Continuing education often involves an investment in tuition, fees, and other expenses. Here's how to calculate your potential return.
Did you know that individuals with a master's degree can earn up to $17,000 more per year on average than those with only a bachelor's degree? That significant pay bump could make pursuing higher education feel like a no-brainer. But while the potential for increased earnings is real, continuing education costs can be steep, leaving many wondering whether the investment is worth it. This is where calculating your Return on Investment (ROI) becomes critical.
Evaluating the financial payoff of further education is more than just looking at salary increases - it involves assessing career advancement opportunities and how much you ultimately pay for it. For instance, teachers who pursue a master's degree often experience a noticeable salary boost, but the same ROI might not apply equally across all industries. And no matter how much of a salary boost you may receive, what if it takes 20 years for that increase to repay the cost of the degree? For many, understanding these nuances is key to making informed decisions about continuing education.
Evaluating the Payoff
One of the most tangible benefits of continuing education is the potential for increased earnings. According to the U.S. Bureau of Labor Statistics, the median weekly earnings for those with a bachelor's degree are 67% higher than those with just a high school diploma. This gap widens further for advanced degrees.
While higher education levels generally correlate with higher earning potential, it's important to note that any figures directly correlating higher education and earnings are median - actual earnings can vary based on industry, location, and individual performance. In many situations, there are just too many variables to make salary predictions with absolute certainty.
However, there are cases where the benefit is more apparent. Many leadership and management positions require advanced degrees or specialized certifications. For example, a teacher with a bachelor's degree might earn around $50,000 per year. However, by obtaining a master's degree, their salary could increase significantly, and they may be able to qualify for leadership positions like department head or principal that offer even higher wages.
In healthcare, earning a specialized certification as a nurse practitioner can lead to a substantial salary hike - sometimes over $30,000 more annually compared to a registered nurse with a bachelor's degree.
By comparing salaries before and after obtaining an advanced degree or certification, you can calculate how long it will take for the increased earnings to outweigh the costs of continuing education. But salary alone isn't the whole story.
Calculating ROI: A Step-by-Step Approach
The upfront costs of continuing education - tuition, fees, and other expenses - can vary significantly depending on the type of credential. So, it's essential to consider these short-term costs in light of the long-term benefits. The key is to break down the costs and calculate how long it will take for your investment to pay off.
Let's take a practical example: if a master's degree costs $30,000 and leads to a salary increase of $10,000 annually, it would take three years to break even. After that, you're essentially earning "profit" on your investment.
To estimate the ROI of a credential:
The good news is that not all credentials involve a substantial investment. And even for those that do, there may be ways to manage those costs in ways that go beyond a simple cost/earnings analysis. For example, as we'll learn in another article this week, some credentials may qualify you for loan forgiveness and employer-based programs that reduce your overall cost.
Beyond Money: Job Satisfaction and Career Flexibility
While financial ROI is critical, it's not the only factor. Continuing education can also open doors to more satisfying work and greater career flexibility. Many adults return to school not just to increase their income but also to transition into fields they are passionate about or to gain skills that allow them to pivot into more flexible roles. For example, earning a certification in project management might allow you to move into a role that offers both higher pay and the option to work remotely - a significant benefit for those looking to improve their work-life balance.
Understanding these personal and professional gains is just as important as evaluating financial ROI. While knowing whether your investment will pay off financially is important, it's equally essential to consider how education will impact your overall quality of life.
Further, advanced education can also provide greater job security in a competitive job market. During the Covid pandemic, for example, the unemployment rates were directly in line with educational attainment - the more education, the less unemployment. Further, employers tend to favor candidates with specialized knowledge or advanced qualifications. In some cases, further education can be the ticket to moving into more secure, higher-level positions. Whether pursuing a career shift or aiming for advancement in your current field, education may provide the credentials needed to secure promotions and more stable employment.
The Takeaway
Calculating the ROI of continuing education is a crucial step in making informed decisions. While the process involves some uncertainty and requires careful consideration of various factors, it can provide valuable insights into the potential value of further education.
So, crunch the numbers, consider your goals, and consider how continuing education may fit into your life and career.
Dort Financial Credit Union is a not-for-profit financial cooperative whose mission is enriching people’s lives… members, employees, community. Unlike other financial institutions, credit union ‘profits’ are returned to the membership in the form of lower loan rates, higher dividend rates, and affordable services.
