Do the benefits of college outweigh the costs? How to find out

When you're submitting college applications, you obviously want to focus on the strength of the academic program of any school you're considering. But for most people, that's not the only important factor. You also need to think about the cost of school.

College is undoubtedly expensive, and unless you have a hefty college fund or plenty of family income to pay tuition, student loans are almost always going to be necessary. And that means that whether you're a parent or a student who may have to borrow, you need to consider how much student loan debt you'd have to take on to attend a particular institution.

Cost-benefit analysis of going to college

As you're weighing student loan debt during the college application process, taking these four steps can help you balance cost versus benefit to make the best choice.

1. Use a net price calculator
2. Budget for monthly payments
3. Compare financial aid award letters
4. Consider the change in your earning potential

1. Use a net price calculator

Some schools have higher tuition payments than others -- especially when choosing between a community college or a four-year institution.

The cost of living can also vary, especially if one school is in a very expensive area, and you'd need to pay more for rent and food while attending school. You'll want to look at the total estimated cost of attending each institution you're interested in so you can do an apples-to-apples comparison. A net price calculator can help you get a better understanding of the amount you're looking at.

When you borrow for school, you also make the cost of attendance higher since you have to pay tuition. Use a student loan calculator to determine how much interest you'd have to pay based on how much you borrow for each program.

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2. Budget for monthly payments

When you commit to taking out student loans, you'll need to make payments on them after graduation until you've become debt-free.

You may have to take out both federal student loans and private student loans as it's common to max out eligibility for federal aid and still need more money. If so, you'll need to know the total monthly payments you'd be looking at to assess how they'll affect your post-graduation budget.

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3. Compare financial aid award letters

There are many sources of financial aid offered by different colleges. And while student loans need to be repaid, other types of financial help such as grants and scholarships do not have to be paid back. If you can qualify for lots of this free money to attend a particular school, it could be a better deal for you even if the tuition price initially appears higher.

Schools you're accepted to should send a financial aid letter detailing all the different kinds of grants, scholarships, loans, and work-study programs you've been approved for. Reviewing your financial aid letter will help you see what your bottom line cost is out-of-pocket and how much you need to borrow.

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4. Consider the change in your earning potential

Sometimes, attending a particular school will open up more doors for you in terms of job opportunities or will maximize your chances of earning a higher salary. If that's the case, the money that you may be able to make could help cover any extra tuition payments.

Consider the field you are interested in, the potential salary range for it, and the school's statistics on post-graduation employment to decide if incurring extra costs to attend a more prestigious university or program may be worth it.

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