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It is no secret that college degrees are expensive, but most parents still envision a college degree for their children. In October 2014, 68.4 percent of 2014s high school graduates were enrolled in colleges or universities. However, with the average student loan debt at $28,400 and climbing, parents and students alike are putting more thought into choosing a college and a major.
While students should certainly choose a major based on their interests and aptitudes, it’s also important to consider the bottom line. Over the course of a lifetime, what is a particular degree actually worth?
Asking tough financial questions like these may seem out-of-line, especially to those who value a liberal arts education for reasons that aren’t entirely financial. But today, it’s more important than ever that students choose a degree that will lead to a solid career.
As more parents and students ask these questions, a number of tools are popping up to help measure the real, monetary value of a college degree. First, well talk about some of the specific questions to ask when choosing a college and a major. Then, well consider a few of the best tools for calculating the costs and benefits of a particular degree track.
Things to Consider When Choosing a College Major
There’s a lot to consider when deciding on the value of a particular college degree. It’s not just about bottom-line potential earnings, though that’s part of the equation. And it’s not just about employability rates, though that also must be considered. Instead, when deciding on the value of a degree, its essential to focus on a variety of factors, including:
Unemployment rates: The overall unemployment rate for bachelor’s degree recipients in 2014 was 3.5%. While that’s lower than the national average among all workers, it’s still significant. And some majors have much higher unemployment rates than others.
A study from Georgetown University showed that from 2009-2010, architecture majors had the highest unemployment rates, at 13.9% for recent graduates. Health and education majors had the lowest unemployment rates right out of college – around 5.4% for both majors.
The Georgetown study looked at unemployment rates not just for recent graduates, but also for those with graduate degrees. The study shows the importance of graduate degrees in some fields. For instance, recent science graduates had a 7.7% unemployment rate, but those with graduate degrees had only a 2.2% unemployment rate.
Studies like these are a valuable way to gauge how employable students are once they graduate with certain degrees. The studies can also show whether or not it’s worthwhile for students to invest in graduate-level education in their fields.
Average and potential earnings: Potential earnings are a huge part of the equation, as well. How much will a recent graduate employed in the field earn? And, what will a graduate’s eventual earnings look like in ten or even twenty years?
Studies on this topic abound, including a recent study by PayScale. That study shows, for instance, that petroleum engineering majors can earn nearly $90,000 per year right out of college, and $160,000 per year at mid-career.
College outcomes: Part of choosing which degree to pursue is also choosing where to pursue that degree. For some majors, the “name brand” of a particular school could help boost earnings. But for many majors, this just isn’t the case. An accredited degree and good GPA from just about anywhere will do.
So when choosing a particular college, be sure to examine that college’s outcomes: their graduation rates, post-degree employment rates, student aid rates, and more.
The price: When it comes to college, sticker price and actual price are often wildly different. Because schools offer a variety of financial aid options, especially to low-income students, they’re typically much cheaper than the up-front sticker price on the website.
This is why it’s important for students to fill out the FAFSA and apply to a variety of schools. Though one prestigious university may have a $25,000 per year sticker price, the aid package at that school could mean it costs less than in-state tuition at a public university.
The “X-factor”: When calculating the value of a degree, parents and students also need to consider other, less tangible factors. Well just call this the “X-factor.”
For instance, students who hated math in high school probably shouldn’t go into engineering, though it’s one of the top-paying fields today. If a student prefers a career track with a much lower average salary, that can work. Just be sure to talk through life expectations with your child and find ways to earn that degree without going into mountains of student loan debt. If you keep the initial investment low, you can still get a good ROI in satisfaction, passion, and money.
Tools to Use
Obviously, this is a ton of information to work through. Luckily, there are some great tools out there to help parents and students choose the right degree track at the right school. Here are 5 things to consider:
- Studies: Every year, companies like PayScale do studies on earnings for various degrees, and the Bureau of Labor Statistics tracks things like average earnings and employability rates by degree type, as well. When choosing a major and a school, look up the latest studies to get real-time data on real-world issues.
- CollegeMeasures.org: This site offers transparent data for many different colleges by state and by ranking. Use data like this to choose a school with good four-year graduation rates and excellent student aid packages.
- CalcXML Calculator: This CalcXML college value calculator requires that you put in your own information, so you’ll have to look it up ahead of time. But, it allows you to compare the value of a degree versus a career with no degree. You might be surprised to learn that even an English degree could result in an additional $350,000 in earnings between graduation and retirement.
- The Hamilton Project Interactive Chart: This interactive graph shows your average earnings over an adult’s working life by various types of degrees. You can add in two degrees at once, making it easy to compare earnings potential for two different degrees in a handy visual format.
- College Reality Check: This comprehensive tool is one of the best around. It lets you look at different colleges by type, size, and location. The tool gives you the average net price for various family income levels, and gives graduation rates for each college. The site also allows you to compare potential salaries with potential student loan payments.
Bonus: Jump$tarts Reality Check: This calculator can help students come to grips with the type of salary they’ll need to maintain the type of lifestyle they’ll want. It’s focused on living costs for single people just out of high school or college, but it’s a good tool to begin talking about potential future salaries.
This isn’t a college calculator, per se, but can help parents direct a conversation about degree options and future earnings. To a high school student, $38,000 per year with an English degree might sound like a lot. But once they plug some numbers into this calculator, they’ll see how quickly that money will go. It’s not necessarily about changing their mind away from their passions, but more about helping them understand that taking a risk on a lower-paying career may mean cutting back on lifestyle expenses they want.
Talk It Out
Using these tools takes time, and both parents and students will want to set aside plenty of that for college conversations. Now more than ever, it’s essential to spend the necessary time upfront, rather than find yourself digging out of $50,000 of loan debt on a $30,000 a year salary later on.