While the thought of incurring student loan debt makes many prospective students reconsider pursuing post-secondary education, the impact of a degree still outpaces the pain of loan debt on future financial well-being. A college degree represents a sound investment in your future earnings. The financial return over a lifetime makes an undergraduate education a sound investment.

Remember, college graduates, on average, earn 84% more over their lifetimes compared to just high school graduates. While tales of successful college dropouts like Bill Gates encourage the notion that an undergraduate degree is not worth the time or money spent, those entering the workforce without a degree face and uphill battle. Once hired, degree-less employees might find their lack of degree a hurdle to future promotions and raises.

So, how do you know if college is worth it? Here's how to dive in and see.

The Value Of College

Why do people go to college? There are a lot of ideals - learning, networking, building lifelong relationships. But the truth is - college costs money. And most students are going to college because they are trying to learn skills that will allow them to earn more money after graduation.

Wait? That sounds like an investment. Because it is!

Students are paying money up front, to see a return on investment after graduation. It's also part of the student loan crisis today. Too many students borrowed money for this investment, and the return on the investment is not what they expected (thus making it hard to repay the student loans they took out).

What does the data show about the value of college?

Well, one of the most commonly cited pieces of data showcasing the value of college comes from the Social Security Administration.

"Men with bachelor's degrees earn approximately $900,000 more in median lifetime earnings than high school graduates. Women with bachelor's degrees earn $630,000 more. Men with graduate degrees earn $1.5 million more in median lifetime earnings than high school graduates. Women with graduate degrees earn $1.1 million more."

That's a great data point - but it omits a key factor. How much did that person pay for that degree?

It sounds amazing to suddenly earn $900,000 more over your lifetime (which is approximately 45 years of working after college graduation). But what if you paid $900,000 for that degree? Is it worth it? Of course not.

And that's the crux of the issue - what's the value of the increased lifetime earnings in today's dollars?

The Net Present Value Of Lifetime Earnings

This is where it gets eye opening. It can also be a little messy since we have to make some estimates - such as the rate of return/inflation. We also have to realize that not everyone is equal, not all careers are equal, etc.

But it's good to have some data points. Let's calculate the net present value of both $900,000 and $630,000 over 45 years (that means you graduate college at 22 and work until you're 67). We will use a 5% return rate for our calculation.

Net Present Value For Men ($900,000): $100,167

Net Present Value For Women ($630,000): $70,117

With this incredibly rudimentary calculation, we can see pretty easily the value of college. For a man, if you spend $100,000 on your college education, you'll break even over your entire lifetime. If you're a woman, that number is $70,000. If you spend less, you start having a positive ROI, if you spend more than that, you have a negative ROI.

Here's where it gets a bit scary though. What if we used a more reasonable 8% return rate? The value of college diminishes significantly.

Net Present Value For Men ($900,000): $28,195

Net Present Value For Women ($630,000): $19,373

The truth is, the value of college likely lies somewhere between these two calculations. But you can see it really starts to become NOT WORTH IT if you spend too much money.

So, how can you personally factor this into your college decision?

Calculating Your College ROI

The key to deciding if college is worth it is simply to calculate your Return on Investment (ROI). Specifically, we're going to look at how much you should borrower to pay for college.

If you can pay cash for your degree, it doesn't matter if it's worth it because you're buying a luxury you can afford (yes, I know education shouldn't be viewed as a luxury - but the paying cash for it can be). It's only if you're going into student loan debt that it really matters.

It's like buying a car to get to work. The goal is to work so you can earn money, and you need a car to get there. You can buy a really cheap old car - it get's you from your house to work. Or you can buy a brand new Mercedes. They both serve the same function - but one is much cheaper and has a better ROI. But if you have so much money and the price tag doesn't matter, buy whatever car you want. But most Americans are't in that situation - so we have to think critically about the costs and return on investment.

