If you’re thinking about going to college, or you have a child who is, you’ve probably experienced a fair amount of sticker shock when considering the cost of attending different schools.
Tuition and other costs have skyrocketed in recent years. Though, a college education is an investment in the future—as with any investment, it’s important to consider what you’ll get in return to determine if it’s worth it.
This guide and benchmark aren’t official measures and they’re not set in stone by any means; we know there are many reasons to get an education, many of which can’t be (and probably shouldn’t be) measured and quantified. This guide is meant to offer tips to help in a challenging and competitive working world. Your mileage—and your life’s path—may vary!
Costs vs. Earnings—Calculating Your ROEd
Choosing the right college is a multifaceted decision. Considerations include where the school is located, whether it has programs that meet your interests, what student culture is like, and, of course, price.
The price tag for college can be jaw dropping. The total cost for tuition, fees, and room and board at a private non-profit four-year college can set you back more than $48,000 per year on average .
Head to an elite private school like Columbia University in New York and tuition and fees can be upward of $60,000 per year . At a public four-year college, you can expect to pay an average of about $10,000 per year in tuition and fees, which is cheaper, but still nothing to sniff at.
If there’s the potential of spending nearly a quarter of a million dollars to obtain a four-year bachelor’s degree, carefully weighing the cost against return, especially if you’re going into debt to pay for your schooling, is wise.
One way to make this consideration is by looking at the ratio of the cost of your degree to your expected income once you graduate. For the purposes of this article, we’ll call this your return on education, or ROEd.
Your ROEd is much like a traditional return on investment calculation, which looks at the ratio between net profit and cost from investing resources.
In this case, time and money are the resources you’re investing, and your future income is the profit.
Your ROEd will depend largely on how much you spend on your schooling, what type of job you get after school, and to a certain extent, what you major in.
Now that we have a sense of the potential cost of school, let’s take a look at what kind of income boost a bachelor’s degree can give you. According to the Bureau of Labor Statistics , workers with a bachelor’s degree make just over $1,100 per week on average.
Compare that to average workers with an associate’s degree who make about $830 per week and workers with only a high school diploma who make about $700 per week. Simply having a bachelor’s degree offers a significant advantage in the workforce with a more than 130% boost over those with an associate’s degree.
The amount you make after you graduate can vary depending on your major. Consider the median salaries of the following majors across the sciences and humanities based on a study from 2015:
• Art history: $49,000
• Biology: $56,000
• Business: $65,000
• Computer science: $83,000
• Communications: $54,000
• Engineering: $78,000
• General education: 46,000
• History: $54,000
• Journalism: $56,000
• Mathematics: $73,000
• Psychology: $49,000
• Visual and performing arts: $42,000
Be aware that salaries typically vary widely depending on job specifics and where the job is based. For example, in the same study from above, business majors in California earn $70,000 a year on average, whereas Florida business majors can expect to earn $54,000.
Your expected salary can also vary based on what school you go to. For example, Princeton grads make an average of about $140,000 per year by mid career . Graduates from Vanderbilt University in Nashville make an average of about $118,000 per year by mid career .
There are a number of reasons for these discrepancies. In some cases a school may be highly specialized, funneling graduates into highly paid fields. In other cases, there are intangibles at play. The social and professional connections available at some elite schools may provide a leg up when you enter the workforce.
So perhaps weigh the price of tuition for the schools you’re considering against your expected salary to determine your ROEd. If you know your major, use that information to help you estimate your future earnings.
If not, you can make some guesses based on what other graduates from the school are making. Carefully consider your reasons for wanting to attend schools with a lower ROEd.
Need help financing your education?
SoFi private student loans have no fees
and flexible repayment options.
You can think of ROEd as a fluid measure that you have some control over. One way to improve ROEd is to lower the amount of money you are paying for school. This could be particularly useful if you already know you want to pursue a career in a relatively low paying field.
One way to offset the cost of tuition is to look for scholarship programs that help pay your tuition or other college costs. Many schools offer need-based financial aid to families who might otherwise struggle to pay tuition costs. In some cases, you could even get a full ride.
If you need to take out student loans to help pay for college, keep an eye on your terms and interest rates to help you keep costs down. You might shop around for lenders that offer the best rates, low fees, and the most favorable terms.
Remember that you’re not necessarily locked into your loan. You could consider refinancing your student loans to a new loan with lower interest payments as a way to lower your costs and improve your ROEd.
You may want to refinance if your credit score has improved since you took out your loan, or if federal interest rates have dropped.
Keep in mind that if you refinance to a longer term, your monthly payments may be lower, but you may actually end up paying more in interest over the life of the loan, which will not improve your ROEd. Also, refinancing federal loans with a private institution will mean that you lose federal loan benefits.
If you take out federal loans and plan to work for certain non-profits or government organizations, you may be eligible for loan forgiveness under the Public Service Loan Forgiveness program. After making 10 years worth of qualifying monthly payments, the remaining balance of your loan may be forgiven through this program.
Finally, some employers may also help you pay back your student loans as part of a benefits package. Consider working for an employer who offers these benefits.
Keeping an Eye on the Future
Graduates degrees, like master’s degrees or Ph.Ds may also give you a boost in income. Whether or not you plan to acquire a graduate degree will of course have some bearing on your decision about attending college, as a B.A. is often a prerequisite for grad school.
If you eventually want to apply to grad school, consider the ROEd in this situation carefully as well. As with many undergraduate programs, grad school costs and debt are on the rise.
Beyond the Price Tag
Though important, the money you’ll eventually earn isn’t the only thing you should consider when choosing a college. Getting a bachelor’s degree can help you acquire skills and expand your horizons in ways that aren’t directly related to your degree or job prospects.
Though these benefits are intangible—they can’t be pegged to dollar amount—they are worth considering when deciding whether to get a degree and what school to attend.
When you decide on the right school for you, taking the time to consider all your options—including scholarships, grants, federal and private student loans, post-graduation repayment programs, and other sources of public and private funding—to help you achieve your education and career goals.
External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. A hard credit pull, which may impact your credit score, is required if you apply for a SoFi product after being pre-qualified.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
SoFi Loan Products
SoFi loans are originated by SoFi Lending Corp. or an affiliate (dba SoFi), a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law, license # 6054612; NMLS # 1121636 . For additional product-specific legal and licensing information, see SoFi.com/legal.
SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.
SoFi Student Loan Refinance
IF YOU ARE LOOKING TO REFINANCE FEDERAL STUDENT LOANS PLEASE BE AWARE OF RECENT LEGISLATIVE CHANGES THAT HAVE SUSPENDED ALL FEDERAL STUDENT LOAN PAYMENTS AND WAIVED INTEREST CHARGES ON FEDERALLY HELD LOANS UNTIL THE END OF SEPTEMBER DUE TO COVID-19. PLEASE CAREFULLY CONSIDER THESE CHANGES BEFORE REFINANCING FEDERALLY HELD LOANS WITH SOFI, SINCE IN DOING SO YOU WILL NO LONGER QUALIFY FOR THE FEDERAL LOAN PAYMENT SUSPENSION, INTEREST WAIVER, OR ANY OTHER CURRENT OR FUTURE BENEFITS APPLICABLE TO FEDERAL LOANS. CLICK HERE FOR MORE INFORMATION.
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income-Driven Repayment plans, including Income-Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.