Note: MOF may earn from links on this page, but that doesn't affect our editors' opinions or evaluations.
Tuition fees to state universities have increased dramatically over the last decade making dreams of many youngsters in America hard to achieve. The sticker price of college fees is only a part of the entire cost of college. Other than that there are hostel, mess and various other expenses that we fail to address. A college degree can be a big deal; the best approach to pay for college is having a long-term educational savings plan curated to fund a college education. However, this is not the case in many cases and which leads to huge amounts of debts.
Given the ever-increasing price of education, it often creates a conflict about college education being an investment or expense considering whether the cost of a college education will or will not pay off well in future.
Investment or Expense?
An expense made is often written, but a return is always expected on an investment. Education always has been considered as a good financial investment which would ensure higher lifetime earnings in return. However, some financial advisors now discourage parents from considering a college education as an investment.
Beatrice Schultz, CFP, often explains to her clients how college is not an investment but an expense to them. She says that when a student pays for it, it could be an investment but if parents finance it, it's an expense.
According to Schultz the parents cant fund their retirements with their kid's college degree. If they choose to pat for their kids, the financial returns from college won't come to them directly.
Undergraduates are allowed to take only a limited amount of subsidised and unsubsidised federal loans per year (check the official website of the US Government for more details.). Parents end up covering the major portion of the costs as federal student loan along with scholarships only covers some part. Even if one considers taking private loans, parents have to cosign, again they are risk bearers if students fail to repay.
Return on Investment (ROI)
Mathematically ROI is calculated as,
ROI = (Current value of investment – Cost investment) / Cost of investment
Return on Investment(ROI) is the first thing that an Entrepreneur would think of whenever he/she devises a plan to launch a new business. Even if you have no background in finance or commerce but we all think of this one ratio when it comes to investing. Be it in a new business or an investment in real estate or share market.
Similarly, a student or parents always think about this ratio knowingly or unknowingly while picking up career.
How can we ensure higher ROI?
One can ensure better ROI by selecting a lucrative field and education that provides boundless scope which in return would ensure better-paying jobs. Another approach can be spending less on getting that degree by reducing the expenses and reducing the debt parents and student needs to borrow.
Also, I would like you to check out America's Top Colleges list by Forbes which ranks the schools on ROI factors. These factors include how well the students perform during and after college. It also considers how much debt they are forced to take.
Perk to the readers:
As promised in the previous blog here is another $1000 scholarship. This scholarship is offered by Nancy Etz.
February 1, 2021.
Check your eligibility and fill-up the form in order to claim the scholarship.
For more details on Nancy Etz scholarship click here.
Previous blogs which offer similar scholarship options
DM me @monkoffinance to ask for similar scholarships offered by various private institutions