With college costs continuing to rise, more students and their families are asking the question about whether the cost of college is worth it.  I came across this tool today from PayScale which calculates a Return on Investment for over 1,000 U.S. colleges.  This presents a great opportunity to have students investigate this issue further.

Here are some questions to ask your students as they use the tool:

• How is the Return on Investment calculated? Write out the formula describing all of the inputs that go into this calculation.
  • Methodology described here
• Where does Payscale get the data for the salaries of college graduates?
• What figures do they use to calculate Total Cost?  Do you feel this is an accurate representation of what most students pay?
• Why does the number of years to graduate from college matter?
• What might average loan amount tell you about the school’s financial aid program?

There are several buttons you can manipulate at the top of the tool:

• What impact does campus housing (on/off) have on college costs?
• What impact does financial aid (with/without) have on total ROI?

Have students pick a major OR a career that they are interested in to see the schools that have the highest ROI for that career.

Finally, ask students what other factors might be important to them as they consider colleges as well as any limitations about an ROI approach.

About the Author

Tim Ranzetta

Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.