If you’re preparing to go to college, you’ve probably realized that it’s a major financial decision and one that you shouldn’t take lightly.
According to The College Board, the average cost of tuition and fees at a public four-year university has tripled over the past 30 years. At public two-year and private four-year schools, that number has more than doubled.
Families often use a variety of ways to pay for college including student loans. According to The Institute for College Access & Success, two-thirds of graduating seniors had student loan debt in 2018, with an average balance of $29,200.
When thinking about how much you should borrow to pay for college, it’s a good idea to consider the return on investment (ROI) on your college degree.
Here’s what you should keep in mind, and what you can do to maximize your return.
Is college worth the cost?
With rising tuition costs, some people are rethinking whether or not college is worth the investment. But when it comes to its impact on your earning potential, getting a degree still pays off.
Third Way, a national think tank, found that the typical college graduate will earn roughly $900,000 more than the typical high school graduate over their working life.
While college is expensive, your degree can help you earn far more money over the length of your career, long after you pay off your student loans.
How to improve the ROI on your education
College can be worthwhile. However, its ROI is dependent on several factors. You can boost your ROI by following these four tips before heading to school.
1. Find out what percentage of students graduate on time
It’s important to graduate on time to get the most value for your money. Unfortunately, that isn’t always the case. According to the National Center for Education Statistics, only 41 percent of undergraduate students seeking a bachelor’s degree at a four-year university graduate within four years.
Many students take six years or even longer to complete their degrees. Each year that you stay in school beyond the four-year mark hurts your ROI. You end up paying more money in tuition and fees, and you lose out on starting your career and earning income.
When deciding where to go to school, pay attention to the university’s graduation rate. Ideally, you want to find a school with a better-than-average graduation rate. Some schools have programs in place, including academic advisors and counselors, to help students graduate on time. Use CollegeResults.org and enter your selected school’s name to see its graduation rates.
2. Choose a school that encourages real-world experience
Having work experience is likely to increase your chances of getting a good job after college. To build up your resume, you should plan on completing at least one internship while in school.
To get the most value from your education, and to get a head start on your career, go to a university that values internships and real work experiences. Some colleges build internships into their curriculums, and completing an internship is mandatory before you can graduate. Other schools have robust career development centers and can help connect you with internship opportunities.
Talk to your selected school and ask about what programs they have available to help students get work experience.
3. Select a major that interests you
Picking the major that will result in the highest-paying job might sound like a great idea, but that strategy can backfire. Choosing a career simply for its earning potential can cause you to end up in a major that doesn’t interest you or doesn’t play to your strengths, causing you to fall behind. Or, you may get discouraged and end up switching majors which might cause you to stay in school longer.
It’s incredibly common. According to the National Center for Education Statistics, one-third of enrolled students changed their major at least once within three years. Students studying mathematics, engineering, and computers — lucrative fields — ended up switching majors at a much higher rate than their classmates studying other majors.
Instead, choose a major you’re genuinely passionate about. The course material will be more interesting and engaging to you, so you’re more likely to finish the coursework on time.
4. Only borrow what you need
With student loans, you can borrow enough money to cover the total cost of attendance, including tuition, room and board, fees, and textbooks. However, borrowing the maximum can cause you to end up paying more than you expected.
When applying for loans, only borrow the minimum you need. You can minimize how much money you need with these tips:
- Complete the Free Application for Federal Student Aid (FAFSA): Fill out the FAFSA as soon as possible to ensure you get the maximum amount of aid you’re entitled to, including grants and federal student loans.
- Apply for grants and scholarships: Apply for grants and scholarships through sites like FastWeb or Scholarships.com to get free money to pay for college that doesn’t have to be repaid.
- Work part-time: If possible, work part-time either on-campus or off. You can use your earnings to cover some of your expenses, reducing how much money you need to borrow in student loans.
- Shop around: In some cases, you may qualify for loans with lower interest rates by working with a private lender. Private student loans can help fill the gap so you can complete your degree.
Paying for college
While a college education can be costly, it still can have a high ROI. By planning and choosing a school wisely, you can minimize how much you need to borrow to pay for school, maximizing your degree’s return.
