How to Determine the ROI for Your College Education

According to Forbes, tuition costs have increased by 1,200% in the past 30 years – which is more than a little daunting when you’re considering a college or university. With so much money coming out of your pocket, you want to be sure you’re making a good investment. What degree will you choose? And how will you know if it’s worth it – really worth it – for your long-term career goals?

Well, here’s the good news and the bad news: you can’t know. Not really. But Forbes also assures worried students and parents that overall, most college graduates get their money’s worth over the course of a lifetime. However, there are some tricks to determine the average ROI for your chosen college degree.

Understand the Net Cost

College costs going beyond just the price of tuition. You’re also paying fees for room and board, extracurricular activities, and alcohol (just kidding, but not really). When you’re looking at the cost of tuition, make sure you factor in the extras as well. This will give you a more accurate understanding of your ROI.

Choose a Major That Offers High Earnings Potential

Not to put a damper on you aspiring English majors, but there is not a lot of money in liberal arts. The arts are near and dear to my heart – but, in the current economy, it’s much less profitable to have a philosophy degree than it is to graduate with a B.S. in engineering.  I would never discourage a potential artist from studying their desired profession. However, to reduce the initial cost of loans and tuition, consider a more affordable college – a state university, or even a community college. An English degree from Harvard is not equal to a law degree from Harvard when it comes to ROI; and there are plenty of smaller schools with incredible liberal arts programs. In addition, if you save money in college so as to reduce your student debt after graduation, you will see your ROI much sooner.

Graduation Timeline

The ROI is high for a doctor, but 8 to 12 years of student loans takes a lot longer to pay off than 4 years. Keep that in mind when choosing your degree. Similarly, if you continuously change your major or emphasis, and thereby spend 6 years getting your bachelor’s, it will take longer for you to see your ROI. Also, there are some fields of study in which it’s incredibly difficult to job with just a bachelor’s degree, such as psychology, so you might not see much of an ROI at all if you change your mind and decide not to continue with graduate school.

Test the Job Market Before Jumping in to a Graduate Program

Once you graduate, spend time seeking out a good job in your field. Despite the current economy, good jobs do exist – but often, undergrads jump right into a graduate program without looking for a job out of college first. Plenty of companies will hire a new graduate with just a B.A. instead of a master’s; but if you sign up for the M.B.A. program without braving the workforce, you’ll be losing out on a lot of potential income – thus lowering your average ROI.

It is possible for college graduates to make a solid ROI in this world, but it comes at a cost. Calculate the pros and cons of your chosen degree, and be savvy about the career you ultimately choose!