Matt's Grand Ideas

Tuition: not the most expensive cost of college

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College can be expensive, but the most costly aspect is often not discussed. No, it’s not tuition. Not room and board. It’s not even books, though as someone currently in graduate school, I’ve found this can be a little a startling.

There are two kinds of people who go to college – those who have just finished earlier school, for example, high schoolers heading for an undergrad degree, or recent college graduates going for a graduate degree. And then there are people like me, who returned to college after a long break. Each of these types of people has options available to them, to go to college, or to wait, and go to work.

What if you skip the degree?

In my area, there is a labor shortage. A young person out of high school will have no trouble finding full-time, but low-paying work. The minimum wage is about $12/hour as I write this, but it’s not hard to find work for $15/hour. To put this into perspective, $15/hour is about $30k per year and a single person keeping expenses tightly under control can live in Des Moines, the capital city of Iowa, for about $28k per year. Barely. If a person has been in the workforce a while, they’re probably able to make about 50% more than that, even in a low or unskilled job.

How much does college cost?

So what are the expenses? According to a recent CNN guide, the typical cost for a four-year degree in the USA is $57,000. That includes tuition, fees, room and board for an undergrad student. You can bring that number down in many ways, such as through scholarships, living with family, or by taking two years at a community college. You can also increase that cost by going to private college, going to an out-of-state college, and forgoing cost-saving living arrangements.

The hidden cost

There’s a big cost that doesn’t show up in those figures, though. The money you’d have made if you had gone right into the workforce. This is called the opportunity cost.

Let’s compare the path of a set of triplets. They’re from a middle-class family, have good aptitudes, but each has a different trajectory once they leave high school.

State college

Jim goes to a local state college, uses earnings from a summer job to pay for some of the expenses and graduates on time. After graduation, he has $0 in earnings, $57,000 in school expenses and immediately gets hired by an accounting firm as an associate for $48,000. He gets a raise of 5% per year, so on his 10-year high school reunion, he has net earnings of $269k and an annual salary of $61k. Not bad.

Trade school

Jamie decides to take an intensive five-semester certificate program to become a state-certified bookkeeper. The local community college offers a program that goes fall-spring-summer, fall-spring, full time. She lives with her parents and her total out of pocket expenses are $12,000 and she gets a job right after graduation, working for a construction company earning $36,000 per year. She also gets a 5% annual raise, so at the reunion, she has net earnings of $332k and an annual salary of $51k. That’s $63k more than Jim, a big difference.

Straight into the workforce

Jackson is eager to be independent and he doesn’t think more school sounds too interesting. He goes to work for a local contractor doing remodeling. He starts at $15/hour but within a year, he’s raised that to $18/hour and after two years, he gets hired on at a large firm making $22/hour. He works about 10 hours per week overtime, getting paid time and a half. At the new firm, he gets an annual raise of 5%. At the reunion, Jackson has earned $587k and is earning $73k per year. If Jackson didn’t work overtime, that number would be lowered to $427k total and $53k per year.

The hidden cost of a four-year degree

The scenarios above show that there is a hidden cost to college, it’s called the opportunity cost. When you choose to do one thing, you are choosing not to do something else. In the case of college, you’re delaying earning money. Comparing the 10-year earnings between Jane and Jackson, that amounts to a cost of $318,000. If Jackson had chosen to be a plumber, an electrician or a truck driver, that difference would be even higher, since these are all careers that require minimal education but have much higher-than-average pay rates.

Will Jim make up the difference over time?

Probably, but if Jackson invests his money wisely starting early in his career, he’ll gain from additional years of compound interest, which could allow him to retire years earlier than Jim. And there’s nothing to stop Jackson from going back to college to earn a degree if there’s an advantage to do so. His employer may even pay for it.


Some jobs are only available to you with a degree. Some jobs pay far higher than average salaries than we used in this scenario. But the bottom line is this: Opportunity cost is the most expensive part of college. I’m not the only one who’s done the math. Chris Bowyer, contributor to Forbes came up with similar results in his 2014 article.

College is still very valuable, strongly consider it. But if you don’t know for sure what you want to do or if a college degree is worth it, consider going into the workforce. Maybe you’ll find that, like me, you can follow your passions and get a degree a little later. Your employer might even pay for your college while you’re working.

My calculations

  Jim  Jamie Jackson
(no overtime)
Year 1 $ –   $ –   $30,000.00 $41,250.00
Year 2 $ –   $(12,000.00) $36,000.00 $49,500.00
Year 3 $ –   $36,000.00 $37,800.00 $51,975.00
Year 4 $(57,000.00) $37,800.00 $39,690.00 $54,573.75
Year 5 $48,000.00 $39,690.00 $41,674.50 $57,302.44
Year 6 $50,400.00 $41,674.50 $43,758.23 $60,167.56
Year 7 $52,920.00 $43,758.23 $45,946.14 $63,175.94
Year 8 $55,566.00 $45,946.14 $48,243.44 $66,334.73
Year 9 $58,344.30 $48,243.44 $50,655.62 $69,651.47
Year 10 $61,261.52 $50,655.62 $53,188.40 $73,134.04
Net Earnings $269,491.82 $331,767.92 $426,956.32 $587,064.93
  Baseline  $62k more  $157k more  $318k more 

Web guy, big thinker, loves to talk, teach and write. I make technology easier to use @ John Deere ISG.

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