Planning for life after graduation
is a topic on the minds of every upper level undergraduate student. Many opt for furthering their education with
grad school, but for most, like me, we are planning to enter the work force. With this decision come many new challenges and
changes we will be facing. Being a
senior, the reality of the real world is coming sooner than I would like.
Over the past four years, I have
been very conscious about finances and my future debt. I chose to major in economics because I
enjoyed the subject matter, but also, because I believe there is a need in the
job market for young adults with an understanding of how to analyze data, and
understand basic business principles, which is just some of what I have been
able to learn through economics. When choosing
a major, I tried to pick one that would make me marketable after
graduation. From an economic standpoint,
I chose a major with a utility function that gave me the most enjoyment versus
a comfortable salary after graduation. However,
I originally entered the university as engineering major. During the two years I spent in this field,
my enjoyment of the subject matter was very low. I was not happy in the classes and found the
material uninteresting. When starting
college, one of the reasons I chose engineering was because people told me that
if you graduate with an engineering degree, you will be sure to find a well-paying
job right out of college. In this utility
scenario, my enjoyment of my major was extremely low, while my perspective
earnings after college were probably slightly higher than they are now. After consideration, I compared the cost of
being happy and doing what I am interested in versus potential future earnings
right out of college. To me, being happy
outweighed the potential salary cut.
Because I know that I have to work
harder to find a high paying job right out of college compared to what an
engineering student might have to, I have been conscious in other ways to
manage my funds. I have taken up a part
time job during the school year to take out some of the financial burden. In this case, I decided to change my
work/leisure utility function to add more work.
This caused a shift in the curve to the left and increased my income,
but lowered my time for leisure. I have
also spent every summer working a part time job so that again, I can make
paying off my student debts a little easier in the future. Another way I was able to save some money was
by not taking out many student loans.
Due to some generous family members, I had a good amount of my college
saved up prior to entering the university.
Because of this, I have really only needed to take out loans for the
past year and a half. Despite this, I am
still conscious of my debt. Every
month, I pay a portion of my income to the loan company so that my interest
will not be so high once I graduate and the full weights of the loans are on
me.
After talking with several friends
who attended university out of state, I am glad I made the decision to attend
the University of Illinois as well from a financial standpoint. I had several friends choose out of state
public schools whose tuition is much greater than mine. They are now feeling the burden of that
decision as they are beginning to have to pay back their loans. When choosing to come to school here, this
was a factor, however, at the time, I did not see it as much as I do now. Many eighteen year olds choosing where to go
to college only look at the fun side of it.
They sometimes have a hard time seeing the struggle and debt they will
be in four years from now. I was one of
these kids, brushing off the price as something I would deal with when I am
older. Luckily for me though, I ended up
going with a school that was somewhat reasonable financially.
Engineering has high fallout rates in general, but maybe is particularly hostile to women. Among the STEM fields, I believe that biology is the most welcoming to women and that you that in the enrollment numbers. In any event, that part of your story is all too common.
ReplyDeleteRegarding how much debt you hold - interest rates are actually incredibly low now and have been low for quite some time. Taking on debt when interest rates are low is normally a good thing to do. So one big issue here is whether you've been able to borrow at market rates or if student loans come in at a higher rate. Just to show what I have in mind, and I really don't know what the rates are on student loans, but let say yours is 5% while your parents could take out a home equity loan at 3.25% (and get an income tax deduction for doing so in addition.) Then if you and your parents trusted each other, you'd pay of your student loans in full and your parents would become your financier instead. You'd get the lower rate as well as some possible forgiveness ahead of time, in case you struggle financially until you land a good job. Using your parents for insurance like this seems a natural thing, as long as you get along with them well. But a lot of kids may be reluctant to push that button, because they'd like to be independent of the parents on day one after graduation. The reality, I'm afraid, is that obligation is there forever.
I found it really interesting to read about the major choice of economics from another student. I'm wondering how you figured out that you are interested in economics while you were doing the engineering major? Did you got economics classes during the engineering major?
ReplyDeleteA thing where you write about in your blog is how you decided to do economics, regardless the lower salary. I totally agree with that decision. I did accountancy for one year and I didn't found it as interesting as I hope it was. I tried to do business economics, but then I found out that general economics was really the subject that I found interesting. I chose to do economics over accountancy and business economics, regardless the lower change of finding a job, because I believe that the passion in your major/job will bring you further than a 'good major' such as engineering for you.
As Professor Arvan said, the interest rates are currently extremely low. I found it very interesting that you chose for a family loan instead of a bank loan, since a bank loan would have been better for the economy at that moment. How do you look back at your decision? Do you think your low risk preference was the reason why you did that or was it your family that motivated your decision?
Yes, I agree that engineering has one of the highest drop out rates. I had several friends leave the major before I did. A majority of these were other females.
ReplyDeleteWith regards to my loans, most of my finances for college came from an account that my grandparents set up years ago. In this case, the money was not a loan, but rather a savings account set up specifically for use in college. The last year, I took out a bank loan as the savings account ran out. This loan is comparable with the interest rates you both have mentioned. While I am lucky to have had a cushion on my student debt thanks to the savings of my grandparents, I still will be leaving college with a good amount of student debt
I thought it was very interesting that your interest and happiness triumphed the potential to obtain a higher paying career. I think some students would've felt trapped in that they might have felt like it was too late to change their major or ultimately prioritized having a high paying job in the future. I am wondering if your choice might have been different if you had a bigger debt. You mentioned how you only accumulated debt for a year and a half, would you have still changed majors if you had to take loans from all your four years in college?
ReplyDelete