What is the ROI of student loans? Are student loans really a good investment? “ROI” is an acronym for Return on Investment and is something every borrower should consider when making the decision to obtain a student loan or any other kind of loan.
The return on investment for student loans is somewhat complicated because it takes several variable factors into account: Where the borrower decides to go to school, what the borrower decides to study and how well the borrower does academically and socially. All of these decisions lead to what type of job the borrower will win, and how much money he or she will earn at that job, which in turn translates into how much money the borrower may save versus how quickly the loan may be paid off after graduation.
To calculate the ROI and decide if student laons are a good investment try…
Where You Go To School Matters
One of the biggest factors involved in calculating what is the ROI of student loans is where the borrower has gone to college. According to U.S. News 2013 College Rankings and Reviews, median starting salaries for those who graduate from higher-ranking schools start at $58,300 per year and rise to a $137,000 mid-career median.
Complimentary to this study is another by U.S. News which lists colleges whose students graduated with the most debt. Students graduating from these schools in 2011 carried average student loan debt balances between $18,000 to $28,000 more than the $26,224 national average.
Lifestyle Choices Also Matter
Lifestyle choices after graduation also play a large part in calculating ROI. The more the borrower plans to spend on cost of living after graduating from college, from the little details like how many times a week he or she goes out to eat, to big life choices like when to get married and/or have children, the longer it will take him or her to pay back the loan, thus lowering the return on investment.
Is the rising cost of higher education worth it?
According to the College Board, it is better to go to college than not, citing an average 54% more students who went to college seeing a return on their investments over the life of their careers. The difference for those who choose to go to university versus those who stopped their education after high school has become steadily (and some say, alarmingly) more pronounced in recent years. Since 1975, men with a college education – a bachelor’s degree in this case – have enjoyed the steady average earning potential of between $50,000 and $60,000 per year in dollar amounts equivalent for 2008, while men without college degrees have seen their earning potential take a nosedive from $50,000 per year to just more than $30,000.S
Good to Know
Potential borrowers should keep in mind that the numerical information provided in calculating what is the ROI of student loans is based on averages, and that while averages can be helpful in determining the 100,000-foot view of a student loan return on investment, each borrower as an individual should consider carefully and closely – take the 10,000-foot view – all of the factors from his or her own life which will have bearing on their student loan and its return on investment.