How to Determine the ROI of Your College Major

| December 29, 2013
English: Day 3 of the protest Occupy Wall Stre...

English: Day 3 of the protest Occupy Wall Street in Manhattan’s Zuccotti Park. (Photo credit: Wikipedia)

Getting your college degree has a lot of advantages. Oftentimes, there are more advantages than there are disadvantages. At the end of the day, college opens up more opportunities, a higher salary and better quality of life. However, there are some degrees that have a poor return on investment, or what is otherwise known as an ROI. When it comes down to it, determining if your college experience will be fiscally cost effective takes a careful combination of mathematics and research. According to insiders, there are some college degrees that just aren’t worth the initial investment, especially if you have to factor in college loans. Here is how to determine the ROI of your college major.

First, you have to look at all your initial costs. For instance, how much is going to college going to cost you over a four to eight year period. If you are becoming a doctor, you may have to factor in costs for the next ten or so years, especially if you plan on getting your doctorate degree. When you calculate your college expenses, you want to factor in tuition, living expenses, and whatever other costs that you will incur. Having this figure is important, because it will be the common denominator in your overall equation.

After you have a rough estimate of what your total college experience will cost you, you want to look at whether or not you need a student loan. Not all student loans are alike. For instance, you want to know if your loan is covering part or all of your college experience. You also want to factor in your interest rates and how much time you have to pay back the loan. Some loans can have an incredibly high interest rate with low monthly payments, which could end up being a bad investment. So, having this financial figure in mind is important to factor into your ROI equation, but also to find out if you are getting a bunk deal on your loan.

Next, you want to do your research on the different careers your major can afford you. If you visited and now you plan on getting your degree in health informatics, you want to know how much these potential careers will pay you annually. As a health informatics specialist, you may be making between $50,000 and $100,000 dollars a year, which is a pretty good return if you think about it.

Lastly, once you have all your figures, you can start calculating. Basically, you want to divide the total cost of your college experience with your annual salary. After that, you want to find out how many years it will take to break even on your college experience. Most of the time, your ROI will be good, but some college majors take much longer to break even. So, if you are on a fast track to start a career, you may not want to invest a few hundred thousand dollars in going to medical school, because you may run out of money and it will take too long to start making the salary you want and to pay back your loans. At the end of the day, calculating your ROI is important when planning your financial future.


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Category: Career, Financial Advisor

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