The Opportunity Cost of Attending College Explained
It cannot be denied that going to college is expensive. Tuition, books, room and board, etc. — you will have to shell out money for these for four years or even more.
On the other hand, you can get a job after graduating from high school, allowing you to make money instead of spending money on attending college.
The cost of earning a bachelor’s degree plus the money you could make if you instead chose to work after high school is the opportunity cost of attending college. Learning about this matter allows you to realize the true cost of college, enabling you to determine whether it’s the better option.
It’s not just your annual educational expenditures that determine the actual cost of being a college student.
College Explicit Costs vs. Implicit Costs: What’s the Difference?
Simply put, explicit costs are costs associated with attending college. They range anywhere from tuition to personal expenses. Implicit costs, on the other hand, are associated costs if you would do something. The combination of explicit and implicit costs makes up the opportunity cost of attending college.
When it comes to determining the opportunity cost of working on an undergraduate degree, there are a couple of costs that step into the scene: explicit costs and implicit costs.
For the most part, explicit costs are so much easier to understand.
That’s because they are just about anything and everything that you pay out of pocket in order to earn an undergraduate degree.
Tuition, student fees, books and supplies, room and board, personal expenses, and transportation fees — these are the explicit costs of going to college.
Also referred to as accounting or out-of-pocket costs in the world of business, explicit costs are pretty straightforward. You can determine the total amount simply by keeping track of receipts and expenditures.
Implicit costs, meanwhile, are a little more complicated than explicit costs. Primarily, it’s for the fact that they deal with intangible costs or costs that can be quickly identified or pointed out but can be difficult to estimate or quantify.
If explicit costs are actual and objective expenditures, implicit costs, on the other hand, are implied and subjective.
Known as imputed or economic costs outside the turf of the opportunity cost of attending college, implicit costs, in their most basic sense, are costs that you would have to make if you would choose to do something else than go to college.
And nothing can be a more sensible and practical alternative to heading to college than getting employed.
So, in other words, it’s sacrificed job earnings.
But since you have no idea of what company in which industry will hire you and give you what amount of salary per month, you can only make a guesstimate of the implicit costs.
However, it’s not just how much money you will sacrifice should you opt for an alternate activity (going to college) that’s considered when determining implicit costs but also everything else you can enjoy — getting 7 to 9 hours of sleep instead of pulling an all-nighter for an exam, spending time with loved ones instead of completing a thesis, etc.
The sum of explicit costs and implicit costs is the opportunity cost of attending college.
Student Loans and the Opportunity Cost of Going to College
Just about any costs involved in the quest to earn an undergraduate degree add to the opportunity cost of attending college. It goes without saying that student loans are included.
However, it’s not the student debt that has to be paid off that’s included but also the interest on the debt that has to be settled.
The majority of all undergraduate students in the US take student federal loans.
By the time they get their hands on their undergraduate degrees, approximately 70% of them have education debt, which, according to this data, can take an average college graduate 20 years to pay off.
Naturally, the sum of money you borrow in order to finance your undergraduate degree or any other college-related expenses adds to the opportunity cost of going to college.
Your opportunity cost is higher if you take out student loans. And the higher the amount of money you borrow, the higher the opportunity cost of choosing college gets.
Repaying student loans and associated interests after graduating from college becomes one of the many opportunity costs of choosing to attend college rather than just working after high school.
It results in a reduction of available income once you get a job after college.
Borrowing a lot of money to finance your higher education pursuit can also cause the generation of other opportunity costs of going to a college or university.
Many undergraduate degree holders who are faced with repaying exorbitant student debt, for instance, are forced to live at home, delay attending graduate school, etc.
Despite student loans adding to the total opportunity cost of choosing college over other a number of alternate options, the fact remains that an undergraduate degree comes with numerous perks that cannot be disregarded.
Are You Better Off Working After High School?
Individuals who choose to work after graduating from high school are financially well ahead of undergraduate students by the time they obtain their respective degrees. However, one must take into account the median salary and earning potential when deciding between working and going to college.
Because the opportunity cost of attending college considers working on an undergraduate degree and other alternate options, it’s necessary to consider the perks of working after getting one’s high school diploma.
While college is typically the next step after high school, it’s not the only choice outside the realm of education.
According to research conducted by Edge Research for the Bill & Melinda Gates Foundation, only about 46% of all high school graduates in the US are definitely planning on going to college. The rest are unsure as to whether or not they will attend college, while about 13% of them don’t plan on going.
The said research also found out that 4 in 10 high school graduates in the country are thinking about exploring a variety of learning options such as attending trade or vocational schools to earn certificates or licenses.
Some high school graduates skip 4-year institutions for many reasons, including:
Steep college costs
There are many perks that come with having an undergraduate degree.
But before you get to reap them, you will first have to go to college for at least four years, which doesn’t come cheap.
As a matter of fact, up to 34% of high school graduates who aren’t enrolled in college now say the reason is that they cannot afford it.
About 39% of high school graduates who choose to work rather than enroll in college, on the other hand, say that they need to financially support themselves or their loved ones.
Questionable value of postsecondary education
Now more than ever, there are many other educational options available to high school graduates.
On-the-job training, apprenticeship, certifications, licenses, stackable courses, online learning — choices come aplenty!
So much so that, based on a 2022 study, up to 86% of recent high school graduates are pursuing education via alternative means.
Because of this, many, especially those who do not have the time and money to go to a 4-year institution, can’t help but wonder if an undergraduate degree is still a must-have in order to reap career success.
Speaking of which, individuals who are armed with only a high school diploma can have careers.
