Taking the Gamble Out of Student Loans

The “value” of a college diploma has always been a little vague, at least in part because the investment and the potential return on investment are so far removed. But, from the Wall Street Journal comes news that with the economy being what it is, many parents and students are now considering the value of a diploma in direct, dollars and cents, terms:

Phillip Hamilton, a St. Louis stockbroker, values the earning potential of a degree from a top professional school for his son, a high-school junior, over any prestige or network a degree from an elite liberal arts college might confer. “Is a degree in sociology, English or communications from a ‘door-opening’ school really going to help with that landscaping job that awaits you?” he asks rhetorically. He hopes his son, 17, chooses a college based on the quality of its engineering, food science or accounting program, and majors in one of those subjects. “Then if you decide to work at a surf shop after graduation, you can still snap out of it at 27 and get a real job,” he says.

Let’s just hope the Hamilton kid didn’t have his heart set on English Literature as a major. Nevertheless, there’s now an online calculator available to help people make decisions about college cost. HumanCapitalScore.com, is a tool created by People Capital, New York that predicts how much money someone will make based on SAT scores, college attended, and grades earned. HumanCapitalScore gives a student ten year projections based on college choices.

The income predictions are based on data sets from government and private sources. People Capital is an organization that exists to “Lend and borrow based on student merit and potential.” The income generator is just a prediction, after all, but it seems like a very interesting tool to help take some of the mystery out of college choices and student loans.

The tool exists to help people decide how much money is appropriate to borrow to go to college. According to the Journal article, “total student loans shouldn’t exceed a grad’s first-year income after graduation.”

Daniel Luzer

Daniel Luzer is the news editor at Governing Magazine and former web editor of the Washington Monthly. Find him on Twitter: @Daniel_Luzer