Choosing whether to attend college – and, if so, where and what to study – is perhaps one of the most important decisions a person will ever make. It’s an investment in your future. And like it or not, like any investment, choosing a college and major combination that provides a solid monetary return is a critical step toward a lifetime of financial stability. By publishing PayScale’s College ROI report, we hope to provide prospective college students with as much information as we can to help you make the best choices for your future.
The Student Loan Generation
A four-year college education ain’t cheap, and it isn’t likely to get cheaper any time soon. According to CNBC, the average cost of a year of college is now $9,970. That’s roughly 213 percent more than the cost of a year of college 30 years ago. I don’t know about you, but I don’t have $40k just lying around, and I expect most college-bound students don’t either, particularly given that the average age of an incoming college freshman is 18.
That means most incoming college students need to borrow money, and they end up taking out student loans in order to pay for their education. In fact, in 2012, 71 percent of students – about 1.3 million people – graduating from four-year colleges had some student loan debt, according to the National Student Loan Data System. Today, when added together, Americans owe over $1.48 trillion in student loan debt, about the same amount of money as the Gross Domestic Product of Canada. The average monthly student loan payment – for borrowers aged 20 to 30 years – is $351.
College-bound students, the point I’m trying to make here is this: $351 in loan repayments is a big chunk of change to cut out of a starting salary every month. According to Money, the average starting salary of a 2017 college grad is $49,785, which translates to about $3,100 a month, depending on the taxes where you live. (As an aside, congratulations, recent college grads; Your starting salaries just hit an all-time high.) So you tell me: How much do you pay in rent? How much do your utilities cost? And if you have anything left, how much is your car payment, or your tab at the bar? Take it from me, when you first get out of college, those bills are going to add up quick.
And that’s why you need to make sure the money you spend on your college education will give you a solid return on investment.
“Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.”
Until Skynet becomes self-aware and the robots take our jobs, and Elon Musk starts paying us all a universal basic income, most people will need a salaried job to survive. Depending on what you do for a living, that salary will be higher or lower, but it’ll need to cover all your costs if you want to sleep well at night, and if you want to keep Moose and Rocco from helping you find your checkbook.
Now, I’m not telling you not to become an actor, or a musician, or a writer, or pursue some other similarly fulfilling but likely-low-paying career. But what I am telling you is that you should plot your steps carefully when it comes to planning your financial future. And the first step for many of us is choosing where we go to college and what we choose to study.
Let’s say you want to become a public high school teacher, which is an admirable profession. The Bureau of Labor Statistics reported that the median annual salary for high school teachers was $58,030 in 2016. And that’s for mid-career teachers, not wet-behind-the-ears newbies like you. Now, if you’re carrying a big chunk of student debt around with you, those monthly payments are going to cut into that salary fairly substantially. How to alleviate the burden of those payments? Carry less debt, make more money, or both.
So how can you know which colleges will cost you less but also give you more earning power post-graduation, or – to put it another way – give you a better return on your investment? I’m so glad you asked.
PayScale’s College ROI Report
As we say in our 2018 College ROI report:
“No matter how you look at it, college is an investment — both of time and money. The benefit to this particular investment is that there are returns far beyond the obvious monetary ones. However, the financial aspects of evaluating college return on investment cannot be ignored. And some schools are simply doing a better job of setting their alumni up for success in the job market. Whether you’re planning to study computer science or psychology, earning potential in your chosen field, along with the cost of attendance for the schools you’re considering, should be part of the equation when whittling down your list of best return on investment colleges.”
Our College ROI report gives precise information on which schools and majors provide the best 20-year net ROI, meaning we tell you how much money you can expect to make in the twenty years after you’ve graduated, compared to how much it cost you to attend the school. Some school and major combinations deliver a great ROI, with a few topping a million dollars. At the other end of the scale, some school and major combinations actually deliver a negative ROI, meaning you’d have been better off financially had you never attended that school at all.
The choice is yours. But by publishing PayScale’s College ROI report, we hope to give you as much information as we can to help you make the best choice for your future.
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