NPV / IRR Model
Net Present Value and Internal Rate of Return are the foundation of Tuvelan’s education investment analysis. Every school+major combination is evaluated as a financial asset with quantifiable costs and projected returns.
The Core Formula
For each school+major combination, we compute the education investment NPV over a 20-year post-graduation horizon:
Where:
- C -- Net cost of education (tuition + fees + room/board - grants - scholarships), sourced from IPEDS net price by income bracket.
- E_degree(t) -- Projected annual earnings for degree holders at year t, calibrated from College Scorecard median earnings at 1, 4, and 10 years post-graduation using Mincer wage curves.
- E_hs(t) -- Counterfactual earnings for high-school-only graduates by state, from Census ACS data.
- L(t) -- Annual loan repayment obligation at year t under the selected repayment plan.
- r -- Discount rate (see selection methodology below).
Lifetime Earnings Premium
The earnings premium is the cumulative income advantage a degree holder earns over a high-school graduate across an entire career. Tuvelan does not use a single national average. Instead, we compute the premium at the intersection of three dimensions:
Institution
College Scorecard median earnings by OPEID at 1, 4, and 10 years post-entry.
Major
Field-of-study-level earnings from Scorecard FOIA data, covering 1,800+ CIP codes.
Geography
BLS area wage adjustments and Census ACS state-level high-school earnings.
The premium is not a single number but a trajectory. A computer science degree from Georgia Tech and a philosophy degree from a private liberal arts college have fundamentally different earning curves -- and Tuvelan models each one individually using the available federal data points.
Discount Rate Selection
The discount rate is the most consequential assumption in any NPV calculation. It reflects the time value of money and the risk that projected earnings may not materialize. Tuvelan uses a tiered approach:
Conservative (default)
Approximates the real return on long-term Treasuries. Appropriate when comparing education to low-risk savings.
Moderate
Reflects opportunity cost of investing in a diversified equity portfolio instead. Standard human capital economics assumption.
Aggressive
Matches long-run S&P 500 real returns. Penalizes uncertain future earnings heavily. Useful for risk-averse families.
Users can override the discount rate via the API or the calculator settings panel. The Monte Carlo simulation runs at all three rates and reports the sensitivity range.
Degree ROI Ranking
The IRR is the discount rate at which NPV equals zero -- the breakeven return on the education investment. Tuvelan computes IRR via Newton-Raphson iteration on the cash flow series. Degrees are then ranked by IRR within their comparison set:
- Same major, different schools -- Which institution delivers the highest return for a given field of study?
- Same school, different majors -- Which major maximizes the financial return at a specific institution?
- Absolute ranking -- Cross-comparison of all school+major combinations by IRR.
An IRR above 10% indicates a strong financial investment. An IRR below 3% means the degree barely outperforms a savings account. Negative IRR means the degree holder would have been financially better off not attending at all -- a finding that applies to roughly 25% of all school+major combinations in the College Scorecard data.
API Endpoint
Access NPV/IRR calculations programmatically. The response includes NPV at all three discount rates and the computed IRR.
/v1/calculatecurl -X POST https://tuvelan-api.smarttechinvest.com/v1/calculate \
-H "X-API-Key: tuv_your_api_key_here" \
-H "Content-Type: application/json" \
-d '{
"institution_id": 166683,
"major_cip": "11.0701",
"discount_rate": 0.05,
"loan_amount": 40000,
"include_irr": true
}'The response includes npv_3pct, npv_5pct, npv_7pct, and irr fields among the full calculation result set.