How should potential salary factor into picking a college major?

    MANISHA THAKOR: I don’t think potential salary should factor heavily in picking a college major–but I do think it should factor very heavily in picking a college.

    Stepping back and looking at college from purely a financial perspective, you pay money to get an education in hopes that (in addition to enriching your mind and enabling you to practice your desired craft) you will earn more as a result of that degree than you would have without it. In other words, you want a positive return on your investment.

    When investing, one of the best ways to increase your odds of having strong returns is to use a high-quality, broadly diversified low-cost approach.  A great investment purchased at too high a price will not generate a strong return. The same goes for college education. You want to expand your mind in the highest quality way you can–but without overpaying.  In other words, I’d liken the decision as to which college (and how much to pay) as the primary decision. It’s the college version of deciding whether you are an active or index investor.  Then I’d liken the choice of a major to which active fund (Janus or Pimco) or which index family (Vanguard Funds or iShares ETFs) you will use.

    In making any decision, the key is to focus on the factors that really matter. In this case, I’d say 80% of your effort should be spent making sure you pay a reasonable amount for your education. Making a bad decision there can torpedo your finances for years to come. Secondary, you should focus on a major that will both enrich your mind and your career opportunities.


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