Every investment comes with a risk profile. Stocks come with prospectuses, bonds with credit ratings, funds with bold-print warnings about past performance. College comes with none of that. The data say it should.
A college investment is the opposite of a diversified portfolio. An 18-year-old makes a single, leveraged, undiversifiable bet on one school and one major. They cannot enroll in three majors at three schools and take the average. The credential cannot be sold, and a student who leaves in year three recovers neither the tuition nor the three years of wages they gave up. The portfolio is the credential.
The selection risk is real at every stage. In 2024 the country graduated 143,144 psychology majors into a market the Bureau of Labor Statistics projects will need only about 12,900 psychologist openings a year. Some cosmetology students finished their programs earning less than when they started. Four in ten recent graduates work in jobs that never required a degree.
None of this means college is a bad bet for everyone. It means it is a bet, and most families are never shown the odds.
Engineering and computing pay a premium. The humanities pay an underemployment penalty.
The two move together.
Seventy-three undergraduate majors. Move right: underemployment rises. Move down: early-career pay falls.
Source · Federal Reserve Bank of New York, Labor Market for Recent College Graduates, outcomes by major, latest release.
This is Chapter 8 of the book. Read the full risk breakdown in the book, or run your own numbers in the model.
Read next: Is College Worth It? The argument in full, or how to tell useful ratings from misleading rankings in this breakdown.