MMost students choose their major based on their talents and interests, not on how easily that major can help them repay their student loans. Maybe it’s time to rethink that.
A new study breaks down exactly how difficult it is for former students to repay their student loans based on their chosen major. Although some of the results are predictable, the research sheds new light on the difficulty for new graduates in certain fields. The Brookings Institution’s Hamilton Project analyzed numbers from more than 80 different majors to determine how much graduates typically earn right out of school as well as a decade later, and how that affects their ability to repay student loans. .
At the median, someone with a bachelor’s degree earns $27,000 right out of school, but some majors earn considerably less, with a number earning less than $20,000. “During the first year of a career, when earnings are at their lowest, graduates of several arts and humanities majors would need more than 20 percent of their earnings to repay their loans,” the report says.
The list of majors who must devote the largest share of their income to their loans in the first year after graduation is eclectic. “Drama and theater graduates face payments of 24% of their earnings in the first year of repayment,” the study said. Additionally, those with degrees in Health and Physical Education, Civilization, Ethnic Studies, Composition, Speech, Fine Arts, and Nutrition and Fitness Studies pay the highest percentage of their income for student loan repayment to the during their first year of schooling.
The vast majority — 66 of the 81 majors surveyed — will need to channel more than 10% of their first-year income into their student loans. Even graduates with business and math degrees must initially devote 12% or more of their income to servicing their debts.
The study also examines how quickly graduates’ income increases after graduation. Some of the majors with the lowest starting salaries are seeing the fastest increase, largely because starting salaries are so low initially. Many graduates, even those who start paying a high percentage of their income for their debts, see that percentage drop quickly. “Earnings rise rapidly for graduates of almost all majors and especially for those starting with the lowest incomes,” the study says. In year six of a 10-year payment plan, only a handful of majors are paying more than 10% of their revenue in debt repayments.
However, those low earnings right after graduation are still a concern. “A key problem with the current college funding system is that debt repayments are often fixed, while for many majors, earnings are low in the first few years after graduation,” the authors point out. the study. “This mismatch can result in a significant financial burden for young workers.”
Is there a solution? The study makes some recommendations for expanding the use of income-contingent reimbursement programs, but for now, students could consider majoring in computer science, nursing, operations, and logistics, or in any type of engineering: Individuals coming out of college with these majors must spend the smallest percentage of their income after graduation on their student loans.
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