Learning how loan and investment interest works and it’s possible affects on your life and finances is the best way to help avoid pitfalls. Too many don’t understand the implications and simply sign on the dotted line; that’s why we’re a the debt crisis. Seeing those possible long term numbers scared the heck out of DD. I could’ve said debt is bad till I was blue in the face; it still wouldn’t have had the impact that 107 page project had. Her scenario: a physician with $200k in student loans who later got cancer, married, no kids. She “lived” very frugally, “purchased” an older model used car, “lived” in a very modest apartment, “bought” good life and health insurance early on; “saved” 12% towards retirement after “accumulating” a 6 month emergency fund and “paying” off her loans within a few years. She “saved” and eventually “purchased” a small modest house. She “donated” money every year to charity and “created” scholarships and non profits in her will. She got to see why she needed an emergency fund and how that debt would’ve crushed her had she not figured out how to pay it off. She had to create a 1 year, 5 year, 10 year and retirement plan. There was no input from her teacher other than definitions and explanations. I’m very thankful she had to do that project.
I am legally self employed so I pay full cost of insurance (through plan with my firm). North of $2k/month for family plan. Back when ACA went into effect, I looked at getting a less expensive plan on my own. Talked with the same insurance company as my firm uses. Sales person was on individual policy side not group side so he said he didn’t have visibility on the group side. But when I gave him some basics about coverage/costs for my group coverage, he told me he was comfortable “guessing” my group plan. When we priced out the individual plan that would be the same coverage as the group plan, the cost was significantly less. But at least as I understood the tax laws at the time, you couldn’t deduct the premium cost for an individually purchased plan if you were offered coverage at work but declined it. If you removed the tax benefit of the tax deduction, there was no cost savings (or it was so close it wouldn’t be worth the hassle of setting up your own plan and paying premiums on your own). Haven’t looked it that since though so maybe the relative costs have changed.
When people question why elite schools get so many applications or why everyone wants to go into business or STEM - it’s often the money. Sure, you can attend any school and be fine but going to a Top 10 business or STEM school and your first job out of college could set you up so much better than if you went to a “good” school that isnt highly ranked.
It could mean the difference between working for a Fortune 100 company vs a mediocre company. It’s not just the salary but your resume for future jobs and that could mean hundreds of thousands of dollars in lost wages and marketability.
STEM encompasses a wide variety of fields – biology-> pre-med, engineering, physics, nursing, … There is a not a uniform career path for all STEM majors or uniform top 10 STEM college. In general STEM employers place little emphasis on whether the student attended a top 10 STEM school in hiring decisions.
Studies that control for individual student characteristics including being the type of person who applies to highly selective colleges (and often is high achieving, more open to working out of local area, comes from wealthy/connected background, …) find much smaller financial benefits associated with attending one. For example, the classic Dale & Krueger studies found:
when we adjust for unobserved student ability by controlling for the average SAT score of the colleges that students applied to, our estimates of the return to college selectivity fall substantially and are generally indistinguishable from zero.
One of the main benefits of a highly selective school is that top firms will recruit there.
That’s why kids want to attend Carnegie Mellon for CS or some of the top rated business schools.
The best companies recruit from the best schools. The best companies also typically pay more. It’s also better on your resume and your future career.
If the best STEM companies you are thinking of a large ones that hire many new grads each year, they probably recruit at a large number of schools, including state flagships and others where there are likely a large number of students in desired majors. If the best STEM companies you are thinking of are smaller ones, there is likely a strong regional bias in their recruiting. For example, a hot Silicon Valley start up might favor recruiting at SJSU over traveling to an east coast Ivy. It’s not a simple rule where the best companies recruit at the best schools and the “mediocre companies” recruit at the mediocre schools.
This site is not the place for religious discussion. Please move on.
Yes, you are correct. The students at Florida Atlantic University have similar job opportunities as those who graduated from MIT.
How can knowing financial information in any form be thought of as a nefarious plot to indoctrinate people?
Sometimes, I think of that old ad, things that make you go um,um. Yep, to me that belief is in that category.
People aren’t born with an innate knowledge of personal finance. But they’ll need it no matter how much or how little they make. My kids ask questions and we talk about how we spend money, trade-offs and so many other things.
It is only nefarious if you are in a business that depends on people having poor knowledge of personal finance. Examples include selling people things that they cannot afford, often with overpriced loans or payment plans. Or selling people financial products or services that they really do not need or which are more complex, hard to understand, risky, and/or expensive than other financial products or services that would fulfill their needs just as well or better.
Also, probably a majority (by number of customers) of the US income tax preparation industry.
Well that’s assuming that you don’t understand it. IF you understand financial information then you can weed through things and KNOW you can’t afford that thing.
Agree with the complex products. Sometimes people do need to be really careful.
In our house, I am the fine text reader. I read every line. You would not believe what I find. For example: Yesterday, found that my husbands new employer pays for headphones up to $825, last week I found another doozy that saved about $500.
But in any case, I said how can KNOWING financial info be nefarious, rather than how can any company be nefarious. We know that many companies are nefarious so we need to teach everyone to understand finance.
Honestly though, the idea that everything is a conspiracy is so yesterday to me. That’s why I laughed so much while reading upthread.
