College ROI: Return on Investment for Your College Education

Is the price of college worth it? When choosing a college, take the time to figure out what the return on investment, or ROI, will be.

A college education can be a great investment. After all, the average annual income of a U.S. college graduate is over $20,000 more than a high school graduate (1).

However, it’s important to remember that this is the average, and that college benefits some students financial much more than others. Different schools programs come with different price tags, and different levels of student loan debt. Also, different majors can lead students to career paths with different earning potential.

When choosing a college or program — or whether or go to college at all — one important thing to keep in mind is return on investment, or ROI. A college education is expensive, but ideally, the money spent on a college education is an investment that will pay off. When computing the ROI of a college education, here are some important things to consider.

Investment for your college educationThe Price of College Education

In 2018, the average price of an in-state public institution was $21,447 a year (including room, board, and fees), and the average price of a private education was $42,224 (2). Again, that’s the average. Keep in mind that these numbers are before financial aid awards are computed. Sometimes private schools are more generous with grant and scholarship funding, which means these schools can sometimes be cheaper than public schools.

When thinking about the ROI of an education, cost is a very important consideration. You’ll want to carefully compute the cost of tuition, room and board, and fees — along with other expenses you might not think about initially, like textbooks, commuting costs, and travel costs to an out-of-state school. You’ll also want to figure out exactly what you’re costs are after financial aid is taken into account.

If you’ve been accepted to multiple schools, ROI should be one of the questions you ask when making a decision. Let’s say School A is your first choice, and your total expenses to attend this school will be around $30,000 a year. Let’s say School B is a safety school, but because it’s close to home and they offered you a scholarship, it only costs $11,000 a year. From an investment perspective, is School A worth $19,000 a year more than School B? Only you can decide that.

Student Loan Debt

In 2018, the nation’s student loan debt surpassed its credit card debt, and the average college graduate is leaving school with over $25,000 in student loan debt (3). This is especially problematic in a poor economy, when it can be difficult for college graduates to find entry-level jobs at all, let alone jobs that pay enough to take care of large student loan payments.

When thinking about college ROI, it’s very important to consider the amount of student loans you’ll have to take to afford a school. If you can only afford a program by taking out large amounts of student loans, you should ask yourself if this is a worthwhile investment.

College Majors and ROI

Some college majors do tend to lead to higher paying jobs than others — although it’s hard to make an easy correlation between majors and paychecks. For a good estimation, check out this College Major ROI Calculator at the Wall Street Journal.

It can also be helpful to research both starting salaries and long term salaries in careers you are considering. This is especially useful when thinking about student loan debt. If starting salaries in your chosen field are around $30,000 a year, maybe it’s not such a good idea to leave school with $40,000 of student loan debt.

The “Intangibles” of College Value

Not everything is college can be measured with a price tag. You’re going to college to become an educated person and to have a particular type of experience. You’re looking for a school that fits. It’s entirely possible that your “perfect fit” school is worth $15,000 a year more to you than a “decent fit” school.

In other words, your return on investment isn’t just about financial return. Nonetheless, in an era where even a state college education can top $20,000 a year, finances shouldn’t be ignored either. When choosing a college, take the time to consider your educational return on investment. Years from now, when you’re working at an entry-level job and learning how to make ends meet, you’ll be glad you did.