College is among the biggest financial investments you’ll make in your life. You can spend $38,270/year on the cost of attendance, on average. If you’re in a private college or an out-of-state student, your annual costs can be more than double.

Such is the significant investment that students and their parents borrow money. In fact, the average cost of attendance and average student loan debt –  $38,375 – are almost the same.

There’s also the time spent on earning a college degree and lost income opportunities. Less than half of college students complete their bachelor’s degree in four years. Potential income lost while pursuing a bachelor’s degree can be as high as $204,282.

So, is a college degree still worth it? Yes, it is. Bachelor’s degree holders earn higher median weekly salaries ($1,493) and enjoy a lower unemployment rate (2.2%).

The trick is to choose bachelor’s degrees with the highest return on investment. In this guide, we’ll talk you through the steps on how to calculate college degree ROI.

Related:

• Top ROI Degrees in the Digital Age
• Strategies to Improve ROI for Your College Degree
• Long-Term ROI: How Degree Choice Impacts Lifetime Earnings
• ROI of Advanced Degrees: Is Graduate School Worth It?

Understanding ROI for College Degrees

In business, return on investment (ROI) measures the profitability of the initial cost of investment.

What Is ROI in Education?

In education, ROI is the comparison between the cost and benefit of a college degree. It asks the question, “Will your future earnings cover your cost of attendance, loans, and lost income?” If you answered “yes,” then you’ve chosen the right degree, ROI-wise.

Why Is It Important?

Understanding ROI when choosing a college major is crucial for these reasons:

• Helps students choose high-value degrees (I.e., high-demand, high-paying majors)
• Prevents excessive student loan debt
• Results in informed decisions about college choice, major, and career paths

Plus, it’s easy enough to calculate ROI when you have the right information and formula.

The Formula for Calculating ROI on a College Degree

Here’s the formula for how to calculate college degree ROI.

ROI = Lifetime Earnings  − Cost of Education × 100 / Cost of Education

or

ROI = (Lifetime Earnings − Cost of Education) / Cost of Education x 100

Where:

Lifetime Earnings = Total expected salary over 40 years

Cost of Education = Total cost of attendance. Total cost of attendance. (Tuition, fees, room and board, books, and supplies, living expenses, and lost wages)

The ROI formula expresses ROI as a percentage. This way, you can determine whether you’re getting good value for your money.

Let’s use the college degree return on investment formula to compare two degrees – business and art. Let’s assume the following figures:

Degree Type	Lifetime Earnings	Cost of Education	ROI
Business	$2,300,000	$93,000 (four years, in-state, public school)	2,373.12%
Art	$1,900,000	$100,000 (four years, in-state, public school)	1,800%

From the above comparison, we can conclude that a business degree has a higher ROI than an art degree. Of course, other factors influence actual ROI.

Gathering Data for an Accurate ROI Calculation

You’ll want to know how to compare college tuition and future salary in determining ROI. Know first where to look for reliable data.

Sources for Tuition Costs

The cost of attendance varies between colleges and majors. Be sure to consider as many information sources as possible. Look beyond the sticker price, too, and consider financial aid opportunities.

Here are reliable sources to consider for tuition costs:

• College websites
• Net price calculators
• FAFSA estimates

Estimating Future Earnings

Projected earnings vary depending on industry demand, location, and college major. The best sources for estimated future earnings are:

• U.S. Bureau of Labor Statistics
• PayScale
• Glassdoor

Considering Student Loan Debt

Be sure to consider interest rates and loan repayment terms. Look for reliable information from the:

• National Student Loan Data System
• Federal and private lenders (e.g., StudentAid.gov)

Adjusting for Inflation

When calculating lifetime earnings vs. tuition costs, adjust for inflation. This is because money decreases in value over time.

Let’s assume a 2.5% inflation rate and a $70,000 current average salary. Over 10 years, the estimated salary will be:

Future Salary = Current Salary × (1 + Inflation Rate) ^Years

70,000 × (1.025) ¹⁰ = 89,605.60

By gathering reliable information, you’ll make a more informed decision about ROI.

