Which degree programs produce students that live within their means?
Some types of graduates may earn a lot of money, but they might also accumulate irresponsible levels of debt (cough cough, MBA students). While other degree programs might produce graduates with lower incomes, but who take on less debt and financial risk.
We decided to look at credit scores of recent college graduates and examine what they actually studied and when they graduated. We looked at the data from Priceonomics customer LendEDU, which maintains a database of this information for graduates looking to refinance their college loans.
It’s clear that higher degrees are associated with higher income, and they may very well lead to higher credit scores, too, with pharmacy, law, PhD, MBA and Master’s degrees achieving higher scores than Bachelor and Associate degrees. MBAs in particular aren’t afraid to accumulate debt, taking out large home and auto loans while accruing the most credit card debt.
Current students and recent graduates have the lowest credit scores, though the classes hit hardest by the recession have the most credit card debt and less home loan debt. Students tend to take out more auto loans the further out from graduation they are, but home loans show a clear peak in 2008 followed by dips and recoveries.
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Credit scores are ratings used by banks and other lenders to indicate the creditworthiness of a potential borrower. Scores are based on an individual’s payment history, amount owed, length of credit history, credit mix and percent new credit. The ability to pay balances on time, a healthy mix of credit types and not too many new lines of credit leads to a better score. Income is not a factor in a borrower’s credit score.
Scores range from 300 to 850. In general, scores over 800 are considered excellent; scores between 750-799 are very good; 700-749 are good; 650-699 are fair; 600-649 are poor; and under 599 are very poor.
Do students with different degrees have different credit scores? Who ranks the best?
Priceonomics/LendEDU
Pharmacists have the best credit scores, followed closely by borrowers with law degrees. People with Master’s, PhDs and MBAs rank third, fourth and fifth, with scores in the “good” range. Bachelor degrees rank sixth and people with Associate degrees come in last with lower scores in the “fair” range. The higher income associated with higher degrees, especially professional degrees like law and pharmacy, likely gives those borrowers better ease to make payments and keep a good credit mix of credit cards, retail accounts and installment loans.
Perhaps it has something more to do with the state of the economy when students enter the workforce. Do certain graduation years have better credit scores?
Priceonomics/LendEDU
Despite a small dip in the class of 2009, graduates (2016 and earlier) have fairly consistent scores in the “good “range between 700 and 750. Current students, especially those near graduation (2017) fare the worst, with their median credit score at 636 in the “poor” range.
Since advanced degrees tend to have higher incomes, do they take on less credit card debt as well?
Priceonomics/LendEDU
Higher income does not mean less credit card debt – in fact, it’s the reverse, with Associate degree earners carrying the least credit card debt. PhD and MBA graduates accrue the most credit card debt, racking up an average of over $ 4,000. Surprisingly, pharmacists are the conservative exception, taking on less credit card debt than all but Associate degrees.
With the rising cost of education, do current students rack up more credit card debt than established graduates?
See the rest of the story at Business Insider
