Return on Investment is the amount of money gained compared to the amount of money invested. In the context of the ROI of a college degree, it refers to the amount of money earned after doing a college degree compared to the amount of money you spent on your college degree.
We discuss how to calculate the ROI of a college degree and the factors affecting the college degree’s ROI in this article.
How to Calculate the ROI of a College Degree?
To calculate the ROI of a college degree, choose a specific period (e.g., 10 years) over which earnings will be received. Subtract the total expenditure on a college degree from the total amount of money earned in the 10 years.
For example, you get a job offering 70,000 USD, and a college degree in computer science costs you 80,000 USD over 4 years.
Total income over 10 years = 70,000 X 10 = 700,000 USD
Net income = Total income – College Degree Cost = 700,000 – 80,000 USD = 620,000 USD
ROI = ((Net income)/(College Degree Cost)) X 100%
After solving the above equation, we get a 775% ROI of your college degree.
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What Are The Factors Affecting the ROI Of A College Degree?
There are 3 main factors affecting the ROI of a college degree, including earning potential, job opportunities, and industry.
These 3 main factors and other potential factors are described below.
- Cost of Education: It includes college tuition fees, books and other essential resources, accommodation, traveling, and food.
- Expected Earnings: It depends upon the type of degree, industry you will work in, and geographic location. For instance, salaries in tier 1 countries are the highest.
- Duration of Study: The longer a degree is, the higher it will cost. If you spend more time on acquiring a college degree, then you will miss out on the potential earnings.
- Field of Study: It affects the earning potential as different industries have different salaries for their employees.
- Economic Conditions: The economic conditions of your country affect the ROI of a college degree. If the country you work in is going through a recession, then you will receive lower salaries, resulting in low earning potential.
What Are Some Examples Of The ROI Of Different College Degrees?
Some examples of the ROI of different college degrees are given below, and the statistics are presented according to educationdata.org.
College Degree Lifetime (40 years) Median ROI For All Degree Levels:
|Education Level||20-Year ROI||Lifetime ROI|
Bachelor’s Degree ROI by Majors:
|Major||40 year ROI|
How To Get More ROI Without Acquiring A College Degree?
You can get better ROI if you invest the money into a business, such as a restaurant. According to CSIMarket data, the average yearly ROI of the restaurant industry was 10.73%.
If you open a restaurant with a 10.73% yearly ROI, you will get a 429% return over 40 years. However, a good restaurant is considered to have a yearly ROI of 15%, and successful restaurants have a 20-25% yearly ROI.
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Are There Any Successful People Without College Degrees?
Yes, there are many successful people without college degrees, such as Bill Gates, Steve Jobs, Richard Branson, Michael Dell, and Mark Zuckerberg.
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The ROI of a college degree is crucial for knowing whether acquiring a degree is worthwhile. To calculate the ROI of a college degree, divide the net earnings over a specific period by the total cost of the college degree and multiply it by 100. The overall ROI can be affected by various factors, such as time taken to acquire a college degree, total cost, and earning potential.
- How to Measure ROI of a College Education. (2023, September 1). Western Governors University. https://www.wgu.edu/blog/how-to-measure-roi-of-a-college-education2207.html
- Woodward, E. (2023, April 13). What is the ROI of your college degree? Bankrate. https://www.bankrate.com/loans/student-loans/roi-college-degree/
- Hanson, M. (2021, December 9). Is College Worth it? | Return on Investment Analysis of College Degree. Education Data Initiative. https://educationdata.org/college-degree-roi