So, the name of the game is to only borrow as much as makes financial sense. And that amount is: never borrow more than your expected 1st year post-graduate salary.

"Never borrow more student loan debt than you expect to earn in your first year post-graduation."

So, if you plan on becoming an engineer and expect to earn $60,000 per year, don't borrow more than $60,000 in student loan debt. If you want to be a teacher and only expect to earn $38,000 per year, don't borrow more than $38,000.

It's a very easy rule to understand, but it can be hard to follow.

There is also a lot more research today to understand the ROI. For example, the Foundation for Research on Equal Opportunity recently released a bunch of data calculated the ROI on 30,000 bachelors degrees from different schools and programs. You can see the real answer to was college worth it.

Related: Where To Apply To College (Finding Financial And Academic Fit)

How To Understand What You Will Earn After Graduation

This can be a tough one - but it's where you have to start. What do you want to do after graduation, and how much will you earn?

When you're 17 or 18 years old, it can be impossible to know. But you can get a ballpark (and you should, especially depending on what field you want to go into). Remember, only 27% of graduates have jobs related to their major in college, but that's a good baseline of where to start.

Once you have a ballpark, you can build a buffer around that. Want to go into education? See what low end teacher make in your state. Marketing? See what marketing jobs are available? Want to be a doctor? Well, I hope you've spoken to some doctors.

If you don't know where to find salaries, look at sites like Glassdoor and Indeed. Both sites have salaries and company reviews - which can be helpful to understand a bit more about big companies in the industry you want to get into.

Reduce Tuition Costs

Research in state school tuition as well as other lower cost programs. While the benefit of an Ivy League education could pay off in networking and career opportunities, it does not make sense to overspend for those benefits. Find well-ranked, lower tuition options.

You could also opt for a hybrid of starting at a community college (which is free in 30 states), and then transferring to a state school after you knock out your general education requirements.

Seek financial aid and scholarships. There is money available to students of all abilities and financial backgrounds. With a little bit of leg work, it is possible to reduce ballooned school tuition to a minimal cash investment. Don't rule out working for a university, often employee benefits include free tuition in addition to comfortable salaries.

Choose to live at home or rent a low cost apartment off campus. Reducing or eliminating room and board expenses can help limit the amount of student loans.

Related: The Ultimate College Budget Guide

Accelerate Your Studies

Take AP courses in high school, or test out of entry level courses with options like the CLEP. Pick a major and stick to the core studies to prevent spending valuable tuition money on extraneous classes. Opt to take lower cost general education credit hours at a community college. Get ahead of your investment by graduating early and on time. Extending your stay in school only increases debt and postpones your ROI.

In my case, I took as many AP courses as possible, and took the AP exam each spring. As a result, I was able to start college with sophomore standing due to the amount of credits I received for my AP classes, and I was able to graduate early (even though I changed my major). AP courses were the key to graduating early and saving a bit on college costs.

Work Through College

Don't be afraid to go out and work during school. Beyond the fact that you get paid and you can use this money to offset the costs of your college education, working gives you amazing skills that you can transfer to any job after college.

For many college students, working in retail or in a restaurant is a flexible way to find a job while still being able to balance your school schedule.

Conclusion - Is College Worth It?

Is college worth it? Maybe.

Like any investment, you won't know until after you make it and start to realize the returns. But you can protect yourself by spending as little as possible up-front.

For example, mitigating the amount of student loan debt you carry with you into adult life creates a better foundation to make future investments and grow personal wealth.

While there are many pathways to success, an undergraduate degree is still a good option for those looking to earn a solid living and live in financial comfort. The return on the investment depends on students managing money wisely, making strong career choices, and backing up their diplomas with discipline and work ethic.

While incurring loan debt sets students behind non-degreed workers for the first few years of employment the earnings potential of those with college degrees far outpaces those without. However, it only makes sense if you don't spend a lot of money on that undergraduate degree.

What do you think? Is college worth the investment?