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Prospective college students searching for a major that will provide the best return on their tuition dollars have long struggled to access good data on expected earnings after graduation. That began to change when the Department of Education published its updated College Scorecard in November 2019.
Last week, the Scorecard received its second major update. It now provides data on college graduates’ earnings by both major and school up to two years after graduation. The data confirm what we suspected already: most of the time, a student’s choice of major matters far more than her choice of school. If you pick the right field, even a community college degree can offer higher earnings than a four-year degree.
The median bachelor’s degree program yields a salary of about $38,000 two years after graduation. But students should be cautious not to take that median salary as a guarantee. One-fifth of bachelor’s degree programs have median earnings below $30,000, and about a sixth have earnings above $60,000.
Preston Cooper/Forbes
Twenty percent of four-year college graduates study business, finance, or a related field. They make up a significant portion of the middle of the earnings distribution: among programs with median earnings between $45,000 and $60,000, over half are in a business field. While these programs generally yield respectable salaries, there appears to be a ceiling for most schools. Only elite institutions such as the University of Pennsylvania and the Massachusetts Institute of Technology have undergraduate business programs that yield early-career salaries above $90,000.
However, that is certainly not true for all majors. The overwhelming majority of programs with earnings above $60,000 were in just three fields of study: computer science, engineering, and nursing. What’s more, the top schools in these fields are not necessarily Ivy League superstars. Nursing majors who graduate from California State University-Fullerton can expect a median early-career salary of $86,000. Even the University of Phoenix, a for-profit school, boasts median earnings of $88,000 in its nursing program.
No one group of majors dominates the lower end of the earnings distribution. Some of the lower-earning majors, such as education and law enforcement, prepare students for careers in the public sector. Much of this is likely due to union-negotiated salary schedules that reward seniority, and thus start new hires off at low pay.
The poor performance of other majors, however, cannot easily be explained away. Visual and performing arts majors account for just 5% of college graduates but 17% of programs with median earnings below $30,000. Popular majors such as psychology and biology also appear frequently in the bottom tranche of earnings, suggesting colleges are producing more of these graduates than the labor market can bear.
In fact, many two-year college degrees have higher median earnings than the typical bachelor’s degree. About 30% of two-year college students graduate from a program that typically pays more than $40,000 per year, most of them in health care-related fields.
Preston Cooper/Forbes
For instance, the associate’s degree in nursing program at Yuba College, a community college in California, yields early-career median earnings of over $100,000. While Yuba College is certainly an outlier, the majority of two-year degrees in health care-related fields pay more than the typical bachelor’s degree overall. This should cause us to question the notion that a four-year college degree is always the best path. If you pick the right field, a two-year degree is often a better bet.
That doesn’t mean all associate’s degrees are good options, though. About one-quarter of two-year degrees produce median earnings below $25,000. The plurality of those (36%) are liberal arts degrees, which do not prepare students with any specific career training.
The data have some limitations. Only students who receive federal student aid under Title IV programs (55% of undergraduates) have their earnings recorded in the dataset. Moreover, only programs with more than ten graduates per cohort (representing 71% of students) have data reported, due to privacy concerns. These restrictions produce an incomplete picture of typical earnings after graduation. Another issue is that students who drop out of college before finishing (40% of undergraduates) are not reflected in the data. A program with high earnings but a low completion rate might not be such a good deal after all.
Still, the update to the College Scorecard is a major improvement on the paucity of major-level data that came before. Hopefully, the update will help prospective students understand that college is not a guaranteed ticket to the upper middle class. The choice of what to study is arguably the most important financial decision a college student can make.
To see typical earnings for your college and field of study, check out the College Scorecard here.
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December 11, 2020 at 02:30PM
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