Salaries for top-earning majors may start below U.S. median. Here’s what Gen Z can expect

Bankrate’s College Major Study found the most valuable degrees yield a median salary between $100,000 and $115,000. However, many Gen Zers holding these degrees have salaries below $59,436, the national median income for all full-time workers in America, according to the Bureau of Labor and Statistics.

Recent graduates who chose their major based on high earning potential may be surprised to start out making similar wages as those who followed their passion and pursued a lower-earning field of study. And thanks to inflation causing higher living costs and student loan interest rates, many may find it difficult to navigate a new world of financial independence.

But the study shows promise for Gen Zers with top-earning majors — especially once they age out of their early-to-mid 20s.

The reality of starting salaries and student loans

When the study examined the salaries of those aged 22 to 26, it showed that half of the 12 highest-earning majors yield starting salaries below the national median. Even the highest median salary of the top-earning group was just slightly more than that, at $65,000.

Median salaries for Gen Z are lower

Bankrate’s Living Paycheck to Paycheck Survey found that 43 percent of U.S. workers making less than $50,000 annually and 33 percent of those earning $50,000-$79,999 state they live paycheck-to-paycheck. Many of these recent graduates are likely in the same boat.

If you’re in this group, another new reality can add salt to the wound. Typically within six months of graduation, student loan borrowers must begin making payments. And this new monthly expense can further strain your new budget. To safeguard your credit and future borrowing potential, it’s imperative to make your payments.

“For any borrower preparing to repay student loans, making those loans a priority — and a fixed part of a monthly spending plan — is essential,” says Stacey MacPhetres, senior director of education finance at Bright Horizons. “Those earning lower than expected will have to pay very close attention to their income and expenses. We strongly suggest creating a strict spending plan before younger workers commit to expenses like apartment rentals and car purchases.”

For new borrowers, the way to keep student loan payments more affordable in the future is to limit the amount you borrow based on your projected starting salary — not what you could make later in your career. MacPhetres recommends borrowing no more than a single year’s worth of your likely starting salary, if possible. 

Gen Z is tuned into salary data

According to Laurin Mayes, senior recruiter for Red Ventures, recent college graduates are asking for higher-than-average starting salaries, despite a lack of professional experience. And access to more information may encourage this.

“There’s so much information out there,” says Mayes. “If you graduated as a millennial in the early 2000s and 2010s, you had access to some information from websites like Monster and Indeed. However, LinkedIn was not nearly as popular, and there weren’t ways to identify and compare compensation easily. Now it’s all at your fingertips.”

Mayes notices another thing that’s different about Gen Z than other generations. “They’re a lot more willing to share their salaries with each other,” she says. “I was more tight-lipped — and I still am. They compare their salaries with their friends.”

They’re also comparing salaries with strangers on social media. 

“Now you have TikTok videos with people saying what they make and telling people what they should be making,” Mayes says. “But do they say why they think people should be making that amount? Do they support it with any data or research?”

While it’s helpful to research earning potential when choosing your major, do so with caution. Even data can be misleading. For example, data on average U.S. salaries may include people with years of experience or advanced degrees and those in places where the cost of living and salaries are high. It’s also important to know whether those listed salaries are gross or net income.

Income tax and other deductions

“Even if recent graduates are making expected salaries, they are very surprised at the amount of their actual take-home pay,” says MacPhetres. “It is not unusual to find that, after taxes, social security, health care and retirement, actual take-home pay is lower than expected.”

Deductions may include:

• Federal income tax ranging from 10% to 37% of taxable income.
• State and local income tax, depending on the locale.
• Social Security and Medicare taxes (FICA) around 7.65% of gross wages.
• Retirement contributions chosen by employee.
• Health, dental and vision insurance, life insurance and other benefits elected by the employee.

Where you live doesn’t just impact the taxes you pay — it also affects your salary and how far that money stretches.

Location and cost of living

“Starting salaries also depend on where someone lives,” says Mayes. “National averages and medians include all 50 states, but there are outliers, like NY and CA, where cost of living is higher and higher salaries are required.”

For someone living in the Midwest, a $65,000 salary can stretch much further than for someone living on the West Coast. For example, when comparing the cost of living of the two regions, a person living in San Diego, CA would have to make a salary of $90,736 to maintain the same standard of living as someone making $65,000 in Detroit, MI. Thus, someone with a starting salary of $65,000 in Detroit may be content with their pay, while someone making the same amount in San Diego may not.

When looking for jobs after graduation, compare listed salaries to the cost of living for the area. Use a cost of living calculator to compare average prices on groceries, housing, utilities, transportation and healthcare. To see if your salary would cover your monthly fixed and variable expenses — or to determine how much you would need to do so — create an example budget using the average costs of living for each category as well as your monthly bills, like student loans.

How long will Gen Z wait for higher earnings?

Your starting salary may not be what you expected when you chose your major or entered the workforce. But don’t panic — salaries typically increase by thousands of dollars within a few years. All majors reviewed in the study saw an increase in median salary in the next age group (27 to 33), though the amount depended on the major.

