What is one's opportunity cost for attending college?
There is an opportunity cost for attending college. Opportunity cost is what is given up when a scarce resource is used in a certain way. Thus, by attending college, a student would be giving up the money that would be earned by working at a job full time. Generally, when a student attends college full time, the student delays entry into the workforce on a full-time basis until college is completed.
Another opportunity cost would be the inability to use the money spent on college tuition for other purposes. A person might not be able to buy a car or some other item that he or she might want to buy.
There are other opportunity costs involved. A student might be sacrificing time with family and friends. The ability to attend sporting events and cultural activities might also be limited if a person went to college full time. A person might not have much free time—to do the things he or she wanted to do—because he or she may have to study.
Finally, if a person has debt in the form of student loans, this will also add to the opportunity cost of attending college. The student will have to pay interest on the debt as well as paying off the debt. Thus, funds will be used to repay the debt that could be used for other purposes.
While there is an opportunity cost for attending college, the expectation is that a person will make up the difference in the long run with a better paying job because of the college education and degree.
The opportunity cost of attending college includes the cost of the tuition and the cost of what the student gives up by going to college instead of working. For example, if the cost of the tuition is $30,000 a year, and the student could've earned $25,000 a year from working, the opportunity cost of attending college is $55,000 a year.
Students tend to rack up debt while in college, as they have to cover the cost of room and board in addition to college. The average student has about $30,000 or more in debt when graduating from a four-year college; in addition, the student has lost about $100,000 in income that he or she could have earned while working over those four years. Therefore, the total opportunity cost of attending college is quite high and could be $120,000 or more in tuition and $100,000 in lost income, adding up to $220,000 (or $250,000 if a student has debt).
However, when calculating the opportunity costs of attending college, a student has to consider that people with college degrees average about $65,000 a year in income, while people with a high school degree earn $35,000 a year on average. Therefore, a college graduate will make up the $250,000 opportunity cost of attending college in a little over 8 years. Over the lifetime of a college graduate, he or she could earn much more than a high school graduate.
The opportunity cost of attending college would essentially be whatever you would have done, and the money you would have earned and saved had you not attended college. This would go beyond the costs of tuition, which might entail college loan debt, and other costs.
When most people go to college, they decide to put off full-time employment or a career for four years. Depending on one's prospects, the opportunity cost could be higher. If one has a skill, for instance, or a family business that would guarantee them a good wage right out of high school, then the opportunity cost would be all the wages and experience they would have gained had they worked for four years rather than going to school in addition to the costs of actually going to school.
So if a person could have earned $25,000 a year for working straight out of high school, and the costs of college are $15,000 a year, then the opportunity cost of attending college would be $40,000 a year. Whether the opportunity cost is worth it or not is a choice individuals have to make, considering both economic factors (like how much more you can earn by going to college) and less tangible ones (the value of an education and the social experience of attending school.) But for everything one decides to do, they face a trade-off, which economists call an opportunity cost.