Going back to school is a big decision, but it can be a viable solution if you want to increase your job opportunities and salary. It’s important to determine if going back to school makes good financial sense. It takes longer to earn back the cost of tuition and lost wages than you might think! Looking at the numbers will help you make a smart financial decision.
Going back to school makes financial sense in several situations:
1. If your degree is nearly complete. Those extra couple of classes can open a lot of doors. There are many positions that require a college degree. If you’re almost there, it makes a lot of sense to finish your degree and reap the rewards.
2. If your employer is willing to pay for it. Many well-established companies offer tuition reimbursement. Ensure that you understand what is and isn’t covered under your company’s plan. Remember that it can be challenging to work and go to school. Can you take paid time off from work to attend classes?
3. If you can find grants and scholarships that support you and pay for school. Apply for as many grants and scholarships as you can. You may qualify for enough of them to allow you to go back to school. Grants and scholarships don’t have to be paid back.
4. If you can work and go to school. For example, many universities have online or weekend classes, so you can get your degree outside of working hours. Taking advantage of this type of degree program allows you to keep a job, and income coming in, while you study.
5. If you’re prepared to do the work, your job prospects improve, and you’re able to take full advantage of your degree. Are you prepared to attend classes and study? Can you still work while attending school? Do you have the financial resources to pull off your plan? Do you have enough time to earn back the lost income and the tuition costs?
• Are you able to move after completing school to pursue new career opportunities? Would you want to?
Going back to school can be financially wise if you fit into one of these categories. However, going back to school doesn’t make financial sense in many situations:
1. You’re happy with your current position and don’t wish to leave. The financial advantages of earning a degree are limited to your ability to increase your salary. If you’re content with your current position, going back to school doesn’t make good financial sense.
2. You’re too close to retirement to realize the financial benefits. The age limit is much lower if you have to quit working to attend school. The lost wages can be insurmountable given the number of working years you have left before retiring. Consider the following math:
• Current salary: $35,000/year at 50 years of age. Likely outcome after completing school: $55,000/year for 13 years.
• If you stop working for four years, you’ll lose $140,000 in salary.
• Suppose your school tuition is $15,000/yr. That’s another $60,000. You’re starting your new career $200,000 in the hole.
• After working for 13 years at $55,000, you’ll have earned $715,000 – $60,000 = $655,000.
• If you stayed at your old position, you’d earn $35,000 for 17 years = $595,000 and barely be behind your school plan. After all that work, you only managed to earn an additional $60,000 over 17 years. That’s roughly $3,500 per year. One small promotion, a good raise, or a side business would cover that.
• Perform the same exercise with your best-guess numbers. How long will it take you to break even? Is it worth it?
Do the math before making a decision to head back to school. On the surface, going back to school seems like a smart financial move. However, you have to work for a long time to make up for the salary lost while you’re in school. If your degree is nearly complete, or someone else is willing to foot the bill, continuing your education can be an excellent choice.