How We Calculate Value
Most education advice is based on anecdote. Ours is based on standard financial modelling used in corporate finance. Here is exactly how the math works.
1. The Net Present Value (NPV) Approach
We treat a university degree strictly as a financial asset. Like buying a rental property or a bond, you pay an upfront cost (tuition + time) in exchange for future cash flows (higher salary).
A degree is "Worth It" only if the specific combination of Net Lifetime Earnings exceeds the Total Cost of Acquisition by a risk-adjusted margin.
2. The "Hidden" Opportunity Cost
The biggest cost of university is rarely tuition—it is Time.
If you study for 4 years, you do not just pay $25,000/year in tuition. You also lose the income you could have earned working a full-time entry-level job (e.g., $35,000/year).
The True Cost Equation:
Direct Cost (Tuition + Living) + Opportunity Cost (Lost Wages) = Total Investment
Our calculator aggressively subtracts these "lost wages" from your university ROI. This often makes university look like a bad deal in the short term, which is the mathematical reality.
3. Investment & Growth Assumptions
Market Return Rate (Default: 7%)
We assume that any money not spent on tuition could be invested in a standard global index fund (S&P 500 equivalent) returning 7% historically after inflation. This punishes expensive degrees heavily—that $100k tuition could have grown to $800k by retirement if invested instead.
Salary Growth (Default: 3-4%)
We model that graduates typically see faster salary velocity (4%) compared to non-graduates (3%) in the early career phase. These are adjustable in the calculator settings.
4. Data Sources & Tax Models
- Income Tax Models: We utilize progressive tax bracket data sourced from OECD and government publications, updated for the 2025/2026 tax year. For other regions, we use effective tax rate approximations based on gross income.
- Tuition Averages: Sourced from OECD Education at a Glance reports and local government datasets (e.g., NCES in the USA, HESA in the UK).
- Opportunity Cost: We calculate the "lost investing potential" of wages forgone during study years, compounding at a conservative 7% market return.
- Student Debt: UK Plan 2 and Plan 5 models include RPI-linked interest and write-off thresholds. US models assume standard 10-year repayment or IDR equivalents.
- Degree Comparison: We use Net Present Value (NPV) to rank different degree options, assuming 40-year career trajectories basic on industry-standard starting salaries.
- Living Costs: Adjusted for inflation using recent CPI data.