Note: This post was submitted to Student Caffé by Andrew Rombach. We would like to thank him for his submission and credit him as the author of this blog post. Andrew is a content associate at LendEDU, a financial product marketplace and consumer education website. Andrew graduated from college in 2016 with his own chunk of student loan debt; now he is working to pay it off slowly but surely. Learn more about LendEDU on Crunchbase.
College might be seen as the gateway to adult life, but it’s also very expensive—in terms of both money and time. In order to get the most out of your time in college, you need to view the entire experience as an investment of its own; in fact, it’s the first big investment you’ll ever make. Like any investment, there’s both a risk and reward, and it’s obvious which of those is preferable.
Seeing it as an investment helps you navigate college with the right mindset; it can motivate you to make decisions that are going to pay off. After all, investing three to five years and tens of thousands of dollars is no small thing. Without a decent return on investment (ROI), like a valuable degree or job prospects, you’re wasting an incredible amount of time and resources.
Maximizing the return on college is easier said than done, but there are a few tricks that can help.
Think about the cost of tuition.
Overall, the cost of college should be a huge consideration for any student; many universities cost tens of thousands of dollars. If you aren’t careful, over four years that number could exceed six figures.
While many students look to Ivy League schools and other prestigious institutions to attend as their first choice, there are plenty of highly regarded schools that are much less expensive. Each career field has a number of top schools, and many of them are public institutions that would still look fantastic on a résumé while costing thousands less than their private counterparts.
Before sending out applications to costly private schools or Ivy League institutions, do some research and find the top 10 schools in your desired career field. You might be surprised to find that for some fields, a public university is actually the best choice—and the least expensive. If you’re lucky, you may even find that a school is close enough to home for you to live with your family, which would save you even more money on room and board.
So the question you need to answer is this: What is the upfront cost of an education? It’s important to know the answer if you’re viewing college as an investment. After all, it defines how much you’re investing in your future, repaying over time, and increasing your net worth.
Think about the cost of financial aid.
One of the uncomfortable truths about going to school is that it’s very difficult to pay for out of pocket. Most students will rely on some sort of financial aid in the form of scholarships, grants, and/or student loans to help cut costs. Simply knowing that there are three types of financial aid means that you have options, so you can make decisions that will impact your return on investment.
For starters, the cost of college will be lower if you can secure scholarships and grants. These are often dubbed “free money” because they do not require repayment. They’re essential to defraying the cost of college, and if you can cover tuition with free money, you’ll be sitting pretty in terms of ROI.
If you can’t get free money, then you’ll probably need to take out student loans. Student loans require repayment with interest, and since they have interest, they generally increase the cost of college. You want to limit student loan debt throughout college as best you can. Taking on too much debt can lead to financial problems down the road, and there’s a chance it could cut into your future net worth considerably (i.e., taking out too many loans to pay for your initial investment [college] could make for a bad investment).
Think about your future salary.
Not all majors are created equal, especially when it comes to future salary—or a graduate’s ability to get hired at all. While you might have your heart set on a particular major, the data show that students who major in “soft” fields make far less money over time than students who enter other fields. For instance, sociology may have a poor return, especially for students who went to expensive schools, since the average annual salary for a social worker is only $42,000.
Ensure that the career field you choose will offer the return you need on your investment, or a salary that quickly overcomes the overall cost of attending college. That may mean passing up your dream of being an art major, and instead pursuing a career in science, technology, engineering, or mathematics—fields commonly known as STEM. Statistically speaking, STEM majors get hired more often than their non-STEM peers, progress in their careers sooner, and make more money over time.
Your future salary determines your net worth down the road as well as your immediate ability to save, pay off debt, and more. It’s one of the main reasons to go to school in the first place, and it’s definitely tied to your ROI when it comes to college. Remember, though, that having an education in the first place (no matter your major) gives you an advantage over individuals who never went to college. The soft skills you learn in college, like how to talk to people and think critically about problems, will help you succeed later on.
The long and the short of it:
College is an investment. It is expensive, takes years to complete, and requires a high level of discipline and commitment. Viewing it as an investment instead of merely an experience could be critical to your future success. If you are planning for college and want to treat it as an investment in your future, ask yourself a few questions:
- Is your school choice the best value for your money?
- Your scholarships will go further at a less expensive school, leaving you better financially situated at graduation and with fewer loans to pay back.
- When it comes to financial aid, are you looking for the best opportunities?
- Are you trying to get a useful degree?
- With a degree in hand, you need to think about what sort of future salary you can expect as well as your future job prospects. Do something you enjoy, but definitely find a way you can get paid to do it.
These three factors will determine the return on your first—and possibly biggest—investment.