As a matter of fact, US News has a ranking of the best jobs that requires nothing more than a high school diploma while offering good work-life balance and strong job growth. Just check out the following table:
|JOB TITLE||MEDIAN SALARY||JOB GROWTH BY 2030|
|Insurance sales agent||$52,180||7%|
|Solar photovoltaic installer||$46,470||52%|
|Community health worker||$42,000||21%|
|Delivery truck driver||$37,050||10%|
|Recreation and fitness worker||$31,250||27%|
|Personal care aide||$27,080||33%|
But keep in mind that entry to some of the above-mentioned fields requires things such as apprenticeship, on-the-job training and even licensure.
So, in other words, you will still have to devote some time and energy and even money, too, as a high school diploma alone may not be enough for employers.
Median salary, simply put, is the midway point of all salaries received by everyone in a particular career.
This means that 50% of individuals in a field make more than the median salary, while 50% of those in the same field make less than the median salary. Needless to say, the median salary is the meeting point of the salary data.
Considering the above table of the best jobs high school graduates may apply for, half of all community health workers with a high school diploma only are making less than $42,000 per year.
On the other hand, the other half of them are making more than $42,000 per year.
However, according to the latest data from the National Center for Education Statistics (NCES), the median annual salary of individuals with only a high school diploma employed full-time is $36,000.
Half earns less than $36,000 per year, while the other half generates more than $36,000 per year.
The average median lifetime earning of high school diploma holders is $1,304,000.
The figures given thus far will make even more sense if they are put into context by comparing them with what undergraduate degree holders make on average per year and over their lifetime earnings, which are the total accumulated earnings over 50 years.
In the US, the median lifetime earnings for all workers, regardless of the highest educational attainment, amount to $1.7 million. Doing the math, that’s under $42,000 per year (or $20 per hour).
Both the median annual salary and lifetime earnings of those with a high school diploma only, therefore, are lower.
On the other hand, the median annual salary of individuals with a bachelor’s degree is $59,600 — that’s higher than what high school diploma holders get per year by $23,600.
Even those with an associate degree tend to earn a higher median salary than those with high school completion — $44,100 vs. $36,000.
In terms of median lifetime earnings, bachelor’s degree holders have higher earnings than workers whose highest educational attainment is high school, amounting to $2,268,000.
Bottom line: even though high school graduates who choose to work rather than go to college enjoy a financial head start by four years, at least, than those who choose to attend college, the median salary of having a bachelor’s degree can make up for it, which becomes even more apparent when median lifetime earnings are taken into account.
Are You Better Off Going to College?
Attending a private non-profit 4-year institution college in order to earn a bachelor’s degree after graduating from high school means spending $218,004 over four years — or $54,501 per year. While expensive and time-consuming, bachelor’s degree holders enjoy higher median annual salaries and median lifetime earnings.
There are numerous jobs available for people who have a high school diploma. And just like what was discussed earlier, some of them can be lucrative and high-paying, too.
However, some jobs require more than just a high school diploma.
It’s for this reason exactly why there are more job opportunities available for those with a bachelor’s degree.
According to a report by the association of public and land-grant universities (APLU), those with a 4-year degree are half as likely to be unemployed as their peers who only have a high school diploma.
NCES data adds that the employment rate in 2021 was the highest for individuals with a bachelor’s degree or higher (86%).
The employment rate for those who had completed high school in the same year, meanwhile, was 68%.
Another perk that comes with going to college is increased earning potential. According to NCES, the median annual earning of bachelor’s degree holders that are employed full-time is $59,600.
On the other hand, their median lifetime earnings amount to $2,268,000, which is $964,000 higher than the median lifetime earnings of high school graduates.
There is no need for you to have a clear idea of the career path you would like to take before working on an undergraduate degree — college provides you with the opportunity to discover your interests through extracurriculars and electives.
After all, you have up to 2 years to decide on a major. And switching majors is always a possibility.
Earlier, I showed you a table of jobs (together with the median annual salary and projected job growth for each one) for individuals whose highest educational attainment is high school.
The table below shows you some jobs available for bachelor’s degree holders with the highest returns:
|JOB TITLE||MEDIAN SALARY||JOB GROWTH BY 2030|
|Information systems manager||$151,150||11%|
|Natural science manager||$137,940||6%|
|Compensation and benefits manager||$125,130||4%|
|Human resources manager||$121,220||9%|
There is one more thing that bachelor’s degree holders can enjoy that those with only a high school diploma may not: promotions.
In most companies, especially big ones, employees must meet minimum educational requirements, usually a bachelor’s degree, in order to be able to climb up the career ladder.
However, before you get to enjoy the numerous perks associated with having an undergraduate degree, devoting your resources — money, time, and energy — to college is a must.
Everything that you will have to allot to earning a bachelor’s degree plus everything you could be earning should you choose to work after getting your high school diploma make up the total opportunity cost of attending college.
Saying that college attendance is a small price to pay in exchange for the many perks is absolutely wrong because college isn’t cheap.
But it’s important to keep in mind that sacrificing money and time and many other things (getting a good night’s sleep each time, enjoying the sights and sounds of various cities, spending quality time with family and friends, building your own family, etc.) for the time being can come with a big payoff after about four years.
Choosing Between Going to College and Working: Conclusion
On average, if you decide to have a full-time job fresh from high school, you can save $218,004 in college costs for four years, plus make $36,000 annually. But in exchange for making money right after getting your high school diploma, you waive the opportunity to be a bachelor’s degree holder and make $59,600 per year.
Maybe working right after high school is the smartest thing to do because you can’t afford college and you really need to make some money ASAP to support yourself or your family.
Or maybe you can willingly devote your resources to working on an undergraduate degree to one day land your dream job and earn more annually and in your lifetime, too.
But no matter the path you wish to take, get a college degree or get employed instead, you will certainly have to give up something each time you go for one option over the other.
Disclaimer: The views and opinions expressed in this article are those of the authors and do not necessarily represent those of the College Reality Check.