The Return on Investment of Higher Education

By Abbey Tiderman 02.04.2015 blog
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As the effects of the time of shedding and cold rocks found their way into struggling American households between 2007 and 2009, families understandably began questioning whether the cost of college was worth the hefty investment. Even today, despite the much-improved state of the economy and an unemployment rate down to 5.3 percent, the question still lingers: what’s the return on investment (ROI) of higher education? The answer varies depending on many factors, but one thing’s pretty clear: there is, indeed, a positive return on the investment in a college degree.

After analyzing 40 years of data from U.S. Census Bureau and U.S. Bureau of Labor Statistics, a 2014 Federal Reserve Bank of New York study found that what one chooses to study affects ROI, noting, “Students whose majors provide technical training, such as engineering or math and computers, earn the highest returns—21 and 18 percent, respectively.” Yet even the least lucrative fields of study, such as liberal arts and hospitality, saw a return of at least 9 percent, while many other majors produced 15 percent returns.

Researchers report that one key factor impacting the solid ROI of college is the consistently low wages of high school graduates going straight into the workforce tracked over four decades. While wages have fluctuated for both college graduates and high school graduates throughout that span, those with a bachelor’s degree tended to earn 56 percent more than high school graduates, while those with associate’s degrees earned approximately 21 percent more. This demonstrates that even at the height of the recession, and with rising college costs, underemployment and falling or stagnant wages among new college graduates, investing in higher education made sound financial sense.

Whether you choose a field you have a passion for, a career path that affords flexibility and work/life balance, or an in-demand “practical” profession with high earning potential, there are several important decisions to make, including which college to attend and how you’re going to pay for an education that, on average, leaves students who borrow with $30,000 worth of debt. Here are a few of the best free federal resources that will help guide you through the process and ultimately contribute to getting you the best ROI:

Net Price Calculator

According to the U.S. Department of Education, “Net Price is the amount that a student pays to attend an institution in a single academic year AFTER subtracting scholarships and grants the student receives.” So while the “sticker price”—the undiscounted total cost of tuition, fees, room, board and other expenses—can seem shocking at first, it doesn’t represent the actual amount you’ll need to pay. To help you figure that out, simply enter your financial information into the Net Price Calculator and it will provide you with an estimate of how much per year a particular school would cost for you, and approximately how much aid you should anticipate receiving.

FAFSA

A crucial step you need to take each year is to fill out your Free Application For Federal Student Aid. Doing so can help you pay for college, whether through entry into a Work Study Program or with grants, free money that you don’t have to repay. Even if your family’s income is on the higher side, it’s always worth it to submit your FAFSA. Getting aid through FAFSA doesn’t require special academic standing, it’s easy to complete online, and there’s assistance if you have any questions: 1-800-4-FED-AID. There’s really no reason not to!

College Scorecard

The College Scorecard tool helps you narrow down the schools that are a right fit for your unique needs, such as location, school size, field of study and degree type. It provides a school’s details including average net price of attending (and whether the net price has risen or fallen in recent years), graduation rate, loan default rate, average monthly loan payment, and if available, earnings overview of that school’s graduates. (Click on image below to go to College Scorecard).

college-score-card

Loan Guidance

It’s imperative that you understand the different types of loans you can access to help pay for college, including federal, private, subsidized and unsubsidized. If you don’t have someone to assist you in these decisions at home, ask your high school guidance or career counselor, the financial aid office of the college you’re planning to attend, or contact the U.S. Department of Education. They’re all there to help, and missteps in this arena can be very damaging down the road financially.

comments

  1. Dev

    The system in the United States of America is horrible.

  2. 123 awesomesauce

    I think that all of this new equipment will help people discover the financial benefits of going to college, but if these new tools are supposedly purposed to help you find the right college for you what would happen if you didn’t have the right college for you and what would happen if you were to go to an expensive college and you couldn’t pay for it?

  3. makaila

    it would be ausome for new edaction and it would help kids learn more by studying

  4. lloyd

    I do not think it is going to work because they can just give there phone to their friends so it will look like they are in school

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