Yes, agreed, and what I was saying was that those nefarious companies are the ones that see better personal finance education and knowledge among the general public as nefarious to their business.
I realize that you are being facetious. However, I’ll ignore that and do a more serious comparison. This thread is about earnings and you are focusing on earnings, so I’ll use the College Scorecard database for early career earnings. Numbers below are from a few years ago (not inflation adjusted). I listed all available STEM majors from another post except for math… I intentionally excluding math to reduce bias from Wall Street banking type companies, which form a different pattern from typical employer hiring and often do emphasize college name.
Aside from CS, this does not strike me as differences in earnings associated with the college name. There are indeed statistically differences in average earnings, but you also need to consider that the average student at a college like MIT is not the same as the average student at college like Florida Atlantic where >96% of the student body has <1400 SAT, many struggle to graduate, etc. For example, the average MIT student might be more likely to ace the technical portion of interviews than the average Florida Atlantic student, which can influence chance of being hired to desirable positions. However, if a particular MIT accepted student chooses to attend Florida Atlantic instead to save money, he/she would probably be much more likely to ace tech interview than the average Florida Atlantic student, and would be more likely to be hired than the average student. If you control for differences in student quality , career goals/interests, and location; I think it is likely enough to eliminate this degree of earnings difference. So I don’t think this is suggestive of college name having a notable influence on earnings in the listed non-CS STEM fields.
However, CS is an outlier field and does seem to show show a significant correlation between selectivity and earnings in the numbers below, more than I’d expect due to just differences in rate of high achieving students at highly selective colleges vs less selective colleges. Location bias is important to control in CS since the highest CS salaries tend to be concentrated in extremely high cost of living areas, such as Silicon Valley and Seattle, much more so than any of the other listed majors. For CS, there may be a more significant influence to college name. It’s difficult to say without additional controls, particularly without a control for location and cost of living. Some prospective CS students may want to review post grad outcomes reports at specific colleges that interest them in more detail, considering both the portion working in high cost of living areas along with the associated average/median salary.
T20 = non-Ivy, USNWR ranked 1 to 20
T50 = USNWR ranked 21 to 50
Major Ivies T20 T50 Pri T50 Pub All
Computer Science+ $110k $104k $86k $81k $66k
Computer Engineering $81k $84k $76k $70k
Electrical Engineering $83k $73k* $75k $76k $67k
Nursing $74k $66k $74k^ $62k $64k
Mechanical Engineering $71k $72k $66k $66k $63k
Engineering (All Majors) $70k $73k $69k $67k $63k
Biology $36k $34k $32k $29k $28k
Chemistry $31k $38k $36k $34k
+Includes Computer and Information Sciences Major
*MIT EECS counted is not counted as EE since most work in CS
^Nursing drops from $74k to $67k without NYU
The question is not just how much students earn but also how many students get hired earning high salaries. Is that included in your study? What percentage of newly graduated MIT kids get job offers making $100k vs at other schools?
Does the study also reveal choice? Does the MIT grad get to pick from more jobs, get more interviews, and are more able to select their own career path?
Also, you can’t exclude investment banking because that is literally one of the highest paying, most competitive, and most desirable jobs straight out of college and why some kids go to certain schools and pick certain majors. They look for feeder schools.
The issue with focusing earnings solely on STEM graduates is, that not all college graduates have a STEM degree. Most STEM students, in particular engineers, IMO can get a similar education at many schools. And they will get similar incomes (thought there is a top end and a bottom end). But that is not at all comparable for those outside of STEM or a bio major from a top 10 school v. one from a bottom 1,000.
The question below hits the nail on the head. Most graduates want their pick of jobs regardless of where they went to school. They want to select their own career path. That’s a big difference and can lead to much better outcomes in both the short and long term.
Like Six Degrees of Kevin Bacon, you can see how long it takes for a thread that isn’t about is/are A/B/C school/Top X schools worth it discussion to turn into one.
There is no such things as “most STEM students”. You are mushing together in one huge pile the kid majoring in chem on his way to teaching chemistry (and coaching the science club) at a HS, the kid majoring in Bio because she (mistakenly) thinks it’s the only way to get into med school, and the kid majoring in physics who wants to work at a quant hedge fund.
Im very interested to see the percentage of graduates who get placed into top paying jobs directly out of college.
To me, that’s one of the primary reasons so many kids apply to the most highly ranked schools.
Here’s one breakdown of firms that recruit for investment banking positions and how many they place. I use this example because investment banking is probably one of the highest paying jobs which is what many college kids are looking for in career choice as it relates to the article about salary estimation.
The original article states that many kids expect their starting salary to be $100k. Outside certain STEM majors and business majors, what jobs pay close to $100k as a first job out of college.
How many hours per week are all these highly paid STEM graduates working? They would all be salaried employees, correct?
There is a fundamental inaccuracy in your premise- NOBODY gets placed into I -banking. The process is a competitive one even for a top GPA student from Wharton or other alleged “feeder” university.
I have seen kids with top drawer resumes, transcripts, etc. bomb interviews at multiple I-banks. They don’t get “placed”, they have to interview and pass multiple assessments and interviews just like anyone else who wants a job.