Is Returning To College Smart?

Are you considering returning to college ? If so, there are two important questions you need to answer:

• Is going back to college worth it?
• If so, how can you make it happen financially?

Let’s tackle the first question now and look at it from a financial standpoint only.

The only way to determine if college is a good investment or not is if you have proper information. You have to compare:

1. What you earn now and what you are likely to earn over the next 10 years if you do nothing. After all, you can find great work even with no college certificate or degree.
2. What it will cost you to go back to college. (Make sure to include all your education expenses of course. But don’t forget to include the income you’ll give up if you have to quit your current job in order to pursue your 4 year degree. Also, remember to take advantage of ways to save a ton of money while getting your degree.)
3. How much will you make after you finish college?

Let’s look at the example below. Line 1 illustrates a hypothetical person who currently earns $35,000 a year. If she doesn’t go back to college, she’ll get 3% raises per year. Simple.

If she goes to college it will cost her $20,000 per year (in this example) and she’ll work part time for four years. She’ll earn $15,000 a year during that time but she’ll be able to pull down a sweet $75,000 per year after she graduates college.

Line 3 shows you what this person’s net cost is to go to school and line 4 shows you the cumulative cost.

In this example, this person is over $166,000 worse off by going to college on the day she graduates. Does this mean going back was a mistake? Not by a long shot.

In the 4th year, she starts earning more than twice what she could have earned had she not gotten the degree. So if you review lines 3 and 4 again, you’ll see that by year 9, she’s more than made up for her investment. And from that point on, she earns over $40,000 a year more than she otherwise would. To me it seems like going back to college is a good move for this person. But there are a few really important conclusions I’d like you to draw here.

1. In order to make a good decision you need information. Don’t try to decide about going back to college unless you know what it’s going to cost you and what your income is going to be both during and after you graduate. Your numbers don’t have to be exact but they have to have a basis in reality in order to use them.
2. You can and should know how long it will take to recoup your investment. Also, you can and should figure out what your cash flow is going to look like during your school years.

Without doing this it will be impossible to set up a plan to fund your education. And if you don’t set up a plan you run a high risk of not being able to complete your studies. That would be far worse than had you not gone back to college in the first place.

College is not an experience in my opinion. It is an investment and as such it is either worthwhile or it isn’t. I hope that before you make a decision like this you get the information you need and then make a smart decision using the model I illustrated above.

Did you go back to college? Was it worth it? Why or why not?