How your college major influences your attractiveness to lenders

Study finds that certain majors are more creditworthy than others due to lower DTI ratios

Certain majors can often beg the question, “What do you plan to do with that?” A valid question, given that college graduates are now leaving school with an average of $35,000 in student loan debt.

Being saddled with a financial burden that large can make it hard to move forward with other goals. In a Gallup survey, one in four people said they pushed back their timeline for important post-grad milestones like buying a house, a car, or starting a family. Nineteen percent even said their student debt burden was an obstacle to getting married.

To avoid having to delay these important post-grad milestones, it’s crucial to take into account how your major can influence your attractiveness to lenders. So what exactly do lenders consider before deeming an individual financially healthy enough to borrow money?

DTI ratio

According to a report released recently by Credible, debt-to-income (DTI) ratio is a huge factor in determining if an individual is financially healthy enough to be given a loan. And when judging a person’s ability to repay a loan, the lower the DTI the better.

“A person’s DTI can be a yes/no factor for a lender, regardless of the person’s job history,” Credible’s chief executive officer, Stephen Dash tells Bloomberg Business. A DTI of 36% or lower is the “sweet spot,” according to the National Foundation for Credit Counseling (NFCC).

To find the DTI for different majors, Credible looked at the debt load and college major of students in its study sample and added in their estimated car, rent, and credit card payments. It divided its estimates of monthly debt payments into the average monthly income numbers for each degree type. And in what may or may not come as a surprise, psychology doesn’t rank too high on the “creditworthy” graduates list.

Medicine majors
College graduates who studied medicine were in the best shape, financially, to pay back their student loans — much better than those who studied psychology, says Credible.

Degrees in pharmacy, dentistry, and post-graduate medicine had the lowest DTI ratios, the report showed. More than any other majors, these students go on to land salaries that are high enough to offset their student debt, making them loan-worthy.

The majors that made it the hardest to pay back debt include history, education, and psychology. However, if students attend graduate school for one of those subjects, they’ll be able to shift their salary-to-debt ratio more in their favor, thus lowering their DTI ratio says Dash.