This simple student loan ROI calculator is a tool for people looking to understand if going to school is the right financial decision.

The calculation is pretty straightforward and shows the net present value (value of all future earnings in today's dollars) comparing if you go to school or not.

The bottom line based on this calculation is you will receive a positive ROI on $26k on student loans if you earn $5/hr more once you graduate college.

If you make $15/hr now but after 4 years of college you earn $20/hr than a $28k student loan will be worth the investment.


NOTE – This model is far from “perfect” but gives you a general idea of whether or not


What Can A Simple ROI Calculator Not Account For?

Here is a great podcast by the guys from Freakenomics on this topic – Part 1Part 2

The return on investment for student loans is somewhat complicated because it is unique for everyone and you have to consider many variables:

  • Where the borrower decides to go to school
  • What the borrower decides to study
  • How well the borrower does academically and socially

All of these factors lead to what type of job the borrower will win, and how much money he or she will earn at that job.

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.

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.