Factors That Affect the ROI of a College Degree

Consider these factors when choosing the best value college degree for yourself:

Choice of Major

The field of study has a significant impact on your future earnings. The STEM and business fields offer the best value college degrees by ROI, including:

• Engineering
• Computer science
• Nursing and Healthcare
• Business and Finance

The low-ROI majors include:

• Art and music
• Social work
• Psychology (without an advanced degree)

Of course, you should ideally choose high ROI college majors and careers.

College Selection

Where you attend college also affects your cost of education and career growth. Go for public colleges for their lower costs and, thus, higher ROI. Be an in-state student instead of an out-of-state student due to lower costs.

But while private colleges are more expensive, they have merits, too, ROI-wise. Their prestigious reputation can mean preferential priority in employment.

Ivy League schools also offer more financial aid and extensive career networks. Princeton, Harvard, and UPenn offer full-tuition scholarships within income thresholds.

Scholarships and Financial Aid

When making a college degree cost-benefit analysis, consider the financial aid opportunities, too. Grants, scholarships, and work-study programs reduce your cost of education. You also don’t have to incur as much student loans. This way, you’re getting a better ROI post-graduation.

Career Advancement and Graduate Degrees

These are also crucial factors affecting the value of a college degree. Certain professions require graduation education for higher ROI. Law, medicine, and psychology are notable examples.

There are also fields where a master’s degree isn’t as necessary. Business, computer science, and information technology are great examples. Extensive work experience and certifications have more value.

Comparing ROI Across Different Degree Types

Consider these comparisons across different college majors when making your choice:

STEM vs. Humanities Degrees

STEM degrees usually have higher ROI than humanities degrees. The latter includes English, history, and sociology (i.e. unless paired with a professional career).

Business and Finance Degrees

Business and finance occupations earned $79,050/year in median wages (BLS, May 2023), a solid amount. Furthermore, an MBA can increase your earning potential. MBA holders can expect 22%-40% higher median starting salaries than bachelor’s degree holders.

Note, however, that it’s only worth the money for management and executive roles. Choose schools with a strong reputation and networking opportunities, too.

Healthcare and Medical Degrees

These fields have higher earnings but their cost of education is just as high. The median wage for healthcare occupations is $80,820/year (BLS, May 2023).

Physicians and surgeons earn over $239,200/year. But doctors have long break-even periods, too, due to their expensive education.

Trade Schools vs. Four-Year Degrees

Skilled trades usually have better short-term ROI. Think of electricians, welders, and HVAC technicians. Lower cost and faster completion results in better short-term ROI. Bachelor’s degrees offer higher lifetime earnings but come at a higher cost and student debt.

Online vs. Traditional Degrees – ROI Comparison

Let’s compare the ROI of online vs. traditional degrees based on three factors:

Cost of education

Online degrees usually have lower costs. There are no room and board fees, among others. Flexible schedules mean you can continue working (i.e., no lost income).

Employer perception

Online degrees are now more recognized by industries and employers. Be sure, however, to choose an accredited online college with a good reputation.

Field of study

There are certain fields where in-person study is still preferred. But when it comes to business, data science, information technology, and healthcare administration, online degrees are recognized.

In short, online and traditional degrees usually have the same ROI.

Maximizing ROI – How to Make College More Affordable

Is a college degree worth the cost? Yes, it is, but you have a crucial role to play in making it so. You must make your college education more affordable.

Minimize Student Loan Debt

• Attend community college first to save on general education credits.
• Apply for grants and scholarships early.
• Be an in-state student in a public college.

Choose High-ROI Majors

• Research fields with a strong job demand and salary growth.
• Compare college majors based on their ROI.

Work While Studying

• Earn while learning through part-time jobs and internships.
• Increase your post-graduation employment prospects, too.

Graduate in Four Years (or Less!)

• Remember that delayed graduation means more student loans and lost earnings.
• Take AP credits in high school, complete summer classes, and take on full course loads.

Conclusion

In summary, calculate ROI first before choosing your college major. With high ROI degrees, you can look forward to higher lifetime earnings and job security. Don’t forget to reduce your tuition costs by maximizing financial aid, too.

Indeed, a college degree will be your best investment in life—but choose wisely!