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How Do You Know College Is a Good Financial Investment?

Making the decision to go back to school as a working adult is difficult in today's changing job market, with the risks of losing income and even going into debt without a guarantee it will all pay off in the future.

Those who've faced the choice say you must determine whether the cost of your education is truly an investment or an unnecessary expense.

Answering these six questions could help you find the answer:

Have you run a break-even or net present value analysis? This means dividing the total cost of your education by the total increase to your wage once you're done, says Mark Brooker, dean of the DeVoe School of Business at Indiana Wesleyan University.

[See: 10 Long-Term Investing Strategies That Work.]

If the cost of your education is $30,000 and you expect to increase your annual wage by $5,000 dollars per year, the break-even point would be six years.

You can also run a net present value calculation to determine the impact of your decision over a lifetime, says Ryan Repko, a financial advisor with Ruedi Wealth Management in Champaign, Illinois, who went back to school for an MBA and a certified financial planner designation.

To get this number, you consider lost earnings while in school, plus the annual costs of the program.

For example, a 30-year-old starts a two-year, full-time MBA program that costs $50,000 per year. He will forego his $90,000 salary for those two years, and then expects to earn an additional $20,000 per year, with a 5 percent raise each year. Assuming he works until age 65 and inflation is 3 percent, the net present value of this degree is $567,568.

"Because the NPV is greater than zero, this person would proceed with obtaining the degree," Repko says. "If the NPV is zero, he or she would be neutral on obtaining the degree from a financial perspective, and of course if the NPV is negative, it would not be wise to obtain the degree."

Can you go to school without losing income? You may be able to enroll in a program that allows you to continue working full-time so you don't lose income in addition to the additional education expense, Brooker says.

Raluca Lozano chose online courses that allowed her to keep her human resources job while studying. This can also help you cut your living expenses.

"Dedicating a lot of your free time to your online course will also prevent you from spending money on entertainment or restaurant meals by staying indoors much more," she says.

Will you really get a better job? Try to determine whether your investment in education is going to pay off with a better opportunity.

[See: 7 Classic Inflation Hedges and Their Thorns.]

Enrolled agent Kristine Stevensen was working full-time for the federal government with an unfinished degree, but many of the internal promotions she wanted required either time in service or superior academic achievement. Going back to school was the faster route.

She eventually graduated summa cum laude from Texas State University and advanced into departments with potential for higher pay rates.

"It was a struggle, but an investment in time and money well worth it," Stevensen says.

Do you have the other qualifications you need to advance? Advanced education isn't a silver bullet, but it's part of a package.

"Yes, an MBA could potentially connect you with future business partners, or a training course could help you get a promotion," says Kim Desmond, cofounder of the software engineering training company CodingNomads. "But at the end of the day you have to go out and get these results for yourself. A piece of paper with your name on it means nothing compared to the worth you put behind it."

Can you avoid going into debt? Being saddled with debt after your education is finished can put a damper on any financial upside. Lozano did extensive research on the price of her master's degree and saved before obtaining it online.

"Paying the tuition up front has brought me a discount of almost $1,000," Lozano says.

If your employer is willing to reimburse for the cost of your educational program, that can make pursuing it a sweeter deal.

"I focused my degree completion with classes I knew my employer would pay for, applied for grants and scholarships due to low income and good grades, and carefully chose a program that allowed me to convert work-life experience into semester credit hours," Stevensen says.

How long is the program? If you have to go to school full-time, then the shorter the program, the better. That's because the opportunity cost of losing a salary adds up.

"Take the traditional two-year MBA," says Alexander Lowry, a finance professor at and executive director of the master's financial analysis program at Gordon College. "These are quickly falling out of favor. The opportunity cost is two years of no salary. Add on to that the cost of the program of on average $140,000. There are very few jobs you can get after graduate school that justify that cost."

Lowry says Gordon College's one-year, accelerated master's program is designed to help working students land jobs that make financial sense for the $30,000 and shorter time required.

[See: The 10 Most Valuable Tech Companies in the World.]

"Students are wising up to what's a good investment," he says. "They know they need an advanced degree to get a senior level position at most companies. So they're working to get the right skill set in the least amount of time at a fair price."

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