WHAT DOES ROI MEAN IN HIGHER EDUCATION?

Updated December 6, 2022 · 2 Min Read

If you are entering college for the very first time, or are going back to school to pursue a master's degree, it is important to consider your education's return on investment ROI. Pursuing a college degree, regardless if it is a bachelor's, masters or a PhD can be a costly investment for both students and ...

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If you are entering college for the very first time, or are going back to school to pursue a master's degree, it is important to consider your education's return on investment ROI.

Pursuing a college degree, regardless if it is a bachelor's, masters or a PhD can be a costly investment for both students and parents. Nowadays, it is very common for people to complain about their mounting loads of education debt. Many people graduate from school with over $50,000 worth of education-related debt and yet are making less than $40,000 a year. This can be a very precarious situation, especially for first-generation college students who are looking to utilize their college education to become upwardly mobile. The same is true for workers looking to go back to school to pursue a master's degree in hopes of landing a better paying job.

Here is a comprehensive overview of how individuals can easily calculate their education's return on investment.

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College Tuition and Living Expenses

One of the first things that parents and students should do is calculate the overall costs associated with getting a college degree. This will include both tuition and living expenses. Tuition costs are constantly rising, so it is important to take into consideration that year after year, tuition rates will generally go up by a few dollars per credit hour. Outside of tuition, other costs should be calculated such as student fees (fraternities, sororities, professional development societies, books, technology, etc). Other costs should be taken into consideration such as dorm costs or apartment rental costs, food, transportation, entertainment and other basic living expenses.

Job Prospects and Career Salaries

Secondly, once one has an idea of what tuition and living expenses will run, it is important for students to do research on prospective careers and salary expectations. Students should take into account that when looking at salaries of careers, look at industry growth, inflation and popular geographic areas for their careers and their associated cost of living. So for instance, someone looking to become a K-12 educator in New York City should take into consideration the cost of living associated with living in NYC compared to being a teacher in Miami, Florida.

Calculate Life Time Earning

Once one gets an idea of the type of career one is going to pursue, calculate your lifetime earnings (generally at least 30 years) by looking at average salary growth (two to three percent a year) plus cost of living adjustments. Once a total cost of lifetime earning has been calculated, subtract total education debt and compare this number with other potential salaries and schools that one is considering.

This should give prospective college students and graduate students an idea of how to seriously calculate the return on investment for a future undergraduate or graduate degree. College is extremely expensive and taking out too much debt to pursue a career in a relatively dead industry does not make any sense at all. Although we would all like to pursue our passions and dreams, sometimes those passions and dreams do not translate into realistic and sustainable life plans that pay off in the end. Do your due diligence and always remember that education decisions should always include potential return on investment ROI.

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