The Impact of College Majors on Retirement Savings

February 5, 2024 | by


In a recent working paper, clinical professors Frank Smith and Ajay K. Aggarwal examined the impact of college majors on retirement savings for millennial couples. Their findings suggest that education debt and choice of major can significantly influence retirement outcomes. According to the researchers’ calculations, millennial couples would need a nest egg of at least $290,000 by age 65 to retire comfortably. However, they found that a staggering 60% of college majors analyzed are unlikely to achieve this goal, even without any student loan debt. The study highlights the importance of considering the long-term financial implications of college majors when making decisions about higher education.

The Impact of College Majors on Retirement Savings

How student loan debt affects millennials in retirement

Millennials are facing significant challenges when it comes to saving for retirement, and student loan debt is one of the primary factors contributing to this struggle. With the rising costs of tuition and fees, millennials who pursued higher education during this period often graduated with substantial student loan debt. This burden, combined with a stagnant job market and increased living expenses, has made it difficult for many millennials to save for their future.

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According to a recent working paper by clinical professors Frank Smith and Ajay K. Aggarwal, education debt and college majors have a considerable influence on the retirement outcomes of millennial couples. The researchers used data from the U.S. government and developed a mathematical model to track the impact of student loan debt and area of study on retirement savings.

The findings of the study are not encouraging for the average student loan borrower or most college majors analyzed. Debt is a significant factor in determining whether a household will have enough retirement savings, according to Smith and Aggarwal. They calculated that millennial couples would need a nest egg of at least $290,000 by age 65 to retire comfortably. However, even with a student debt level of $20,000, the odds of reaching that target were only about 50/50.

The average student loan debt for U.S. students who graduated with a bachelor’s degree in the 2021-2022 academic year was $29,400, according to the College Board. At a debt level of about $40,000, only 2 in 5 millennial college graduates will achieve the minimum retirement savings they need. Furthermore, at a debt level of $80,000, only 1 in 4 millennial college graduates will retire comfortably.

College majors and retirement saving success

To evaluate which college majors had the best chance of reaching the $290,000 retirement savings goal by age 65, Smith and Aggarwal analyzed annualized salary data from Payscale and the National Association of Colleges and Employers. They divided the majors into five categories: medical and life science, visual and performing arts, engineering and technology, liberal arts, and business.

The analysis included 45 unique majors, and the researchers found that 60% of them would not achieve the minimum retirement savings goal, even without any student loan debt. Across all majors, millennial graduates would need a starting salary of at least $48,500 to reach the retirement savings target in time.

Engineering and technology majors were found to have high enough starting salaries to retire comfortably, regardless of their debt levels. About half of the business majors could reach the minimum retirement goal without debt, but none could achieve it with a debt level of $40,000. Among the medical and life science majors, only nursing and pharmacy majors’ starting pay met the minimum retirement threshold. Nursing graduates could have up to $39,999 in debt and still retire comfortably, while pharmacy graduates could have up to $80,000 in debt and have a 50/50 chance of not outliving their retirement savings.

However, the majors within the visual and performing arts and liberal arts categories had a bleak outlook. None of them were projected to reach sufficient retirement savings, even without debt at graduation.

The Impact of College Majors on Retirement Savings

Challenges for millennial college graduates

Millennials face numerous challenges when it comes to saving for retirement. Rising tuition and fees, coupled with the burden of student loan debt, make it difficult to allocate funds for retirement savings. Additionally, the job market may not always provide lucrative opportunities for graduates, particularly those with majors in fields like visual and performing arts or liberal arts.

The combination of high debt levels, low starting salaries, and the increasing cost of living can hinder millennials’ ability to save for retirement. Without proactive financial planning and budgeting, many millennial college graduates may find themselves working well into their retirement years.

The impact of a college degree

While the challenges are significant, having a college degree still offers advantages when it comes to income and career opportunities. Studies have shown that college graduates earn significantly more over their working years compared to those with only a high school diploma. Additionally, individuals with a college degree tend to have higher median yearly incomes.

A college degree opens doors to better-paying jobs and potentially higher-income growth over time. It provides the foundation for a successful career, which in turn can increase the likelihood of saving for retirement. However, the relationship between majors and income potential plays a crucial role in determining the retirement savings success of college graduates.

Benefits of employer-sponsored retirement plans

One potential solution for millennials facing challenges in retirement savings is employer-sponsored retirement plans. These plans, such as 401(k) plans, can provide a valuable opportunity to save for retirement with the help of employer contributions.


Employers now have the option to match borrowers’ student loan payments as contributions to a tax-deferred retirement plan, thanks to SECURE 2.0, a set of retirement laws implemented recently. This benefit allows workers with education debt to save for retirement by simply paying their student loan bills on time.

With the majority of borrowers noting that student loans impact their ability to save, this new benefit could have a significant impact on millennials’ retirement outcomes. It provides a potential solution for the retirement savings challenges they face, assuming widespread adoption by employers.

Nevertheless, employer-sponsored defined contribution plans, such as 401(k) plans, remain critical tools for workers to grow their retirement funds. Even small contributions can have a substantial impact over time. Additionally, industry-specific benefits, such as teacher pensions, can make a significant difference in retirement planning.

In conclusion, student loan debt has a significant impact on millennials’ ability to save for retirement. Different college majors also play a role in retirement savings success, with some majors having a higher likelihood of achieving the retirement savings goal. Employer-sponsored retirement plans and strategic financial planning are essential tools for millennials to overcome these challenges and secure their financial future.


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