Determining Your Return on a College Investment

College fees have skyrocketed over the last two decades, giving rise to a vital question: Is college education worth the money? Can I get back a return on my investment by earning a high salary and if so, how soon? To quote Charles Miller at a time when he chaired the USDE's 'Commission on the Future of Higher Education', "If college costs continue to escalate at this rate, you may reach a point where the investment simply isn't worth it."

Why is Higher Education So Costly?

We all know that college education is expensive, but why is it so?

Primarily the country's institutes of higher education are competing against each other to provide top grade facilities not only in terms of classrooms and education but also to have the best gym, swimming pool, cafeteria, and other such facilities. This race is not just to have a bigger talent pool to select from but also the privilege of refusing a bigger number of applicants. This would hike up the institute's position in the U.S. News and World Report ranking, giving it the status of a 'difficult to get into' school. Another major reason that is responsible for the increased costs of higher education is the growing number of college-age people, which is expected to rise from 17.5 million in 1997 to a whopping 21.2 million by 2010. Colleges with a good reputation have not expanded to keep pace with this growth. It is therefore inevitable that in this demand-supply mismatch, the price of higher education has shot up. Also read Options for Financial Assistance and Aid for additional information regarding paying for college.

The Money Spent on College Education
To meet the financial requirements of college education, students and parents take various education loans and financial aids that accumulate over a typical four-year degree program to end at average debt amounts of $20,000. This figure in all probability is exclusive of the home-equity, credit card, and other loans that parents may have already taken. There have been numerous cases (almost 20 percent of students with a debt amount crossing $15,000) of students not able to pay back this huge debt. To avoid getting caught in this situation, avoid taking a loan amount that requires you to pay more than 10 percent of your starting salary.

Is It Worth Spending This Money?
This really depends on the job you get and the amount you are able to save. Though your college degree is your passport to a good job, it is not a guarantee. Take a look at the College Board's web site. A study here reveals that compared to an average high school graduate earning $26,300, a college grad will earn $42,200 annually. This is why spending on college education is worth it.

Some Tips to Make a Calculated Decision:

  • The time for college education does not come without notice; so save early and as much as possible.
  • Maximize the chances of financial aid by early and extensive research and application. You are likely to be chosen for scholarships if you participate in community service, extra curricular activities, and get good scores right from the 9th grade.
  • Spend your 529 money first. The 529 plan is very good for meeting college costs, as your after-tax dollars can be withdrawn to meet any qualified education cost, without an extra tax burden.
  • Try to pick a college that is less expensive but gives almost equal end results in terms of jobs. If a certain company that you wish to join recruits from two or three colleges, select the one that is less expensive, other factors remaining unchanged.

That college education will give you a much better career both financially and productively is not a matter of contention. However, how well you plan for it will make all the difference. Get started as early as the 9th grade, and find a fulfilling and lucrative future. It is important to keep in mind that not all college degrees are worth the same. While degrees in science and career-related studies usually have greater potential to help you earn more, the same cannot be said for college degrees in humanities. There are of course exceptions, and this is only a generalized statement. However you decide to go about it, a college degree should take no more than 10 years to pay off. Make these calculations, so that you are not caught in a future debt trap.

Look at these sites to find out how you can save on college education money:

FreeMoneyFinance.com
FreeMoneyFinance.com - 1
FreeMoneyFinance.com - 2
FreeMoneyFinance.com - 3

For more information check out the following links:

NYTimes.com
Independent.uk
CollegeInfo.com


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