ROI of a 4 Year University — UW
Going purely by numbers, what is the ROI on the various degrees offered by higher education? What do you need to know before you can calculate the ROI or when you'll be able to pay back student loans if you've taken any. Is it a better option to go straight into work after high school?
Cost of a 4 Year University — University of Washington
Let's choose the University of Washington as an example (as I'm an alumnus). Based on their website on an Annual Student Budget for 2021 - 22, these are the breakdown in costs. I'll be using their Seattle campus and not their Bothell or Tacoma campuses.
U of W Seattle Campus 2021 - 2022 Academic Year Student Budget
“Annual” means the school academic year which is 9 months (Oct - Jun). I'm also showing costs for Resident students and not Non-Resident students, whose tuition would be $39.114.
Assuming that you are a resident and living with your parents (or relatives) in order to save on rent, utilities, & food costs, the total costs for your first academic year would be $23,169. This doesn't account for the other 3 months and what the costs of those months would incur.
Costs for years 2, 3, & 4 would be very similar (not taking into account inflation or tuition price increases). The only line item removed from the list above would be the "New Student Enrollment & Orientation Fee" which accounts for $354.
Not accounting for costs incurred during the 3 months not attending University, inflation, increase in tuition, and other expenses.
Finacial Aid
It's been many years since I've attended university so it's a bit fuzzy as to how financial aid works, so please feel free to correct any incorrect information.
Based on studentaid.org, it looks like your financial aid package is determined by the Free Application for Federal Student Aid (FAFSA), which needs to be filled out annually. Based on raise.me, these are the type of aid a student could receive.
Student Loans
What would be an average financial aid package look like for a UofW student? What would it be for the four years it would take to complete a degree? No clue as there are various factors in determining the types and amount of aid a student would get, but based on collegefactual.com the average loan amount is $5,704 per year. If the 1st year of college is $23,169 - $5,704 (student loans) = $17,465 remaining, then the student needs to have gotten grants and/or other scholarships, saved for college, or gotten help from family to make up the difference.
But let's assume that the student did get some form of grants and/or scholarships and kept their student loans to $5,704 per year. That would translate to $22,816 student loans upon graduating from UofW.
Degree/Major
Okay, our fictional student has graduated from the University of Washington. What degree did this student graduate with? Based on the degree, that student will have different opportunities & earning potential. Let's take a look at a few.
Based on niche.com, I took the top 4 majors and did a quick search on Indeed based on major, skill level, and location. I also listed four job listings per major which had compenstation amounts on the listing.
Cost of Living — Seattle
I've pulled cost of living prices from various sources and have covered the basics of costs. I could be over or under, but you can adjust numbers based on your own experiences/costs. Numbers are also based on the current prices/estimates as of today when I'm doing the research. I've also linked to all sources. I'm sure I'm missing things like costs for internet, cellphones, gym memberships and more, but I just wanted to get a basic average monthly cost.
Based on the numbers below, the monthly cost of living for an individual in Seattle living outside of the city is $3,838.86 a month.
Based on these numbers, how would a student who graduated with the four top degrees fair if they got one of the four jobs? See the numbers below.
Four our Psychology major, the only job that would allow them to contribute to their 401k & have a positive remaining amount from their monthly gross income is the UX Researcher job. All other positions would put them in the negative each month.
Our Communication major did a little better in that one position (Community Relations Coordinator) was able to contribute to their 401k & have a positive remaining balance. One additional job (E-Commerce Manager) had a positive remaining balance, but that's only if they do not contribute anything to their 401k contributions. The other two positions would put our student in a negative each month.
Our Biology major was the same as our Psychology major with 3 of the 4 positions ending in a negative each month. The only positive was the Biotechnology Sales Engineer position.
And finally our Computer Science major. They did well with 3 of the 4 positions leaving our student with a positive balance at each of the month, but only one allowed the ability to contribute to their 401k.
Okay, so finally. What is the Return on Investment of a 4 year university? It depends.
Next week, I'll take a closer look at all the numbers and see if there one reliable source.
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