<p>Calculating "Return on Investment" (ROI) is a common practice when considering the merits of a financial commitment. For many an investment in education (and where to acquire it) is overwhelming at best.</p>
<p>What components should be considered and what would the formula look like to calculate the ROI for a post secondary education? Is there an existing method available to compare the ROI of like educations at different schools?</p>
<p>I know there are many subjective variables, but what hard numbers should be applied?</p>
<p>I was looking for exactly the same kind of info and found this calculator. This is clear and easy to manipulate for high school kids to use. There are many other types on the linked site as well. My point to many, albeit obvious to some is that a teacher, healthcare personnel, etc will make the same salary with a state school undergrad degree as they would with an Ivy degree. ROI is the key.
[FinAid</a> | Calculators | Student Loan Advisor - Undergraduate Students](<a href=“Your Guide for College Financial Aid - Finaid”>Your Guide for College Financial Aid - Finaid)</p>
<p>In order to do a proper ROI on education, you need to introduce the idea of a utility function. You could go to vocational school and be a plumber for a fraction of the cost of a 4 year college and become an accountant. What is the utility of a life being a plumber vs. being an office worker? Some people would enjoy the hands on nature of being a plumber. Others would rather die than be a plumber.</p>
<p>Sometimes it comes down to: What do you enjoy doing most, and how do you get there. Where ROI becomes more relevant is: For the same potential job, should you pay more to go to a more prestigious school, and possibly result in a higher position/income in the future.</p>
<p>The basic numbers are: What are your out of pocket costs (pays as you ago, and loans) vs. increased income in the future.</p>
<p>There is also a factor for foregone income (could have worked while in school). And the related: If I start a job today, I will be 4 years into raises vs. a college grad starting a new job in 4 years.</p>
<p>Finally, don’t forget tax effects to reduce the value of future income. Uncle Sam takes at least 7.65% for FICA plus the income taxes.</p>
<p>I took the several schools (private and state) that my D was interested in, compiled the COA, and offered merit packages. We proposed to pay the rough equivilent of Sate school COA and allowed her to play with the balances. If she wanted a private, she would incur the add’l debt load. This calculator really “brought it home” as it provides realistic affordability to the student.
[FinAid</a> | Calculators | Student Loan Advisor - Undergraduate Students](<a href=“http://www.finaid.org/calculators/undergradadvisor.phtml]FinAid”>http://www.finaid.org/calculators/undergradadvisor.phtml)</p>
<p>I think the huge variable is what you plan to do with the degree. A bachelors from Harvard, on a comparative basis, will give you a much higher ROI if you want to be a banker or consultant than it will if you want to be an MD or an engineer.</p>
<p>Ok, Ive read the posts and everyone one makes good points. Although I have to say I disagree somewhat with the last one. My contention would be that the best ROI for anyone Harvard or not is specific skill training not “knowledge gathering” that puts an MD, engineer or plumber at the top of my list as opposed to a history PHD or liberal arts degree.</p>
<p>I’m still waiting for someone to come up with an equation to calculate an ROI for the expense of tuition + lost $ opportunity, etc. Poster # 1 was close but what are the specifics? You know finite components like A x C - D / y = ROI.</p>
<p>FYI - I just finished reading Real Education by Charles Murray. If you get a chance it’s a great read, really makes you think about what we’re doing with our educational $. Non-profit or for profit it’s a huge business and misses the mark for most.</p>
<p>We’ve been drinking the Kool-Aide for to long. What’s the true ROI???</p>
<p>I look at it very differently. The skill development is the least of it in my opinion. The ROI is derived from the opportunities, jobs and salaries that are typical for people with a given degree.</p>
Hmm … so college is all about the analytical ROI … then I’d suggest skipping college and learning the applicable job related subjects by buying the relevant books and self-learning … or better yet borrow the books from the library and I would imagine that would yield the highest ROI. Of course there is no value from being taught by a professor, sharing thoughts and ideas with fellow students, taking electives that have nothing to do with eventual majors or getting a job, or exploring options to pick a major, or heaven forbid picking an initial career choice that does not have hard evidence of a substantial monetary return. Of course YMMV.</p>
<p>This may seem obvious to some, but many people do still pay a lot of money to pricey privates or publics to become nurses and teachers. That might be fine when parents can easily pay, but it seems a little nutty if the student is racking up student debt.</p>
<p>LOL You are so right…Education consists of so much more than the content of our discussion. But “starvng artists”…Starve. And when all the passion in the world, and fancy learnin, aint enough to pay the bills, you can be the most enlightened person in the welfare line if you dont consider the realities.</p>
<p>^I wasn’t trying to be sarcastic in #8 … to me there are two very different situations. While I’m a pretty big elite schools snob I think taking on big debt to pay for college is buts. However, if college can be paid for without taking on large debt then the decision is not unlike a ton of other purchase decisions … do I see enough extra value to warrent paying the additional expense. It’s true for choosing to pay for a private college, it’s true for car choices, it’s true for house choices. I also do not agree with the characterization of these spending choices being an either/or choice (I can pay for Harvard or retire) … any additional spending delays my retirement possible date. I also am very analytical and figured out for evey $2500 saved/invested I can retire a month earlier (or move to any job I want) … choosing to pay for private collleges certainly pushes out the fate … less than our house choice … and a lot closer to our car choices than most would guess (most would guess college is a huge expense compared to cars but it is not). And for my wife and I our kids college education is so much more than minimal vocational training … and we believe different schools can provide better eductional expericences than others (tons of schools would be fine but others would be better).</p>
<p>I don’t think calculating the ROI is helpful in all life events. If I was looking strictly at ROI, I would not have had kids in the first place. I don’t see any return for me on my child’s college costs.</p>
<p>If $200K plus per kid is no big deal, I agree. But for most families colleges represents one of the biggest expenditures they’ll ever make and I believe ROI is a sensible consideration.</p>
<p>My H’s family has always been “into” pricey privates (H was the only one to go to public Big 10s). My family went to UC’s and Cal States, yet my H and my siblings earn a LOT more than my H’s siblings do.</p>