Quick Highlights:
- Understanding ROI involves comparing the costs of education against the additional earnings a degree might provide over a career.
- Online degrees typically have lower tuition costs which can mean a higher ROI by reducing initial expenses.
- Traditional degrees might offer slightly higher salary potentials due to networking opportunities, but the difference is narrowing.
- Consider hidden expenses like textbooks, commuting, and opportunity costs, which can affect the overall ROI of education.
Table of contents
Going back to school is a big decision that can bring higher salary expectations and a great return on investment (ROI). However, it is also important to consider how the ROI can be different with a traditional college education and online degrees.
Online degrees typically have lower tuition costs, which is why they are popular among modern students. When these degrees first came out, there was a stigma attached to them. Thanks to changing perceptions, online degrees are more accepted and prevalent than ever before. Because of this, more students are looking into getting an online education.
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Understanding ROI in Education
In business, a return on investment (ROI) is the extra money you earn because of your investment. Companies calculate it by subtracting the cost of the investment from the current value of the investment. Then, this figure is divided by the cost of the investment.
For example, let’s assume that you spent $40,000 on your education. Afterward, you earned an additional $400,000 over the course of your career because you had a degree. The return on investment (ROI) would look like this:
($400,000 – $40,000) / $40,000 = 9
This means your ROI is $9 for every dollar you spend on your education. In reality, the real rate of return is actually much higher than this example. While the ROI varies based on your demographic group, the United States Federal Reserve estimates that the typical student gets an ROI between 13.5% and 35.9%.
There are many factors that determine how high your ROI is. The level of schooling you receive is a factor since a master’s degree normally leads to higher wages than a bachelor’s degree. While a worker with a bachelor’s degree earns an average wage of $59,124 per year, someone who has a master’s degree earns $69,732 per year.
Additionally, your tuition costs, opportunity costs for lost wages, textbook expenses, and other fees can impact the ROI. If you pay more for school and earn the same amount in your future career, the return you get will be less. Personal factors can sway this calculation because some people are more likely to receive career advancement opportunities than others.
The Cost of Education
A major factor in calculating your return on investment (ROI) is the cost of getting your education. Textbooks, tuition costs, commuting expenses, higher education costs, and course materials can quickly add up. Normally, you will pay much less with online degrees than you do with traditional college education for some of the following reasons.
Tuition Fees and Associated Costs
If you are attending a public, four-year college, online degrees will be an average of $31,165 cheaper. While in-person private schools charge $185,252 for a typical degree, an online private school charges just $60,593. By choosing distance learning options, you can pay significantly less on tuition costs.
Time Away from Work
If you pursue a traditional college education, you will likely have to move closer to the university. Classes are at a set time, so it may be impossible to keep a 9-to-5 job. Because of this, you will likely earn less money and have to leave your current job if you decide to go to an in-person program.
Commuting Costs
The average full-time student at a community college spends $1,760 per year on their commuting costs. In comparison, online students can spend almost nothing on commuting to school. While you may occasionally need to drive to buy your textbook or to take a proctored test, your commuting costs will be almost completely eliminated. As long as you have an internet connection at home, you can study from the comfort of your living room.
Room and Board
With online degrees, you will need to pay for your rent, utilities, internet, and groceries. Meanwhile, students typically have to pay for a campus meal plan and on-campus housing during traditional degrees.
In general, online schools have lower room and board costs. Most people can eat at home for much less than campus meal plans cost, so this can save you significantly. Additionally, you can reduce the cost of rent by having roommates, but there isn’t a way to decrease the cost of your dorm. You can also limit the cost of room and board by staying with your family.
The Earning Potential
While a traditional college education is generally more expensive, it also comes with a better earning potential. Thanks to employer perceptions and other factors, you might enjoy slightly higher salary expectations with an on-campus school.
However, this salary difference may largely stem from networking benefits associated with on-campus colleges. Many schools have alumni organizations that help with finding jobs, and it is often easier to develop relationships with your professors on campus.
When it comes to actually applying for jobs, you’ll receive a similar salary with distance learning. Jobs typically look at your:
- experience
- academic accreditation
- certifications
- geographic location
- interview quality
Going to school in-person or online isn’t a significant factor at most workplaces. According to the NCES, the median earnings of someone with a bachelor’s degree are 55% higher than an individual who has just a high school degree, so a college degree from any environment will help you increase your lifetime earnings.
Additionally, online degrees are less likely to matter if you pick specific fields of study. For example, Texas requires a master’s degree for anyone who wants to be a counselor. It doesn’t matter if this degree is pursued online or offline. As long as the program has the right accreditation, you can get your license.
For many fields, you simply need the right degree from an accredited program. As long as you get the right degree, you can get your license and start applying for jobs in the industry.
Market Perception of Online Vs. Traditional Degrees
A study done by Excelsior College and Zogby International revealed that 83% of hiring managers surveyed believe online degrees have the same value as a traditional college education as long as they come from a respected institution. Among the general public, opinions about online education have improved over the last decade. In a recent survey by Champlain College Online, 72% of the public said that online colleges were a reputable way to get an education. Plus, 84% of respondents thought that employers are more accepting of online education than they were before the pandemic started.
Because most colleges offer online options, employers have started to treat both styles of learning equally. However, this view can vary significantly based on the company. According to Greg Keller, chief operating officer at a major recruiting firm, businesses from the “elite worlds of big law, big consulting, big tech, etc.,” put a heavier emphasis on where you got your degree. For most average employers, an online degree is just as good as an in-person degree.
Flexibility and Accessibility
When it comes to flexible learning, online colleges tend to be a better option. You can choose what time of day you go to school, so this makes it easier for you to balance work, school, and your personal life. If the only time you have available to do homework is during your lunch break, you can easily log into your online classroom and get your work done from any location.
If you want to handle family obligations or maintain your career while you are in school, this flexibility is incredibly important. A traditional college education has a set time and location for each class, so you can’t get flexible learning options with in-person coursework.
Networking and Professional Development
Other than considering the salary expectations and tuition costs of online degrees and traditional college education, it’s also important to think about non-monetary factors. Networking and professional development opportunities are different based on where you go to school. Because it is easier to meet people when you interact with other students and teachers in your classes each day, traditional programs have a head start on networking options.
Through networking, you can learn about potential job openings. Over time, this leads to more opportunities for career advancement. While traditional schools are generally better for networking, there are still ways to network during online degrees. For example, many online schools offer career fairs. They often partner with major employers, so students can access internships and job shadowing opportunities.
Learn More About the ROI for Your Education
While online degrees and a traditional college education offer a similar return on investment (ROI), your earning potential and higher education costs will be specific to you. Depending on the degree type and where you go to school, your salary expectations will vary. In addition, some professional licenses, like licenses in counseling, law, nursing, and teaching, accept applicants from online degree programs. The salary differences may be insignificant for these fields.
By weighing your tuition costs and salary expectations along with personal needs and professional goals, you can determine which educational path is right for you. You should carefully compare all of the tuition costs, living expenses, and fees associated with your favorite options. Once you have looked at your costs and potential benefits, you develop a better understanding of which degree is right for you.