On Student Debt and Maximizing ROI

If you're going to borrow money, invest it wisely

I’ve pretty much had a job ever since I was 13. I started work at Egghead Software the same month it became legal for me to do so. Pretty much had a job ever since. I’ve held one goal that entire time: maximize my earning potential while enjoying what I do. Since I’m obsessed with computers and finance, that fortunately hasn’t been too difficult.

Unfortunately, I think a few too many people in my generation, and those following, focused too much on the “enjoy what you do” part. See, when I was selecting what major I wanted in college, I didn’t assume what I wanted to do for a career. The book they sent us had starting and expected 10 year salaries for each major. I looked at each one and picked the one with the highest salary 10 years out. It just so happened to be computer engineering. So, it was a good fit. It also happened to be one of the most difficult majors at Vanderbilt. It has an exceptionally high dropout rate (higher than pre-med).

My point is: I didn’t decide my major on what I wanted to study for fun, or because I wanted an easy time in college (all the “easy” majors were the most popular ones while mine only had 40 people). I wanted to spend those 4 years maximizing my earning potential. And boy has it ever paid off. Best investment ever.

And that’s what college is: an investment in your future. Now, for many, this investment involves taking on a huge amount of debt that will be a part of your life for potentially decades. What I’d like to try to impress upon the world is that you should look at this debt as something which should be used carefully since it’s a once in a lifetime opportunity to maximize your investment. This is going to sound harsh but while some students have the luxury of studying whatever they want, when you’re going to be saddled with life changing amounts of debt, you should really consider the ramifications of that when you pick what you are going to study as it will significantly affect your earnings potential, ability to service that debt, and ability to live a full and complete life free of worry.

I just read a story of someone who got all her degrees for an MSW (therapist) and is exiting graduate school with $250k in debt. Now the average MSW, regardless of experience, makes $51,934 a year. Conversely, my usually job title, again regardless of experience, on average pays $171,653 a year and frequently significantly more (trust me on this). And almost all of that is attributable to what I studied in college and the career path it put me on. I can at least say it would be absolutely impossible for me to be where I am today without having selected my undergrad major with its high earning potential.

Just a simple question: why in the hell if you were going to borrow $250,000 would you spend it on a degree that qualifies you for such a low paying job?

I see this constantly in today’s world regarding student debt. Yes, I agree and understand that a college degree is unfortunately mandatory in today’s workforce and that’s a shame, but at least study something useful and in demand that pays well. $250,000??? That’s a mortgage in some parts of the US!

I will never understand why more students aren’t pushed by whomever is guiding these decisions into majors that will provide a higher ROI on their excessive debt and afford them a better lifestyle than what they seem to be studying. This isn’t to indict everyone who doesn’t study a great major. Lots of people make fantastic livings off of any major. Just those that get something that has no real career path and then complain endlessly about their loans. It’s not the loans’ fault. You studied something without a good career path and no real earning potential.

If you’re going to go deep into debt, having a plan on how to maximize your ROI on the investment you make with that debt is just prudent planning. Sadly, all too often I see little to no planning at all. It’s high time we start changing that up.