DB#11: education and capital budgeting
It may not have occurred to you at the time, but you already made a huge decision in your life that was ideally suited to both incremental analysis and capital budgeting. No, it’s not your choice of whether to have pizza or Chinese food at lunch today. I am referring to your decision to pursue a post-high-school degree. If you weren’t going to college, you could be working full-time. School costs money, which is an expenditure that you could have avoided. Also, if you did not go to college, many of you would avoid mountains of school-related debt. While you cannot go back and redo your initial decision, we can look at some facts to evaluate the wisdom of your decision.
- Over a lifetime of work, high-school graduates earn an average of $1.2 million, associate’s degree holders earn an average of $1.6 million, and people with bachelor’s degrees earn about $2.1 million.
- A year of tuition at a public four-year college costs about $8,655, and a year of tuition at a public two-year college costs about $1,359.
- There has also been considerable research on other, less-tangible benefits of post-high-school education. For example, some have suggested that there is a relationship between higher education and good health. Research also suggests that college-educated people are more optimistic.
- About 600,000 students drop out of four-year colleges each year.
About the Numbers
Tuition is very expensive. As a result, many students have high “unmet needs”-the portion of college expenses not provided by family or student aid. Students with high “unmet” financial needs will decide not to pursue any form of post-high-school education. This has obvious implications for their long-term personal financial well-being. It also has significant implications for the well-being of the United States as a society. Research shows that people with post-high-school degrees pay more in taxes. Also, without adequate educational training of its citizenry, the United States will be less able to compete in a high-tech world.
What Do You Think?
Each year many students decide to drop out of school. Many of them never return. Let’s suppose and assume that you are working two jobs and going to college and that you are not making ends meet. Your grades are suffering due to your lack of available study time. You feel depressed. Should you drop out of school?