How to Figure the ROI of a Four Year College Degree

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  • “Why do you want to go to college?” This is a question that most students ask themselves–and for some, the answer is difficult to find. Some teens are questioning whether attending a university is necessary, as they already work while in high school and plan to continue working throughout their adult lives. There are others with the skills and talents who opt not to go to college simply because they can already work–almost immediately–using their gifts. Some just prefer to not continue their education at all, because they belong to an affluent family.

    Is that all there is? If so, what then is college for?

    A Return on Investment (ROI)

    What is the return on investment for those who graduate college? If it’s only to get a job, then why bother, considering that there are many students who choose to go straight into the workforce after high school? What is the payoff college degree?

    Professor of Education John R. Thelin from the University of Kentucky and author of A History of American Higher Education mentions that there was a time in the 1870’s when a college degree would indeed pay off. In the book The Education of Henry Adams, Adams asked a Harvard student what an education could do for him. The student responds that it is all worth the money.

    PayScale, a consultancy firm that specializes in the compensation of employees, lately came out with a report of the 30-year investment of 1,070 Colleges and Universities. The report explores the amount of money a student who has graduated from college would earn as compared to a student with a high school diploma.

    The report uncovered two important points. First, graduates who attended more expensive public schools tend to earn higher incomes. Second, graduates who attended more expensive private schools also tend to have higher incomes.

    "There is a tapping to look at the worth of college education through the value of the short-term earning power of these graduates from college," says John R. Kroger, president of Reed College. “With the ROI argument, it is all about looking at the return to the family and the individual. Another thing that we need to consider is the gains in the society. If someone decides to go to college to pursue a higher degree, it only means that the societal gain is bigger than the individual gain which becomes rather limited.”

    So with these points, is the payoff college degree really put into place?

    The Cost of College Nowadays

    Nowadays 30% of Americans between the ages of 25 and 29 are college graduates, as compared with 12% 40 years ago. That is still quite a good number, but the question remains whether these figures are indeed the payoff college degree that a student expects after getting his diploma. Thelin says that he has read of recent graduates who toil at their unpaid internships and at the not-so-good jobs that they gain after college.      

    As college tuition fees keep on increasing each year, the return on investment seems a little bit prudent and inevitable. But when it comes to money, this is best spent in developing critically aware and curious people. These qualities may have greater financial rewards than most critics would realize.

    It’s not just college tuition that is expensive. It’s the cost of getting the money to attend college in the first place. Many graduates are entering adulthood deep in debt, with college loans to repay. They leave college already worrying about their credit score and keeping close watch on credit reports to ensure their score is high. They know that when an employer does a credit check, they have a better chance of being hired if they have excellent credit. Having to repay student loans with limited funds is a challenge when you’re trying to maintain a better than average credit rating.

    In spite of the doom and gloom over the increasing costs of college, it is still better to get an education–if you know how to do it. According to the May, 2011, report by the Center on Education and the Workforce at Georgetown Center, workers who have a bachelor’s degree earn more that those with a high school diploma–at least 84 percent higher. The payoff college degree is indeed overwhelming.

    Potential and Low Unemployment Rates

    According to Katie Bardaro, a lead economist at PayScale, the courses on physics, engineering, and computer science are those fields with low unemployment rates and potential, which can help students reap returns on their educational investments.

    "Not everyone, though, would like to get involved in this analytical stuff,” says Bardaro. “On the other hand, if you are indeed one of those people, you are lucky because hiring you wouldn’t be a problem anymore.”

    Here are some of the courses with earnings potential and low unemployment rates. Chemical Engineering: $64,500; Electrical Engineering: $61,300; Materials Science and Engineering: $60,400; Aerospace Engineering: $60,700; Computer Engineering: $61,800.

    Author Bio:
    Amy Johnson is an active blogger who is fond of sharing interesting finance related articles to encourage people to manage and protect their finances.

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