Picking a college degree based on its financial return
Something about a college degree makes it more like a stock than a bond. It has no guaranteed payback, but it can yield some tangible dividends and increase your earnings over time.
The idea of a degree’s return on investment (ROI) is hardly new for those eyeing colleges. Yet I think it should be taken to a new level, if for no other reason than to reduce some of the vexing uncertainty of a degree’s future value.
Case in the point is the recent annual survey done by PayScale, a company that provides information on salaries across many industries. It also tracks how much graduates of specific colleges and degree programs earn over time, from early career and a decade into the future. PayScale surveyed more than 1 million alumni from more than 1,300 colleges.
Of course, doing the math of what degree or school returns the most over a decade or so is a tricky business. You can get a degree from a reasonably priced school, but it may be extremely specialized for one industry.
Graduates of the SUNY Maritime College in New York State, for example, posted the highest median, mid-career income in the latest PayScale survey -- $147,000 -- but the institution mostly trains you for the global merchant marine industry.
This degree won’t work if you have an aversion to less-than-gentle rolling waves or being on a commercial vessel. Personal note: When I was 18, I was offered a free education at either the U.S. Naval or Merchant Marine Academies. I made a really wise choice to decline.
If you choose to specialize, though -- and can confidently make that decision when you’re 18 or 19 -- then matching a high-ROI degree with a superior college can take some of the stress out of worrying whether you’ll be gainfully employed after college.
By specialization, I mean targeting math, sciences and high-end health services professions. Engineering degrees, for example, accounted for 68 percent of the top-earning programs in the PayScale ranking.
The top engineering job is still in petroleum engineering in the PayScale rankings, with median pay at $172,000. However, I’d be skeptical on how many petrochemical firms are hiring engineers now, given the worldwide glut of oil and a growing movement to reduce the global carbon footprint.
Still, it makes sense to pay attention to how salaries in a given profession grow relative to others. You may be adding on debt only to find you won’t be able to pay off your loans and other bills after graduation.
“It’s critical that prospective college students understand their earning potential before making decisions about how to fund their education, because the impact on their future financial health can be significant,” said Lydia Frank, senior editorial director at PayScale.
That’s why you shouldn’t select a degree program casually.
If you choose to become a dental hygienist, you’re looking at a pay increase over a decade of only 15 percent. In absolute terms, early-education majors showed the lowest mid-career salaries, at around $37,500.
While I think both dental hygienists and early-childhood teachers are essential to our society, if you’re interested in moving up the economic ladder and beating inflation, you may consider other majors.
And don’t just focus on a two- or four-year degree. Getting graduate degrees also can move you up the wage scale.
When it comes to considering higher ROI-oriented education, getting graduate degrees in computer science, engineering and nurse/anesthesia “top the list of master’s degrees in terms of early and mid-career median pay,” PayScale said in its analysis.
Still, I always add a note of caution when I offer such findings. These salaries go back in time, but they may not apply to the future. Jobs are still being outsourced, and millions of others are being automated.
OK, liberal arts majors. Now it’s your turn. Should you be bummed if you’re not good at math or science or you have no idea what to study now?
While the best-paying majors are going to be in STEM fields (science, technology, engineering and math) in the near future, the ever-changing global marketplace is still going to value those who can communicate, analyze and collaborate with teams. Robots can’t do this (yet).
According to a report on future jobs issued by the World Economic Forum earlier this year, some “65 percent of children entering primary school today will ultimately end up working in job types that don’t exist today.”
In practical terms, while the report forecasts more than 6 million jobs will disappear in manufacturing, offices, mining and construction, it projects more than 300 percent growth from 2015-2020 in architecture and engineering, business/financial operations, and management and sales.
Sought-after employees will still need to have a broad range of enhanced “people skills” that combine analysis, communication, engagement and empathy. Some of the top attributes of an in-demand worker in 2020 will be complex problem-solving, critical thinking, creativity, coordination and emotional intelligence, the World Economic Forum forecasts.
While you will may not find a program that has those skills sets listed in the degree description, any college that places a priority on these attributes will likely offer you a high return on investment. Think Warren Buffett, not some hot-shot Wall Street trader.
