You might have heard from a guidance counselor that there’s no such thing as the wrong college major. But if you’re interested in paying back the debt you'll accumulate over your college career, you may want to ignore that advice, a new report suggests.
By one measure, college graduates who studied medicine are in a far better position to pay back their student loans than grads who studied psychology, according to Credible, a San Francisco-based, multi-lender marketplace in a report released last week.
Credible looked at the debt-to-income ratio, a measure of financial health and creditworthiness, of 11,512 people seeking to refinance their student loans. Lenders look at an individual’s debt-to-income (DTI) ratio to judge his or her ability to repay a loan-lower is considered better.
“A person’s DTI can be a yes/no factor for a lender, regardless of the person’s job history,” said Credible’s chief executive officer, Stephen Dash. To find the DTI for different majors, Credible looked at the debt load and college major of its study sample and added estimated monthly debt payments for such expenses as rent, cars, and credit cards. It divided its estimates of monthly debt payments into the average monthly income numbers for each degree type.
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Graduates with degrees in pharmacy, dentistry, and post- graduate medicine had the lowest DTI ratios, the Credible report showed. More than any other majors, those students have salaries that are high enough to offset burdens of student debt and make the students attractive to lenders.
The undergraduate majors that that make it the hardest to pay back debt include history, education, and psychology. People who attend graduate school for one of those subjects, however, and increase their salary relative to the additional debt they take on can shrink their DTI ratios, said Dash.
In its analysis, Credible didn’t control for rent variations and other expenses that are different across the country. “Lawyers living in New York City are likely paying a lot more for rent than lawyers in Lincoln, Nebraska,” said Dash.