Choose A Major

If you’re thinking about college, recently enrolled, or attending, you’ve probably thought a lot about majors. University small talk frequently begins with, “What are you studying?” Your parents probably pressure you to find and/or settle on a major; graduate in four years, they stress. From advisers to counselors to friends to acquaintances, the onslaught for selecting a major can be daunting. Unfortunately, it’s not the most important question to prevent and tackle student loan debt.

The Secret To Less Debt

How do you prevent or lessen student loan debt if you’re footing the bill?

The secret is simple: Project your future income.

More and more students are entering into college – oblivious of the financial ramifications. As Congress finds “solutions” to our $1.2 trillion student loan debt crisis, students are floundering. Now more than ever, it’s important to know how to stem the tide and beat the debt. But the key is knowing what your major is worth.

Frankly, it sucks to think about majors from a financial, future-income perspective. It’s not sexy. Universities often depict a wealth of opportunities and encouragement for any field of study. They’re selling studies irrespective of salary. This can be dangerous.

The reality is that universities are selling a degree – charging thousands – without telling you the whole picture. Do your homework before settling on your dream degree.

Example Degrees

Thinking about a degree in philosophy? Starting median salary is $39,900.

How about psychology? Prepare for an abysmal $35,900.

What about financially-oriented degrees like economics? An impressive $50,100.

And the major that takes the top spot: Chemical Engineering. Right out of college, you can expect to make about $63,200.

Next time someone says, “Follow your dreams!” Ask yourself, “How much will this cost me and what will be my future salary?” If you graduate with $80,000 in student loan debt, it’s best to have a good job lined up. My recommendation: You could find part-time and full-time jobs on job search sites. Otherwise, the crushing, choking student loan debt will ruin those idyllic dreams.

Source: http://online.wsj.com/public/resources/documents/info-Degrees_that_Pay_you_Back-sort.html

I’ve been gorging on the financial trough that is the Federal government. They know how important I am, and they’ve been more than happy to open up their coffers for a swell guy like me. I’m part of the educated elite, don’t you know? They’re investing in me. What an ego boost!

Although, when I look at my Mint.com account, with all the accounts consolidated into one domain, I see a different picture. Suddenly, I appear to be the fool in a bigger game of Monopoly. I own nothing, and I’m being given nearly unlimited funds to continue deeper down this rabbit hole of debt. Today, that hole sits at $37,605 (see my previous post on debt that started this site) – a gut check that leaves me breathless and anxious. I’m told to rest assured: Everyone goes through this – it is nothing compared to other people. That doesn’t assuage my worries.

What does comfort me is that the greater economy is realizing the impact of over a trillion dollars in student loan debt. You see, economists and businesses have taken note. Even though the country has shrinking credit card debt, we’ve replaced it with student loans. It’s a shell game, and WE the students are going to be left with the bill.

Student loan debt is the responsibility of students, government, and corporations, alike. There are too many hands on the profits, and not enough students that know they deserve better. That interest rate that we pay, 6.8%, may be raised very soon if Congress doesn’t act. Even worse, banks prime rate for loans through the Federal Reserve is 3.25% – other rates are near 0% (citation). That prime rate is what banks get to lend money to suckers like you. Congress finances our student loans at 6.8%. Are you doing the math? I am. That’s 3.55% more than what banks pay to lend money.

Our government shouts from the staircases, halls, and opulent gardens that we are a country that prides itself on education. Education comes first here in America, and we are the best country because of it. Unfortunately, we are neither. The country is consistently ranked behind most of Europe for education and our crumbling, decaying system of education is hurting our future. One of the best ways we incentivize an education is by making Federal loans highly accessible. One of the worst ways we cripple our economy is by charging more than double the interest rates that big banks get. Where’s the logic? This seemingly short-term decision to pass on the debt to an even younger generation seems ill-advised and destined for long-term failure.

The government is profiting over this system of student loans. In fact, they’re poised to earn $33.5 billion for fiscal 2013 (link). If this was Goldman Sachs, Citigroup, and/or (insert bank name here), we would write this off as yet another crazy, astronomical year for the banks. But this isn’t a corporation or a for-profit machine. This is our government, which aims to protect against predatory lending. The irony? It’s doing just that.

Only 39 percent said they fully understood the burden student loan debt would place on the future, and 60 percent now have at least some regret over the choice of education financing. (AICPA Survey Results & HuffPo)

To start paying off her $120,000 in student debt, she is already working two restaurant jobs and will soon give up her apartment here to live with her parents. Her mother, who co-signed on the loans, is taking out a life insurance policy on her daughter. (New York Times)

I’m convinced that students (me included) are not able to accurately calculate and convert a bucket of student loan debt into a monthly payment – with compounding interest – on a salary that doesn’t exist yet. Good luck with your repayment plans!

Perhaps we need to tackle this problem at the government level, as well. Perhaps it’s time for our representatives to represent. Perhaps they can follow the lead from the champion of the middle class, Senator Elizabeth Warren.

The rise and noise over student loan debt has just begun. President Obama will be tackling this impending disaster soon, but will it be too late?