Education: Return On Investment

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A New Age

There was a time in history when a college degree would guarantee you a successful and profitable career. If you had a degree you enjoyed a nice big paycheck to go along with it. It was easy; a degree meant more money plain and simple.

That time has passed.

Sorry.

This is a new era. It is the age of college graduates who work at Arby’s. This is the age of graduate students who live in their parent’s basement. This is age of realization. It is a rude awakening. People are starting to realize that a degree isn’t the magic ingredient it used to be. A lot of the time it is necessary, but it is not enough. You can no longer flash a degree at an employer and expect money to be thrown at your feet.

A degree is a tool to help you shape your future. It’s a very expensive tool, but a tool nonetheless. Now, more than ever, it’s important to look at a degree as an investment in your future. When you look at an investment the one thing that simply cannot be ignored is the return on that investment.

What is ROI?

ROI (Return on Investment) is a performance measure used to evaluate the efficiency of an investment or to compare the efficiency of a number of different investments. Or more simply put, it’s what you’ll gain or lose from an investment.

An Example

If you look at a degree as an investment (which it is) then obviously some will yield a higher ROI then others. Let’s use the teaching profession as an example.

Two students from rural Indiana decided to follow their passions and become teachers. They both planned on returning to their home town to teach kindergarten in one of the local schools. They both got exceptional grades in high school and got great ACT and SAT scores. They had nearly every college and university available to them.

The first student applied to as many prestigious schools as she could.  She decided to go to a very competitive out of state college. She did not receive nearly as much financial aid or scholarship money attending this university. The degree was exceptionally expensive, but because she was accepted by such a prestigious school she thought she would be cheating herself if she didn’t go there.

The second student decided to go to a local community college. The college was small and fairly inexpensive. Because of her grades she was able to get some decent scholarships from the school. The school was not very well known, but she didn’t mind. The campus was close enough that she could live at home and because of that and her scholarships she didn’t need to take on any student loan debt to get her degree.

Upon graduation both student graduated with honors and were able to return to their home town and easily get a job teaching kindergarten in one of the local elementary schools.

Which student had the best return on investment from their degree?

Obviously the second student had the best return on investment. She was able to graduate without debt and start at the same salary as the first student who took on massive student loan debt to do the same thing. Both are going to be making about the same amount of money. Both are going to be kindergarten teachers. Both ended up in the same place, one just spent a lot more to get there. A quality education is important, but you shouldn’t be bankrupting your future to get it.

Earning Potential

You have to think about the earning potential of a degree. Why would a local elementary school in rural Indiana pay significantly more to hire an Ivy League grad than someone else with the same degree from a local college? Answer: they won’t.

There are a lot of noble and humanitarian careers that pay horribly. I would (almost) never discourage you from pursuing a career in one of those fields. They’re good jobs, but spending hundreds of thousands of dollars to get a job making $30,000 a year just doesn’t make sense. If you want to be a teacher, social worker, or some other equally underpaid profession, then you need to be realistic about how much you should invest in your degree (hint: less is better).

On the other hand, if you really want to impress people with you’re really expensive and prestigious degree then by all means ignore everything I’ve just written. I’m sure your co-workers won’t be able to get enough of your stories about how you went to an expensive Ivy League school.

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