Salaries increasing by less than $15,000 were mainly in education, social sciences, human services and the arts. Salaries that doubled were within the STEM fields, along with some outliers, including anthropology and archaeology, art history, philosophy and religious studies and pre-law. 

The most significant jump in earnings was in pharmacy, pharmaceutical sciences and administration. The median salary more than tripled, increasing from $29,600 to $90,000.

The most valuable majors’ median salaries increased significantly, some more than doubling.

Salary increases mid-20s to mid-30s

If you have one of these majors, expect to wait until your mid-30s to early 40s to reach or exceed the field’s median income, based on the study. And while there may be light at the end of a seemingly long tunnel, you can’t wait to earn more before you start repaying their student loans. That’s where choosing the right repayment plan comes in.

Prioritize student loans with the best repayment plan

Those with private student loans typically have just one option: Making fixed monthly payments throughout the entire 10- to 25-year loan term. Depending on the lender, you may be able to choose the term that works best for your budget. Some lenders offer a variety of repayment periods — some as short as 5 years — while others may only offer one option. When choosing your repayment plan, consider your short- and long-term financial goals.

• Shorter repayment period: Pay more per month, pay less in total interest over the life of the loan.
• Longer repayment period: Pay less each month, pay more in total interest over the life of the loan.

Federal loans come with more flexibility and offer more protections than private loans. When choosing your repayment program, consider your starting salary and the probability that it will increase over time.

• Standard repayment program: Pay fixed monthly payments over the entire loan term, typically 10 years.
• Graduated repayment program: Start with a low monthly payment that increases every two years.
• Income-driven repayment (IDR): Payments are based on your discretionary income and your remaining balance is forgiven after 20 or 25 years of repayments. There are four types of IDR plans. However, not all are available at this time due to ongoing litigation against the SAVE plan.

Other loan programs — for which one must qualify — include:

• Public Service Loan Forgiveness (PSLF) program: Have loans forgiven after 120 qualifying monthly payments while working for an eligible government or not-for-profit employer.
• Extended Fixed or Graduated program: Extend the loan term to 25 years. Borrowers must owe more than $30,000 to qualify for this repayment plan.

MacPhetres encourages borrowers to make payments based on the shortest possible time to limit the amount of accrued student loan interest. “Typically, if borrowing is limited to no more than the first year of an annual salary, the standard repayment plan of 120 equal payments is often manageable for most,” she says.

The standard repayment plan can save you interest. However, if you need lower monthly payments while you grow your salary, the graduated plan may be a better option. The SAVE plan has the lowest monthly payment for lower salaries — you could even have payments as low as $0. However, this program’s future is unclear.

To better understand your monthly payments and choose the best option for your financial goals, use a student loan calculator or compare federal student loan repayment plans at StudentAid.gov.

No matter the plan, student loan payments can take a chunk out of any budget. MacPhetres, who’s worked directly with many young, new-to-the-workforce people, commonly sees recent grads take on additional work to meet these financial obligations.

Despite lower starting salaries, degrees pay off

While student loan payments loom and starting salaries may not be what grads expect — especially those who chose their major based on pay — a college education still matters.

According to Mayes, a job requiring a niche skill set and specific knowledge often earns higher pay than those that require soft skills and more natural ability. That’s why a degree is often required. A college major focuses your education and training, while providing opportunities to gain first-hand experience. A college degree is proof that you’ve acquired that focused skill set and knowledge.

Salaries also tend to increase when employees earn advanced degrees. This may be one reason that, within top-earning majors, between 31 percent and 64 percent of employees have an advanced degree. While more schooling costs more money, graduate school loans are available, and degree-earners can see a high return on investment — especially when salaries catch up after years of experience.

The bottom line

While starting salaries are typically lower than recent grads may anticipate, income can grow over time as you gain more experience and build your skillset.

When reviewing potential earnings, look beyond the medians and averages. Dig into salaries by age, level of experience, title and location to form a more holistic expectation. And remember that starting salaries are just that — starting. Earning a college degree can pay off. They provide a step up, helping you gain the knowledge and skills required for higher-salary positions. 

If you’re new to the workforce, set yourself up for financial success by creating a budget that considers your area’s cost of living and prioritizes your student loan payments. If you’re still in college, limit your borrowing and look for reliable information about your intended major. Mayes suggests using your school’s career services, which are free for students.

• Methodology
  

  To create a ranking of the most and least valuable college majors, Bankrate looked at the most recent data available from the U.S. Census Bureau’s American Community Survey (2022 ACS). The ACS utilizes a randomly selected sample of about 3.5 million addresses each year and is intended to be representative of the U.S. population. Bankrate extracted the 2022 ACS data from IPUMS USA, the clearinghouse of census microdata hosted by the University of Minnesota.

  Bankrate analyzed bachelor’s degree holders who were in the labor force and either employed or seeking work. We looked at the 152 majors reported by at least 250 people in the 2022 ACS. We also examined how many college graduates went on to earn advanced degrees, including master’s degrees or doctorates. To construct our ranking, Bankrate considered three factors (weightings in parentheses): median income (70 percent), unemployment rate (20 percent) and the percentage of people with an advanced degree (10 percent). Income and labor force data were rounded to the nearest tenth of a percent.