Article

Analyze Colleges Just Like You Would a Stock

This article delves into this notion, addressing questions like: How can you apply stock market analysis principles to selecting a college? What factors should you prioritize, and what long-term benefits can be expected? This piece guides you through an analytical approach, encouraging readers to view their educational choices as investment decisions.

May 6, 2025
Important Disclosure: Content on our website and in our newsletters is for informational purposes only. The information provided may (or may not) directly apply to your situation. We recommend that readers work directly with a professional advisor when making decisions in the context of their specific situation.

A typical college degree is worth a lot of money over the length of a career. A typical degree – but not every college.

College costs rose roughly 7% annually over the past 50 years, about double the average yearly inflation rate. And overall costs of some, including even community colleges, have increased faster than that in recent years, according to the College Board.

In general, higher education does boost lifetime earning potential. Some schools simply seem not worth the investment, though.

What is Your Return on Investment?

To calculate whether a college is worth the investment, use an opportunity cost measure called return on investment (ROI). After factoring all the net college costs, compare 30 years of estimated income of a college graduate versus 34 years of income from a high school graduate who started working immediately and didn’t pay college expenses or assume the debt of student loans.

Future college students (and their parents) must realize that not all colleges are equal. Graduates from the lowest-ranking schools often earn less income after graduation. One can also assume that low-performing schools tend to offer less financial assistance, which leaves graduates with larger debt burdens.

The most highly endowed colleges can reduce their cost of attendance with grants and scholarships. For example, Stanford ranks as one of the most expensive schools based on sticker price. But generous financial assistance makes for a very competitive net cost and would give the school a high ROI score.

Debt burdens are also relative. A doctor’s salary more quickly pays off a high-price education loan than a teacher’s. Good rule: Avoid incurring college debt exceeding half of the expected annual income. Limiting loans in this way allows students to pay off the debt after five years, using 10% of their future salary.

Clearly, an ROI analysis will show a world of difference between the outcomes of graduates of highly rated schools and those graduates of schools near the bottom of the barrel. Attending a college with a poor ROI is not necessarily a mistake, but the financial aid package should be sweet. As with any investment, do the homework before committing time and money to determine if the overall investment is worth it.

Other content you may like

  • Podcast Highlight 1 - Market Recap

    Podcast Highlight 3 - Price to Sales Ratio and AI

    June 3, 2024
    The Strong Valley advisor team talks about how stocks make their way to becoming fully valued and a simplified look at the basic formula used to identify value, which is an important aspect of the current AI frenzy.
    Read this Article
  • Planning Your Exercise & Your Financial Fitness

    Planning Your Exercise & Financial Fitness

    June 28, 2022
    Most people don’t prepare to invest and that’s a big mistake. Using the analogy of getting physically fit, this article explores ways that you can prepare for financial uncertainty in much the same way you spend your energy to prepare your body for the stress of a fitness goal or staying active and healthy into your golden years. Preparation matters.
    Read this Article
  • Analyze Colleges Just Like You Would a Stock

    May 6, 2025
    Can you use stock analysis principles to evaluate colleges? By considering selection as an investment, learn about return on investment, long-term benefits, and financial feasibility. It’s a strategic approach to make the most out of higher education choices.
    Read this Article
  • Housing Market Snapshot - Strong Valley

    Time to be a Contrarian on the Housing Market?

    December 14, 2020
    According to the National Association of Realtors, existing-home sales grew for the fourth consecutive month in September as each major region saw month-over-month and year-over-year gains.
    Read this Article
  • The link you have selected is located on another server. The linked site contains information that has been created, published, maintained, or otherwise posted by institutions or organizations independent of this organization. We do not endorse, approve, certify, or control any linked websites, their sponsors, or any of their policies, activities, products, or services. We do not assume responsibility for the accuracy, completeness, or timeliness of the information contained therein. Visitors to any linked websites should not use or rely on the information contained therein until they have consulted with an independent financial professional. Please click “Continue to Link” to leave this website and proceed to the selected site.
    phone-handset