Increasing Your Return on Investment in College

Over the past several decades, the cost of college has been rising at a much faster rate than people’s income in the United States.  What this means is that it`s effectively become a lot more expensive to go to college.  The value of the entire decision to attend is being reevaluated.  Many articles are being written about this – here’s one example.

This means a few things.  For one, it means that students need to be more and more careful about which colleges they choose to go to and secondly, it means that students need to think long and hard about how to increase their return on investment when they decide to go to college.

And so what we`d like to do is spend a little bit of time here thinking about that second point, increasing your return on investment when you decide to go to college.  Then at the end of this post, we`ll come back and talk about that first point which is choosing which college to attend.  College is a unique investment in that you can really control the return that you get from it.  Let`s assume college costs $25,000 a year, so that`s $100,000 to get a degree, assuming you finish it in four years.  Let’s consider that investment versus an investment in, for example, the stock market.  Well, with the stock market, you buy some stock for $100,000 and while you can choose which stocks you buy, once you buy them, you just sit back and wait and see how they do.

College is very different because you can control what that $100,000 returns to you in “value.”  If you take that $100,000 and you basically “buy” a degree from a mid-tier school, party a lot and get a C average, well, the return that you get on that investment will be relatively low in the form of a less prestigious job or a lower salary, et cetera.

Compare that to taking $100,000 and spending it on a degree in engineering from Harvard, for example.  Well, that degree is going to be worth so much more, therefore the return on that $100,000 is going to be so much higher.  It might seem obvious, but it’s an important point to think about.

You should start thinking about this concept early, well before you`re even ready to go to college.  Of course the concept would apply both for college and graduate school for those that are getting PhDs, MBAs or law degrees.  The better that you do in high school (i.e,. higher GPA, more activities, etc.), the better position you`ll be to make those dollars that you`re going to invest in a college degree more valuable.  If you don`t get the right grades or the right test scores in high school, you`re not in a good position to get into the type of a college that gives you a high return on your investment.

So that`s the important thing to think about - college is an investment, but one where you can control the return on that investment.  In a future blog post, we`ll touch upon the first point that we started off making - students might just want to think long and hard about which colleges make the most sense for them, based on the value of the degree they’ll have once they graduate relative to the tuition cost being charged.  They also might want to begin thinking much harder about how AP classes, summer school, and online courses can help reduce the cost of college my increasing the number of credits they can transfer in.  But that’s a topic for another time.