College Finance

College Finance

How to Calculate ROI of a College Degree


College is a dream for many. Unfortunately, ever escalating costs make college feel like the impossible dream. In 2019, student loans exceeded both credit card debt and car loans. At nearly $1.6 trillion, economists believe loan debt will reach $2 trillion by 2021 and $3 trillion before 2030.

Planning your educational and financial future will require more than putting together numbers. A good idea may be a financial wellness course. It’s a solid place not just for planning college but developing a sound financial future. “The process of borrowing money to pay for college is complicated and only 16% of millennials are considered to be financially literate. ” said Ken Ruggiero, Chief Executive Officer at Ascent Funding. With this level of misinformation in the college education system, students must take control over their finances and empower themselves with knowledge to make the right financial decisions for their future.

If you’re looking to continue your education, consider your ROI. This article will cover how to calculate the ROI of a college degree.

Putting Together Your ROI

A college degree is worth the investment. What you need are smart financial decisions. Put together the rate of return, or ROI, on what you’ll spend to get what you want out of a continued education.

ROIs are metrics that measure the potential gain from an investment. The ratio compares gain and loss against the investment relative to the cost. Get ROI by subtracting investment (all college expenses) from the investment’s final value (potential financial future), dividing that sum (net return) by original investment cost and multiplying that number by 100. You can use an ROI calculator to work the equation.

Interpreting ROI

If final figures are positive, expect your return on college investment to exceed costs. A negative number means expected financial stability after college will not meet expectations. This doesn’t eliminate college altogether. You may have to consider different institutions to get a ROI that works for you.

Specific Steps: Sample of ROI & College

Net Price

The net price is the cost of full attendance at the campus. Room and board, books, tuition, travel expenses minus scholarships and other financial help. Account for inflation. What a freshman pays won’t necessarily be what you pay every year. Likely not even every semester. According to Urban Institute, in 2015-2016, college costs on average ranged between $625 and $5,000 per year. According to, assume costs will go up 1%-2% each year.

Potential Debt

You’ll need your financial aid package or an idea of it. Deduct any loans, grants and scholarships you have or expect from total costs. Consider what you can contribute to manage college (savings, part-time employment). The answer helps you estimate what kind of debt is on the horizon.

Earning Potential & Missed Income

What you hope to earn is key to college ROI calculation. You can’t make smart choices about college and financial ramification without understanding salary potential. If expected annual earnings exceed tuition and loans (be sure to know how lenders want to be paid and take that calculation into expected salaries and expenses). If the salary outpaces debt, you’re on the right track.

If you’re looking to change careers and go back to school, factor into the ROI the salary you’re going to lose. If you forgo an $80,000 salary to go back to college for four years, you’ve essentially lost the opportunity to earn $320,000.

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Clean How Students with Divorced Parents Can Maximize College Financial Aid


College is quite expensive, as you may already know. The money required to apply for college makes parents start saving even before their child is born, depending on income.

As such, you can imagine how hard it is for students with divorced parents to get their hands on just enough money to apply for college and not worry about too much afterward.

Because of this, today’s article will take a look at how those students can maximize the college financial aid that they can get. The government has some measures in place, meant to help people ensure their education, so to say.

FAFSA Regulations

Students are required to apply for something called FAFSA. This is a Free Application for Federal Student Aid, and it takes into account two years of income.

FAFSA manages married and divorced couples in different manners. As such:

  • When it comes to married couples, the FAFSA takes into account the income of both parents.
  • On the other hand, when it comes to divorced couples, the FAFSA only considers custodial parents’ income.
  • The only condition for the latter is that the custodial parent is clearly specified in the divorce agreement. This is why couples should not engage in a divorce without the aid of family law attorneys. If they forget to take care of something, their children may suffer the consequences.

Naturally, students can also work with their parents and further maximize college financial aid.

FAFSA Peculiarities

FAFSA is a relatively permissive application/form. Parents that wish the best for their children can make the system work in their favor. Students can do so as well, mainly if they express their wish to attend college.

Given this, here are a couple of things that can maximize financial aid:

  • The divorce agreement could name as the custodial parent as the one with a lower income. Moreover, the parents are also allowed to keep low “paper earnings” for the custodial parent so that the student (their child) enjoys increased financial aid.
  • Divorce is not mandatory – more or less. Students with separated parents can apply for single-income FAFSA if their parents have been living separately for at least half a year.
  • If the student’s custodial parent marries again, the new parent will have to be introduced to the FAFSA form.
  • Divorce agreements may not be FAFSA friendly, particularly when it comes to alimony and such. If that’s the case, divorced parents can amend the parenting plan once their child is close to college age.

The Bottom Line

Last but not least, keep in mind that colleges may come with personal financial policies that don’t adhere to the federal ones mentioned in FAFSA. It is recommended that both students and parents reach out to the institution and get informed.

As for the issue at hand, students with divorced parents could further boost their finances if their parents are on alert. The parents only have to consider that their child is about to go to college and take it seriously!

References and Sources

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