Return on Investment (ROI) is a metric used to evaluate the financial return you get from investing money, time, or other resources into something. Especially, with major investments, such as a college degree or professional credential, you need to understand if it's worth it.
While there's a lot more to an education program than just ROI, almost all students expect that they will be financially better off after completing a program than worse off!
We calculate this by looking at:
Present Value of Incremental Earnings: This is the estimated increase in income you'll get by completing the course, discounted to its value today. In simple terms, how much more money you expect to make in the future because you got this education, but thought of as if you got all that money today.
Tuition & Fees: The money you pay for the course itself.
Foregone Wages: The money you could have made if you were working instead of studying.
Time to Completion: The average time it takes to complete the course.
Completion Rate: The percentage of people who actually finish the course.
So, the formula takes the future money you'd earn (Present Value of Incremental Earnings) and subtracts both the money spent and the money you could have made (Tuition & Fees + Foregone Wages) if you weren't studying. This gives you a net gain or loss from the course. Then it adjusts this by how long the course takes (Avg Time to Completion) and the odds of actually finishing (Completion Rate).
In simpler terms, ROI helps you understand if the program is financially worth it. If the ROI is positive, you're expected to earn back more than you invested. If it's negative, you should think twice about taking the program.
Willow empowers students and counselors to evaluate different college and professional programs using ROI and student experience metrics. Forward-thinking counselors partner with Willow to ensure all of their students have the opportunity to find meaningful work and a thriving wage. Get in touch today!
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