Higher ROI for Less Education

We are all aware that our education system sucks, right? But how bad is it really? Would you believe that the Return on Investment (ROI) is lower for a Master’s degree than it is for a Bachelor’s degree? I certainly did not. I was under the impression that the more schooling I had, the more value I possessed. I might not believe that anymore.

Bachelor’s v. Masters’s

A common expression and statistic is “a person with a Bachelor’s degree will earn an average of $1 million more over his or her lifetime than someone who graduated from high school.” Statistics have also recently shown that a person with a Master’s degree will earn, on average, $400,000 more over his/her lifetime than someone with a Bachelor’s degree.

My high school education math teacher says that is a 40 percent increase from a Bachelor’s. Woo! Money in my pocket! But that begs the question: Why is there such a massive jump for a Bachelor’s degree, then only a 40 percent increase for a Master’s degree?

School Debt

The College Board has recently researched, reviewed, and published the average cost of tuition per year. College Board is a non-profit organization dedicated to “expand access to higher education.” Based on this data, an in-state student would spend nearly $40,000 on a public four-year degree.

Type of College Average Published Yearly Tuition and Fees
Public Two-Year College (in-district students) $3,440
Public Four-Year College (in-state students) $9,410
Public Four-Year College (out-of-state students) $23,890
Private Four-Year College $32,410

We should try some college education math. Before we do that, we need background information so we know where to start.

In addition to the $40,000 Bachelor’s degree, a Master’s would increase that amount by another $30,000 to $120,000. Crazy, right? For the sake of simplicity, we should take the average of the Master’s debt— an amount of $75,000. That means for us to earn an additional $400,000 more over a forty-year period, we must now become in debt for roughly $75,000.

Is a Master’s Degree Worth It?

Is $400,000 over the course of your life worth being in debt $75,000 right now? Time value of money, people. Money is worth more now than it is in the future.

Net Present Value

My half-assed calculations of Net Present Value (NPV) show an individual will receive nearly $75,000 in today’s dollars when receiving the average Master’s degree. The result is positive, which indicates a good investment, BUT that is not the best payoff.  I would like my ROI to be much greater for receiving a higher education level.


*Used the average figures of $75,000 tuition, a rate of 6% (listed as the U.S. Government’s interest rate for student loans), and $400,000 over a forty-year period.

That shows that a Bachelor’s degree is most likely the better option. The payoff for a Bachelor’s degree is significantly higher and the price, while still expensive, is generally more worth it. A Master’s degree, on the other hand, might not be as beneficial. It sucks that the ROI decreases when we receive MORE education.

In addition, the U.S. Government does not offer subsidized loans for graduate programs. The government merely offers these loans for Bachelor’s programs. That is because the government probably knows the ROI is not as high, which is why it charges you interest payments while you are still attending. That, my friend, is why I say that our government does not value education.


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