Human Capital ROI: Education Investment Simulator

Education Investment

Extra years of schooling 3

Annual tuition + fees $12,000

Wage premium from degree 28%

Discount rate 4.0%

Live Readouts

Net present value of investment (40-yr career)

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Break-even age (years of career)

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Internal rate of return

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Legend

Path A — work straight away Path B — study then work Break-even year marker

How it works

Each bar is one year of a 40-year working life. Height = cumulative, discounted net earnings up to that year for each path — the human-capital analogue of comparing two investments.

Wage (Mincer-style):
  w(t) = w0 · (1+g)^t              [Path A, experience growth g]
  w(t) = w0 · (1+premium) · (1+g)^(t−S)   [Path B, after S years]

During schooling (t < S): Path B pays −tuition, earns nothing.

Discounted cumulative earnings:
  NPV(T) = Σ_{t=0..T}  cashflow(t) / (1+r)^t

Break-even year = first T where NPV_B(T) ≥ NPV_A(T)
IRR = discount rate r* that makes NPV_B(T) − NPV_A(T) = 0 at career end

Extra years of schooling — how long the degree/programme takes; those years cost tuition and forgo Path-A wages.
Tuition + fees — annual out-of-pocket cost during schooling (loans, opportunity cost of savings).
Wage premium — how much higher Path B's wage is once the degree pays off, relative to Path A's wage at the same career year.
Discount rate — how much a dollar earned in the future is worth today; higher rates punish the up-front cost of education more.

Real-world relevance: this is the standard human-capital investment model economists use to explain why average returns to a university degree stay positive even after accounting for tuition and years of forgone income — and why that return shrinks as discount rates or tuition rise.

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