I don’t know anyone who doesn’t think ROI (Return on Investment) is important when making decisions. Nobody buys a house for $300,000 and when they sell it hope they get $200,000 for it. No owner of baseball team pays a player $100,000 over 5 years and only hopes they hit for a .200 batting average. Nobody puts money into a 401(K) or a mutual fund and expects to lose money on it. Let me also say that this is a tough topic to nail down because there are many factors involved, but it is a good one to understand and think about before applying to colleges.
What is ROI?
Below is a quote by valuecolleges.com that I thought was a great description of ROI.
“There are a lot of factors to take into consideration. You invest a lot more than just money into a college education – you invest time, work, and stress. That makes college fundamentally different from many other investments.
ROI could be as simple as what income people make vs. what they paid for college and what they owe in student debt, but that is still too simple. Income isn’t necessarily a measure of success, and student loan debt could just mean you took out more loans than you needed to, not that the school was too expensive. While some short sighted people just want to know how much money they can make straight out of school, others want a certain level of long-term career satisfaction. Neither is wrong.
Plus, as Chris Maples, president of the Oregon Institute of Technology explains, there are a lot of different investors in an education, too – not just you, but your family, the foundations that provide grants and scholarships (who don’t want to see their money wasted), the government (which needs the taxes you’ll pay from the work you do with your degree), and the institutions themselves, who put a lot of thought into who they accept and who expect their graduates to prove their worth. You may be fulfilled tending bar with your Ivy League education, but they’re not putting you in the alumni newsletter.”
What are the biggest factors that impact ROI?
6. Earning College Credit While in High School
Through dual credit opportunities your high school provides (DC students and parents, click here to understand our partnership with CCU), you may be able to earn 12-15 or more dual credits that will transfer to the colleges you eventually attend. This will save you thousands of dollars and the ROI is tremendous! There are other opportunities to earn college credit while in high school like AP exams, taking college classes online or in-person while in high school, CLEP exams and more. Click here to read my post titled “Earning College Credit While in High School” for more information.
5. Major
Based on the major you end up pursuing in college, you can start looking at job prospects and career earnings. I do say what you “end up pursuing” because you typically have a year and a half to change majors and decide which major is best to earn your degree in. When you decide on a major, you can then begin to understand the earning potential in that career field. When you are applying to college, it’s important to not just apply to schools you think or see on lists that are “better” for that major because there are plenty of colleges in the United States that will prepare you for a career field in that major. A lot of times what we hear is not the entire picture and it is up to us to put in the time to research and find similar (and less expensive) opportunities that we were not aware of before.
4. Location/Living Expenses
Please see my last post titled, “Sometimes it Pays to Go Away to College” for more information on why going a bit further away to college from home can earn you more merit based scholarship opportunities. It is important to understand what your living expenses in college will be and not have them be so exorbitant that it impacts the debt that you find yourself in after you graduate. Another impact on ROI when it comes to where you attend college is that it is less expensive to live in certain states. This could impact your cost of living while in college as well as after you graduate. Things like gas, food and housing are definitely less expensive in certain states. Where you attend college may have no bearing on where you will work after college but many college graduates tend to get their first job in the area in which they attended college. Companies are also a bit more familiar with graduates from colleges in the area they are located in. If you major in education, you most likely are doing your substitute teaching and earning a teacher’s certificate in the state you attend college in. If you had any internships during your college years, they are typically with companies near the college you attend and then some students continue working with these companies after graduation. When applying to college, consider the area you may go to school in and understand what the living expenses are in that area.
3. Internship/Networking Opportunities
This is a big category for return on investment and one that is talked about in more wealthy and “competitive” areas. Some will say that if you spend more money to go to one of the most competitive admission colleges or universities, it is worth that “extra” amount of money you are spending compared to a less competitive school because the byproduct of attending that school, you now are in a better position to be more successful after you graduate. This is because of the networking opportunities and the “name brand” recognition that the more competitive college may provide. I understand that the most competitive admission colleges offer a unique experience. At the end of my post titled, “Want to Apply to a Competitive Admission College? Think “Outside” the Box”, I provide a link that says there is no correlation to future success if you earn an Ivy League degree in all majors except maybe Finance and Political Science. Earning a degree in these two fields at an Ivy League school can have its advantages. When it comes to other majors however, (Engineering, Nursing, Education, etc.), you can earn your degree at many other schools and find yourself earning the same or more amount of money. There are plenty of colleges that provide many internship and networking opportunities that are not in the top 50 of the US News and World Report and I would encourage you to really look closely at these schools because they will be the schools that award more merit scholarships. Here is a link to a US News and World Report list of 22 colleges that are best for internships or co-op programs and only two are high competitive admission colleges (Cornell and MIT). Two other colleges that are high on the list of providing internship opportunities are George Washington and American Universities in Washington, DC.
