How to Calculate is College Feasible

June 7, 2024
Kyle Gundersen
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Deciding whether college is a feasible financial investment requires a thorough analysis of costs and potential returns. Here’s how to approach this decision mathematically:

Step 1: Calculate Total College Costs

  1. Tuition and Fees: Research the annual tuition and fees for your chosen institution.
  2. Room and Board: Include the cost of on-campus housing or estimate off-campus living expenses.
  3. Books and Supplies: Account for textbooks, software, and other educational materials.
  4. Miscellaneous Expenses: Include transportation, personal expenses, and other incidentals.

Example:

  • Tuition and Fees: $10,000 per year
  • Room and Board: $8,000 per year
  • Books and Supplies: $1,000 per year
  • Miscellaneous: $3,000 per year

Total Annual Cost: $22,000

Total Cost for a 4-Year Degree: $22,000 x 4 = $88,000

Step 2: Estimate Potential Earnings

  1. Average Salary: Research the average starting salary for graduates in your chosen field.
  2. Salary Growth: Consider potential salary increases over time based on industry data.

Example:

  • Starting Salary: $50,000 per year
  • Estimated Salary Growth: 3% annually

Step 3: Compare Costs to Potential Earnings

Calculate the break-even point where the additional earnings from having a degree offset the costs of obtaining it.

Example: Assume $88,000 total cost and $50,000 starting salary with 3% growth:

  • Year 1: $50,000
  • Year 2: $51,500
  • Year 3: $53,045
  • Year 4: $54,636
  • Year 5: $56,275

Total earnings over 5 years: $265,456

Step 4: Consider Opportunity Costs

Factor in the income you could have earned if you worked instead of attending college.

Example:

  • Average non-degree job salary: $30,000 per year
  • Earnings over 4 years: $30,000 x 4 = $120,000

Step 5: Analyze the Return on Investment (ROI)

Calculate the ROI by comparing the net gain from a degree to the cost of obtaining it.

Example: Net Gain from Degree: $265,456 (5 years of earnings) – $88,000 (college costs) – $120,000 (opportunity cost) = $57,456

Practical Examples

Feasible Scenario:

  • Field: Engineering
  • Cost: $88,000
  • Starting Salary: $70,000
  • 5-Year Total Earnings: $372,530

Net Gain

$372,530 – $88,000 – $120,000 = $164,530

Non-Feasible Scenario:

  • Field: Arts
  • Cost: $88,000
  • Starting Salary: $30,000
  • 5-Year Total Earnings: $159,661

Net Loss:

$159,661 – $88,000 – $120,000 =$48,339

Conclusion: Is College Feasible?

  1. Positive ROI: If the net gain from earning a degree is positive, college may be a feasible investment.
  2. Negative ROI: If the costs outweigh the benefits, consider alternative education paths or careers.

By evaluating these factors, you can make a well-informed decision about whether college is a worthwhile investment for your specific situation.