The data was gathered from more than 200,000 applicants for SoFi student loan refinancing between January, 2014 and July, 2015.
Individuals were divided into degree category cohorts that reflected whether they have 1) an undergraduate degree or 2) some combination of undergrad and graduate degree. Degrees are self-reported and only verified at the underwriting stage if a loan is approved.
To calculate Return on Education (ROEd), SoFi estimated lifetime income based on two components:
Following calculation of lifetime income, the cost of graduate school was subtracted, as measured by an applicant’s student loans. Knowing the loan balance for which a refinancing was sought, SoFi assumed these existing loans to be 15 years in term with 7% annual interest.
While loans may not reflect the full cost of a graduate degree, it is a good proxy for the cost to the student. Graduate students usually receive grants, assistantships, fellowships, and other forms of aid, such as assistance from relatives. Absent reliable data on these sources, the amount the student borrowed is a good measure of the portion of the cost that the student is actually bearing.
This is the Lifetime Income less the Loan Cost.
ROEd is the percentage increase (or decrease) of net lifetime income. SoFi calculated ROEd by comparing the net lifetime income of applicants with no graduate degree (but a certain undergraduate degree) to those with the same undergraduate degree that have also gone on to obtain a graduate degree.< Back to Return on Education (ROEd) Infographic