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Going to college? Determine your Return on Investment First

By Larry Lane for www.InvestorZoo.com

In order to be competitive in your chosen field, youve decided you need a four year degree.What is the average income for high school and college graduate? Measured in 2006 dollars, the

median earnings for adults ages 2534 who worked full time throughout a full year increased as

education level increased this pattern held true for males and female across all ethnicities.

The earnings difference between those with at least a bachelor's degree and those with less

education increased dramatically between 1980 and 2006. However, between 2000 and 2006,

there was generally no measurable change. For example, in 1980, those with a bachelors degree

or higher earned $14,600 more than those who did not earn a high school diploma

. In 2000, this difference increased to $23,400. In 2006, the amount increased to $23,600. Clickhere for the studyhttp://nces.ed.gov/fastfacts/display.asp?id=77

Median annual earnings of all full-time, full-year wage and

salary workers ages 2534, by sex and educational

attainment: Selected years, 19802006

[In constant 2006 dollars]

Year

All education

levels

High school diploma

or GED

Bachelor's degree or

higher

Male

1980 $43,700 $41,400 $48,900

1985 41,200 37,500 51,400

1990 38,600 33,900 49,000

1995 36,400 31,800 49,300

2000 39,800 33,900 53,900

2005 36,100 31,000 51,600

2006 37,000 30,000 50,000

Female

1980 $29,400 $26,900 $36,300

http://www.investorzoo.com/http://nces.ed.gov/fastfacts/display.asp?id=77http://nces.ed.gov/fastfacts/display.asp?id=77http://nces.ed.gov/fastfacts/display.asp?id=77http://nces.ed.gov/fastfacts/display.asp?id=77http://www.investorzoo.com/

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1985 30,000 26,200 39,100

1990 30,500 24,700 40,100

1995 29,100 23,300 39,700

2000 31,600 24,600 41,600

2005 31,000 24,800 41,300

2006 31,800 24,000 41,000

As you can see from the above table, the average salary of a high school graduate is in decline,

while those who have graduated college have stayed consistent. If there is one indication you

take away from this table, you need a secondary education to stay competitive in todays market.

SOURCE: U.S. Department of Education, National Center for Education Statistics.

(2008). The Condition of Education 2008 (NCES 2008031)

Figure 2:Estimated Cumulative Lifetime Earnings by Sex and Degree Level in the UnitedStates http://www.incontext.indiana.edu/2009/mar-apr/article1.asp

The average high school graduate will make about $700,000 to $1,000,000 on his/her lifetime

versus a bachelors degree which will generate $1,400.000 to $2,100,000.

http://www.incontext.indiana.edu/2009/mar-apr/article1.asphttp://www.incontext.indiana.edu/2009/mar-apr/article1.asp

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Your choice of college degree can have a huge effect on your lifetime earnings. While money

cant buy you love, obtaining a good career will open you to more opportunities. You will have

the ability to save more for retirement through a 401k or Roth IRA. You will have the means to

purchase a house in a good neighborhood allowing you to build up equity and homeownership.

You will be eligible for a larger social security check when you retire.

Now that weve established the importance of a degree, what career path you choose is vital. The

average liberal arts major will take home $30,600 while the first year chemical engineer will

bring in over $60,000. Start thinking as your college education not only as an investment in

knowledge but in your retirement as well.

When considering an investment in your higher education, you must factor in all of your

education expenses. This includes tuition, room, board, travel, books, lab fees, food and other

expenses. What school you choose is another important factor. Is spending $100,000 versus

$25,000 for a bachelors degree a huge benefit? Do you really want to graduate college $100,000or more in debt before starting your new career? To pay off your debt of $100,000, you will pay

$1,000 per month and it will take you until you are 32 to 35 years old to pay off your education.

This assumes a 2-3% interest rate. During those 10 years, chances are you will be putting a huge

strain on your finances. Most likely, youll have to put off the purchase of a home, delaying

building equity in your house you couldnt buy. It will also put a strain on your ability to invest

in your companys 401k or other retirement vehicles.

Not to add additional pressure, but choose your education and school wisely. It will affect the

rest of your life.

What is the best return on your investment? Since the first two years of your education will

consist of mandatory classes such as gym, Math and English 101 etc, some may consider going

to a state school or community college. This is especially beneficial in case youre still exploring

your major and career choices. In most cases, you can transfer those basic courses over to your

next college. After all, when your employer is looking at your resume, theyll be looking where

youve graduated from, not the road you took to get there.

Weigh your educational options and spend your dollars wisely. The time you take to plan now,

will pay dividends well into your future.

Larry Lane is the editor for InvestorZoo.com, a social network specializing in personal finance