that 70% of borrowers are perfectly fine with their station in life, with their loan payments being but an afterthought? Of course not – as we mentioned earlier in this article, student loan debt is the only debt that has been increasing recently. That means younger folks with degrees aren’t buying cars, aren’t shopping, and certainly aren’t buying houses – there has been a material decline in how much these borrowers can help juice the economy. Where’s the happy accident in that?
Here’s a quote to live by: “Life is what you do when you aren’t at work.” That doesn’t mean you can’t enjoy your job, oh no. It means that there are plenty of hours in the day (and the weekend!) for you to follow your passion when you aren’t working. Personally, I love taking photos and playing with my dog and prognosticating about economics and playing guitar and arguing politics and talking on Twitter and lifting weights and writing articles and playing basketball and watching TV with my family (blah, blah, blah)… However, the best use of my working hours remains writing C++ at my day job. And, you know what? I love my day job – it’s just that I doubt I’d write C++ all the time if living the rest of my life was equally lucrative. And that’s okay.
I know one recently popular way to pick a suitable career has been answering the question: “What would you do for a living if everything paid the same amount?”.
Newsflash: that’s not how the world works.
Society values certain jobs more than others, and reflects its preferences in the salaries paid to practitioners in certain fields. Those fields may require intelligence or risk-taking or cunning or hard work or strength or endurance or any other combination of rare skills – that’s what makes them valuable. Think about that the next time you purchase $25/lb Alaskan King Crab or your contractor charges you thousands to build you a custom nightstand from some rare hardwood.
Or, if you prefer a song quote, I give you my favorite lyric on money. From Silverchair‘s Tomorrow -
You say that money isn’t everything…
Well, I’d like to see you live without it.
Don’t Touch the Third Rail!
If you hang around any group for long enough, you start to see cracks in the armor – imperfections, perhaps, and maybe even unbelievable contradictions. In no place is that more obvious that the approach blogs take to commenting on higher education.
Since I’ve been writing on this website for over 4 years, my flashlight shines brightly on the personal finance blogs of my peers. Although it’s not a universal failing, personal finance blogs, as a whole, are disgustingly contradictory when it comes to post-secondary education.
Allow me to explain. You’ve got a huge mass of blogs which have words like “Money”, “Cash”, “Funds”, “Budget” and other tangentially fiscally related terms in their title. Many writers are recent college graduates, and spill a lot of digital ink on paying off student loans. Many of these sites go even further, and concentrate on readers in their 20s and early 30s – a demographic often burdened by student loans and low earnings. These blogs purport to help people navigate young adulthood – paying off debt and setting up a responsible budget, while avoiding expensive habits like shopping trips and $5 coffees.
However, as the topic of this article suggests, there is one major faux pas in this field – nothing makes writers angrier than someone questioning choices of college majors! No, young recent college graduates (who blog about paying off massive student loans and help people decide what to buy and what to leave in the store) cannot bring themselves to suggest matriculating (or, for non-Freshmen, switching) to a more lucrative Major – or even dual majoring or switching their interest to a minor.
About four years ago (and three, before it went into effect), it was all the rage for Personal Finance bloggers to throw their weight behind the so-called Credit CARD act, a law signed by President Obama that, amongst other things, made it illegal to issue credit cards to people under the age of 21 without burdensome new hoops to jump through. This part of the bill, of course, was hugely popular: “of course 18 year-olds can’t decide how best to enter into a voluntary contract with an institution which charges them money if they use certain services! They may be adults, but they aren’t smart enough to weigh risks for themselves!”. And, I even heard one or two “Won’t somebody please think of the children!“s in there.
Okay, got it – so it’s not fair to let children enter into, again, voluntary contracts with companies unless they have the explicit consent of a co-signer or parent.
With all of that societal intervention and nannying, how much cognitive dissonance are these bloggers really suggesting you should be comfortable enduring? Banning 17 and 18 year olds from voluntarily signing up for credit cards by force of law – good! Suggesting 17 and 18 year olds think briefly about potential salaries before picking what they do with the next 50 years of their lives – bad!
Makes your head hurt, doesn’t it?
So, Picking a Major…
As I mentioned in the Photography article, you should attempt to manipulate both sides of the scales. Anything you can do to defray education and training (college isn’t the only option!) costs – summer jobs, paid internships, grants, scholarships, cheaper schools, community college credits that transfer, vocational training, trade schools, apprenticeships, cheaper housing, cheaper meals, working for rich relatives(!) – is worthy. That’s one side of the equation. Balance it with the other side – what you’ll expect to make when you get out.
If you’re rocking the full scholarship, or somehow drove your costs below most students (or your last name is Kennedy, Romney, Carnegie, Mellon, etc.) – you’ve got more latitude to pick your major. For the rest of the world, if you’re borrowing $30,000, $50,000, $100,000 to get that degree? You need to be sure that what you do on the back end will cover your costs.
Look, college is a great time, but it’s also an investment. It’s the very rare student who minimizes every cost – (present company included) but an eye towards the price tag can’t hurt you, and it might even make you question some decisions. That’s healthy.
So, world, it’s time to stop avoiding such an important question – students everywhere, you need to think, at least briefly, with your future wallet. You’re welcome.
How much will you make if you pursue your current major?