How to calculate ROI from higher education?

These days MBA, post graduate degree education, professional course are becoming very costly. If someone is applying to such course, it is important to analyze Return on Investment (ROI) from such investment.  ROI varies from type of education course i.e. It is different in cases of distance learning education, part time courses, full time courses.

Cost of such education can be divided in 4 segments

Additional of 4 parameters would give exact economic cost of going for particular course. After calculating the cost we should look at returns from such investment. Returns of education can be calculated over the period of 3 to 6 years of period.

  1. Avg  Income before  going for Higher Education
  2. Income immediately after completion of the course
  3. Avg income over the period of 3 to 6 years
  4. Difference between Avg income prior to education and after education
  5. Change  in job profile over longer period of time
  6. Saving in the income tax due to higher education loan repayment
TypeDescriptionFull Time CourseDistance Learning
1. Direct CostIt includes course fee structure, accommodation, cost of living in specific location relevant to education institute.SignificantMedium
2. Opportunity costAmount of yearly Salary and work experience required to be sacrificed. This is specifically important for the professionals who are planning for higher education full time degree after working for some of the years and looking for up gradation in the career.ImportantNot Applicable
3. Indirect CostsIndirect costs related to completion of education course successfullyMediumNA
4. Education Loan CostInterest and monthly EMI to be paid after EducationHighMedium

After careful analysis of all those factors, you should come up with proper decision of approximate return on investment in higher education course (Full time or Distance Learning)

Returns = (Total Income over period of 3 to 6 Years After Higher Education) – (Total Income over 3 to 6 years without higher education)  –  Total Direct/Indirect/Opportunity Cost of Education +  Savings of Income Tax due to Education Loan + Change in Job profile

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