What’s The Return on My College Degree?

September 13th, 2012

College is very expensive, and, naturally, financial considerations ride quite high in an aspiring student’s mind. However, getting a college degree can be very beneficial for one’s earning potential too. The annual earnings of students with at least a bachelor’s degree are at least 50% more than that of students who’ve only completed high school.

But how beneficial is a formal degree in the long-run? If you want a definite answer in terms of numbers, then calculating the return on investment (ROI) on your degree will be your best bet. Here’s how to go about it.

Calculating the ROI on your Education

1. How Much Does Your Degree Cost?

This includes not just the tuition fee, but also any extra amount you’ll be spending on accommodation (if you get one), textbooks, study material, etc. You may not include food costs since you’ll be eating regardless of whether you go to college or not! Add all these up for a year and multiply by the number of years your degree is expected to last.

2. Are There Any Opportunity Costs?

Usually, those opting for grad school have to face this dilemma as they may already be working at full-time jobs and may already have a bachelor’s degree. If they go to a traditional university, they’ll have to give up their jobs and the lost income for the number of years in school should be added to the cost of your degree. Students who opt to get an affordable online degree, however, may not need to worry about the opportunity cost as they can continue to work and study.

3. How Much Do You Expect To Earn?

For those going for an undergrad degree, the expected salary after completing their education should be the primary concern. For those who are already working and going for further studies, it is the increase in salary expected after the degree that should be considered. Check out salary scales for your preferred profession on websites such as payscale.com or salary.com, or talk to people already in the industry to further get an idea of how much you’d be making. Factor in bonuses, increments, perks, etc that you think you’ll be getting.

4. How Many Years Do You Plan To Work?

Are you one of those who dream of retiring after working for 20 years? Or do you wish to be in the job market for a good 40-50 years, preferably beyond retirement age? Be realistic about how many years you think you’ll be working. Most ROI calculations assume 30 years of work life for college graduates, but this varies depending on the person’s own preferences and interests. Multiply this by the annual median salary you expect to make to see your gains over the years.

Once you’ve gotten all this data at your hands, subtract the total cost incurred from the total expected earnings. This will be your total gains. Divide it by the total cost and multiply by 100 to get the ROI in percentage. But remember this is no exact figure, and will vary depending on what you end up earning and how many years you end up working. Besides, at the end of the day, never forget that there’s more to a college education than an ROI.

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