Report: Students Should Keep Debt in Mind When Deciding on Major

College students hoping to have an easier time unburdening themselves of student loan debt may want to consider carefully which major they pursue, according to a new report prepared for the Legislature.

Put simply: Your pocketbook is no great fan of the humanities.   

The report, which focuses on the relationship between students' choice of major and their ability to repay their debt, was compiled by TG, a public, nonprofit corporation created by the Legislature in 1979. TG, which administers federal loans and promotes money management education, is required to produce biennial reports to the Legislature on issues regarding student aid.

Their latest effort found that while the amount of debt accumulated by students was roughly consistent across majors, their earning potential — and, subsequently, their ability to pay off that debt — varied dramatically. Starting with the title, “Balancing Passion and Practicality: The Role of Debt and Major on Students’ Financial Outcomes,” the document almost takes on a parental tone that is probably familiar to many liberal arts students.

Jeff Webster, the assistant vice president of TG’s research and analytical services wing, said it was important that students be aware as they prepare to choose a major, a decision he referred to as “pivotal” and “life-altering.”

“We’re not saying don’t go into social work or theater arts or something like that,” Webster said. “What we’re saying is: Make those decisions informed, and have a realistic expectation for what your earnings might be and how much debt you’re going to cover after you leave school.”

While the study found that individuals' income potential tended to rise with their level of education, so did the variance of possible income. For example, in Texas, 50 percent of full-time workers with bachelor’s degrees make $36,800 to $84,000 each year. That means a quarter of people with bachelor’s degrees make more than that — and 25 percent make less than $36,800 each year.

Nationally, students who major in the humanities take home less money and have a significantly higher debt-to-income ratio, a key indicator of one’s ability to repay, than those who major in engineering or computer science. Financial aid experts cited in the report recommend keeping student loan payments below 15 percent of a borrower’s monthly income. According to the report, humanities graduates have a median debt-to-income ratio of 18 percent, compared with 7 percent for engineering grads.

Webster said that he particularly hopes the message of the report reaches counselors and high school and college counselors so that they can help students make the mental connection between their major decision and their borrowing.

“Right now, in the counseling that goes on, there’s not a lot of integration between the loan office and career guidance,” he said.

In the meantime, he recommends that students thinking of going into theater arts begin implementing strategies to lower their debt. According to TG’s findings, the most effective of these is shortening the time to graduation.

Encouraging students to graduate sooner rather than later is something lawmakers, in particular Senate Higher Education Chairwoman Judith Zaffirini, D-Laredo, have been pushing, most notably through the B-On-Time loan program. The implementation of the program has been rocky and was recently questioned in a Sunset report of the Texas Higher Education Commission. The program could be revisited in the coming session.

The TG report also encourages the state’s policymakers to make labor market data more available, as it can help students choose a field and prove vital when an individual is deciding whether to pursue an advanced degree. Webster said TG hopes to unveil a tool to help students comb through that data in the coming months.