Friday, June 21, 2013

University education: Cost vs. return on investment

When College Becomes a Risky Investment 1
It's an interesting and sometimes daunting time in University education.  State institutions are under government scrutiny while private schools must generate funds to remain competitive.

A recent article in the Chronicle of Higher Education "When College Becomes a Risky Investment" brings more to light regarding the costs incurred by students, many times in the form of loans.

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When it comes to costing out your choice of university, is more, better? That depends on how each student measures ROI (return on investment). For most, job opportunities and related income will drive decision making...or maybe, it should.

This post is not about judging any specific institutions, or the required tuition. Instead, it's a motivator to vet the cost against your intended outcome. For example, if your ROI is job placement, let's consider a private university that requires a $40,000/year to live and study. An undergrad degree at this institution must offer $160,000 in whatever ROI you determine. If your degree steers you into a $40,000 a year job, your take home pay might be around $28,000. Your value model may indicate that your university investment require 5.7 years to repay - if you dedicate 100% of your take home income to student loans.

Of course, most won't retire their loan that aggressively.  But, the calculation demonstrates your education is worth 5.7 years of hard labor. Only you can decide if that is a good value is a sound investment.

Be careful. Make good choices. Have a forward thinking approach. Investigate different paths to the same degree. A business approach to academics can set the stage for your future.

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