How to do a Cost Benefits Analysis of Going to College
Most today know that student loans are out of control. Part of the reason is students enrolling in programs with no clear plan to pay for the debt incurred. A key way to prevent being hammered with unmanageable education debt is to perform a cost-benefit analysis.
Facing facts, not all college students enter business programs. Those doing so will likely enjoy this information – others are likely to shudder. Another fact is that few High School graduates know anything about a cost-benefit analysis. This article will simplify the cost analysis so that anyone can know before enrolling what to expect financially upon graduation.
About the Cost-Benefit Analysis of Attending College
Polling data indicates that many people today do not believe that the benefits of going to college outweigh the costs. At the same time, polling data indicates that most parents want their children to attend a college or university, so there is pressure.
However, few parents and teens take the time to weight the costs against the benefits of attending college. Those who do will readily determine whether the intended program of study will be beneficial to the graduate or too costly to be of use.
The simple reason most do not perform a cost-benefit analysis is because they do now know how.
A Simple Way to Do a Cost-Benefit Analysis
Doing a cost-benefit analysis does not have to be a complicated, drawn out process. One simple way is to open a spreadsheet. Treat this much like creating a simple budget. In fact, if planning to work while in school, it helps to incorporate a budget into the analysis.
The simplest way to do this analysis is to create a column for the costs of attending one or more preferred colleges.
Add rows for Tuition for each semester attended. Learn how much tuition increases each year and adjust accordingly. Add rows for the cost of books, student housing if applicable, and any other costs which may arise.
Then add a section which considers the expected costs of loans upon graduation.
Add columns which account for the expected wages upon graduation. An excellent source for accurate information related to jobs is the Bureau of Labor Statistics. Keep in mind, however, that BLJ stats are averages – students will enter the workforce at lower than average wages.
Also, consider the role of wages locally. Do a search for job titles and the average wages in the area in which a student expects to live.
Enter the figures into the spreadsheet and a good rule of thumb is to be conservative when entering expected wages.
Drawing Conclusions from the Cost-Benefit Analysis
Once projected wages and future costs of attending college are in the spreadsheet, simple formulas subtracting costs from wages can provide an understanding needed to draw conclusions.
This is where adding a projected living budget really comes in handy. If all the costs upon graduation exceed the anticipated wages, a student may want to reconsider a few things.
Can a less expensive technical school provide the needed skills?
Can the student plan to live in a more affordable location upon graduation?
Will the wages of the planned career adequately cover the costs of attendance?
Would a different degree program better serve the needs of the graduating student?
These are important questions, but only by planning the costs and expected benefits (wages) can a student know beforehand whether the desired college and/or program will provide well enough to make it worthwhile.
A cost-benefit analysis need not be complicated, but it does need to be done.