Enter the lifetime earnings with education ($), the lifetime earnings without education ($), and the total cost of education ($) into the Return on Education Calculator. The calculator will evaluate and display the Return on Education. 

Return on Education Formula

The following formula is used to calculate the Return on Education. 

ROE = (LEE - LEWE) / C * 100
  • Where ROE is the Return on Education (%)
  • LEE is the lifetime earnings with education ($) 
  • LEWE is the lifetime earnings without education ($) 
  • C is the total cost of education ($) 

To calculate the return on education, divide the difference in lifetime earnings with and without education by the total education cost, then multiply by 100.

How to Calculate Return on Education?

The following example problems outline how to calculate Return on Education.

Example Problem #1

  1. First, determine the lifetime earnings with education ($).
    • The lifetime earnings with education ($) are calculated to be : 1,500,000.
  2. Next, determine the lifetime earning without education ($).
    • The lifetime earning without education ($) is measured to be: 1,000,000.
  3. Next, determine the total cost of education ($).
    • The total cost of education ($) is found to be: 200,000.
  4. Finally, calculate the Return on Education using the formula above: 

ROE = (LEE – LEWE) / C * 100

The values given above are inserted into the equation below and the solution is calculated:

ROE = (1,500,000 – 1,000,000) / 200,000 * 100 = 250.00 (%)

FAQ

What factors can affect the Return on Education (ROE)?

Several factors can influence the ROE, including the field of study, the institution’s reputation, the geographic location where the education is obtained and where the individual chooses to work, the individual’s career path, and economic conditions. Additionally, the cost of education and the opportunity cost of time spent in education versus working can also significantly impact ROE.

How does the choice of field of study impact lifetime earnings?

The choice of field of study can have a significant impact on lifetime earnings. Fields with high demand and specialized skills, such as engineering, computer science, and healthcare, often lead to higher lifetime earnings compared to fields with lower demand or oversupply of graduates. It’s important to research and consider the projected job market and earning potential in a chosen field before making educational and career decisions.

Is the Return on Education (ROE) calculation applicable to all forms of education?

While the ROE calculation is primarily designed for formal education, such as college or university degrees, it can also be adapted to evaluate the return on investment for vocational training, professional certifications, and other non-traditional forms of education. The key is to accurately estimate the lifetime earnings with and without the specific education or training and to consider the total cost, including tuition, fees, and any opportunity costs.