2. Tuition/Scholarships
If you going to get a great ROI, you most likely will be making sure that you are not paying more in tuition than you have to. Let me also say that getting a great ROI also means that you are not spending as much of your own money than you have to. You are using Other People’s Money (OPM). What do I mean? Even if you saved up for college and realistically can pay for more of your child’s college expense, it is still smart to get that tuition and room and board cost down that you have to pay because you are spending less of your own money and you are letting the school or government pay for you to attend that school. It may be best to explain this point with an example. A dad and mom save $180,000 (which is a lot!) in their daughter’s college fund. She is accepted to a more prestigious university that would cost them $60,000 a year because they are a “meet need” school. This means that they do not offer merit scholarships. All of their money goes to meeting the financial need of students that attend their school. She was also accepted to a great flagship state university and received a scholarship that covered full-tuition and room and board. She would have had enough money to cover the first three years at the more prestigious university but she would have had to take out loans her senior year for $60,000. What she did, however, was go to the flagship state university that she had a full scholarship to and used that $180,000 for graduate school and to start her career eventually…THAT is a proper perspective of ROI. Merit scholarships are the best way to achieve ROI from colleges. If you have done well academically in high school, you have put yourself in great position to receive large merit scholarships from colleges. Find those colleges and see what opportunities they provide for you. Even if you have mostly B’s and some C’s…there are colleges out there that will give you good merit scholarships!
- Student Loan Debt
We are down to the #1 factor that impacts ROI and that is student loan debt. If you are going to have a great ROI from your college education, you will need to keep your student loan debt amount down. It would be great if everyone can avoid having to take out student loans to pay for their college education but for most, this is not realistic. Honestly, I tell parents who can pay for their child’s entire college education that I think it is good for their child to have to pay back some of their college education if they can’t earn the money during college to pay it off. Just to have them take out the subsidized portion of the Stafford Loan ($2,000-$3,000 a year) allows them to have some “skin in the game”. Then they know they are investing in their own education and if they slack off or get lazy, they know that it is costing them. What is a great rule of thumb for how much in student loans a student should take out to pay for college? You should keep your total amount of student loans over four years under the amount of your projected starting salary. For some professions, this means keeping it under $30-35,000, for others in professions that pay more, this could mean keeping it under $50-60,000. Nevertheless, if your total student loan debt over four years is more than your initial starting salary right out of college, it is going to be more strenuous and you will need to make some life decisions to be able to pay the debt off. However, this decision shouldn’t be considered while in college or after you graduate. If you applied to the appropriate colleges you knew going into the application process and then in the decision process and were wise about total cost, merit scholarships, internship/networking opportunities, location and what major you will or may pursue, you already have made a very wise decision on ROI that will pay large emotional, physical and financial dividends for years to come!
1/2. How Do You Approach Life After College?
Based on a book by Jeff Selingo titled, “There is Life After College”, Twenty-something’s nowadays transition into adulthood in one of three ways. They’re either SPRINTERS, WANDERERS or STRAGGLERS. Click here for a great two page document that explains these transitions to adulthood in detail.
Resources from “Return on Investment in College Admissions” Presentation:
Earning College Credit While in High School– College Counselor Corner Blog Post
“Choosing Your Major” by Alex Chediak
“Vocation Plans” by Alex Chediak
“Finding Colleges that Offer Big Scholarships”– Lynn O’Shaughnessy
“New FAFSA Changes: Winners and Losers”– Lynn O’Shaughnessy
“What Are Soft Skills and Why Are They Important?”– College Counselor Corner Blog Post
“Sprinters, Stragglers and Wanderers”– Review of book titled “Life After College” by Jeff Selingo
