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Going to college? Determine your Return on Investment First

By Larry Lane for www.InvestorZoo.com

In order to be competitive in your chosen field, you’ve decided you need a four year degree.
What is the average income for high school and college graduate? Measured in 2006 dollars, the
median earnings for adults’ ages 25–34 who worked full time throughout a full year increased as
education level increased this pattern held true for males and female across all ethnicities.

The earnings difference between those with at least a bachelor's degree and those with less
education increased dramatically between 1980 and 2006. However, between 2000 and 2006,
there was generally no measurable change. For example, in 1980, those with a bachelor’s degree
or higher earned $14,600 more than those who did not earn a high school diploma

. In 2000, this difference increased to $23,400. In 2006, the amount increased to $23,600. Click
here for the studyhttp://nces.ed.gov/fastfacts/display.asp?id=77

Median annual earnings of all full-time, full-year wage and

salary workers ages 25–34, by sex and educational
attainment: Selected years, 1980–2006

[In constant 2006 dollars]

All education High school diploma Bachelor's degree or
Year levels or GED higher

Male

1980 $43,700 $41,400 $48,900

1985 41,200 37,500 51,400

1990 38,600 33,900 49,000

1995 36,400 31,800 49,300

2000 39,800 33,900 53,900

2005 36,100 31,000 51,600

2006 37,000 30,000 50,000

Female

1980 $29,400 $26,900 $36,300

 1985 30,000 26,200 39,100

1990 30,500 24,700 40,100

1995 29,100 23,300 39,700

2000 31,600 24,600 41,600

2005 31,000 24,800 41,300

2006 31,800 24,000 41,000

As you can see from the above table, the average salary of a high school graduate is in decline,
while those who have graduated college have stayed consistent. If there is one indication you
take away from this table, you need a secondary education to stay competitive in today’s market.

SOURCE: U.S. Department of Education, National Center for Education Statistics.

(2008). The Condition of Education 2008 (NCES 2008–031)

Figure 2: Estimated Cumulative Lifetime Earnings by Sex and Degree Level in the United
States http://www.incontext.indiana.edu/2009/mar-apr/article1.asp

The average high school graduate will make about $700,000 to $1,000,000 on his/her lifetime
versus a bachelor’s degree which will generate $1,400.000 to $2,100,000.
Your choice of college degree can have a huge effect on your lifetime earnings. While money
can’t buy you love, obtaining a good career will open you to more opportunities. You will have
the ability to save more for retirement through a 401k or Roth IRA. You will have the means to
purchase a house in a good neighborhood allowing you to build up equity and homeownership.
You will be eligible for a larger social security check when you retire.

Now that we’ve established the importance of a degree, what career path you choose is vital. The
average liberal arts major will take home $30,600 while the first year chemical engineer will
bring in over $60,000. Start thinking as your college education not only as an investment in
knowledge but in your retirement as well.

When considering an investment in your higher education, you must factor in all of your
education expenses. This includes tuition, room, board, travel, books, lab fees, food and other
expenses. What school you choose is another important factor. Is spending $100,000 versus
$25,000 for a bachelor’s degree a huge benefit? Do you really want to graduate college $100,000
or more in debt before starting your new career? To pay off your debt of $100,000, you will pay
$1,000 per month and it will take you until you are 32 to 35 years old to pay off your education.
This assumes a 2-3% interest rate. During those 10 years, chances are you will be putting a huge
strain on your finances. Most likely, you’ll have to put off the purchase of a home, delaying
building equity in your house you couldn’t buy. It will also put a strain on your ability to invest
in your company’s 401k or other retirement vehicles.

Not to add additional pressure, but choose your education and school wisely. It will affect the
rest of your life.

What is the best return on your investment? Since the first two years of your education will
consist of mandatory classes such as gym, Math and English 101 etc, some may consider going
to a state school or community college. This is especially beneficial in case you’re still exploring
your major and career choices. In most cases, you can transfer those basic courses over to your
next college. After all, when your employer is looking at your resume, they’ll be looking where
you’ve graduated from, not the road you took to get there.

Weigh your educational options and spend your dollars wisely. The time you take to plan now,
will pay dividends well into your future.

Larry Lane is the editor for InvestorZoo.com, a social network specializing in personal finance