Counselors Network


Major, debt, and income: Important factors in evaluating the higher education investment

Student loans hold a stronger presence in the national consciousness than ever before, as evidenced by the recent surge in news coverage devoted to this topic. Most of these stories have been spurred by the total student loan indebtedness in the U.S. — particularly in light of the infamous trillion-dollar milestone the nation hit last year. This number is certainly daunting, and may influence students entering the education pipeline to borrow conservatively or not at all.

For those who do take out loans to pay for college, many see borrowing as an investment that will pay off once they've landed a job. Certainly their starting salary will enable them to handle their student loan payments. Or will it?

How much should a student borrow to invest in a degree? Given a likely career path, what loan repayment amount will be affordable? In planning for the future, students should ask themselves these kinds of questions before they decide to borrow large sums of money. Not knowing what to expect after graduation — in terms of expected debt-to-income ratio — can prove hazardous to a student's financial health.

A recently published report from TG helps to provide important context for students facing these kinds of long-range decisions. The report, Balancing Passion and Practicality: The Role of Debt and Major on Students' Financial Outcomes, analyzes data collected from the U.S. Census Bureau and the National Center for Education Statistics (NCES), along with case studies at three Texas colleges and three non-Texas colleges, and provides an in-depth look at debt-to-income ratios for the most popular majors in the U.S. and Texas.

The central idea of the report is that a student's ability to repay student loan debt is closely related to his or her educational and occupational choices. While college graduates typically earn more than high school graduates, not all college graduates earn the same. Students pursuing certain degrees, such as engineering or natural science, can usually find a job more easily and earn more than other majors. By contrast, humanities majors have higher unemployment rates and typically earn less.

The report does not, of course, recommend that all students should automatically switch to a discipline with higher earning potential. However, it does suggest that decisions about selecting a major and taking on debt shouldn't take place in a vacuum. The report offers a set of recommendations for college administrators on how to structure their advising services to students contemplating borrowing to pay for college. It suggests that a three-pronged approach — involving financial aid counseling, academic advising, and career guidance — can help students make more informed decisions that take into account not just the here and now, but the there and then.

Again, it's wise for students to think about how they will repay their debts, given their likely salaries. Armed with this knowledge, students can make financial and academic decisions that allow them to pursue their passions without ignoring practical concerns.