At the end of a short column arguing that taking on debt is an entirely sensible thing to do in pursuit of a college degree, economists Susan Dynarski of the University of Michigan and Sarah Turner of the University of Virginia write the following:
Students should keep their job prospects firmly in mind. Planning a career in fine arts or cosmetology? Keep tuition and loans to a minimum, since the earnings prospects are not great. Heading into engineering or economics? Borrowing more is fine, since the job outlook is good.
One of the key challenges facing students, however, is getting reliable, objective information on exactly this question. Colleges and universities have a strong incentive to persuade students not to worry about the economic viability of their career choices, and lenders offering non-dischargeable loans also have nothing to fear.
Recently, an organization called Lumni USA launched to offer a distinctive approach to helping students finance their college educations. As in a traditional equity contract, students agree to pay a fixed-percentage of their post-graduation salary for a set period of time. This gives Lumni a strong incentive to correctly evaluate the earnings prospects of graduates from various colleges and universities. Eventually, one can imagine organizations like Lumni opening up their algorithms so that any student could plug in a particular college and a particular major to determine what her earning prospects might be post-graduation. Naturally, these algorithms won’t be foolproof, but they will offer a useful guide to students making decisions about their educational future.