Question

D EC 2a.Based on the political cartoon, what is the opportunity cost of going to college and collecting student loan debt? LOVE SONG 2b. Complete a cost-benefit analysis of attending college or a post-secondary program after high school. What are the costs and benefits of making this decision? I-

Answer 1

The cost-benefit analysis of attending college is one of the most sought after research questions in the field of economics of education and there are strong arguments that run both ways:

2.a) The opportunity cost of going to college and collecting high student debt is indeed start working right out of high school. The income will be lower at the start but there will not be any backlog of any monthly payment of installments towards student debt.

2.b) Benefits:

i) The most important benefit of attending college is the increase in lifetime earning potential of an individual. Although, the earnings will start 4 years later for a person who attends college, research has shown that people with a college degree climb up the ladder much faster than those with only a high school degree and the starting pay is itself much higher.

ii) Apart from income, the nature of jobs is also very important. People with a college degree are preferred when it comes to jobs requiring the application of mind and intellect. The amount of physical labor involved is much lower which is another key for a happy life.

iii) Moving away from the finances for a bit, higher education indeed prepares a person to make informed decisions throughout his/her life through rational thinking. It improves the collective decision making of the society when it comes to matters of collective public action like voting. There is indeed an argument that universal franchise should not be adopted in countries with very low levels of education as it often leads to below-par outcomes. (bad decision making of uneducated dominates the good decision making of the educated and the entire society has to suffer)

Cost:

i) As mentioned above, one of the most important costs of college is the actual financial burden of attending it. Many children can't afford to pay and rely on student loans. Although, the interest rates on these loans is lower, it still leads to big payments towards servicing of loans for a major a part of ones earning life.

ii) Apart from the financial cost, debt has a huge psychological cost as well. A person under debt is constantly under pressure as if due to any economic shock, the person loses his/her job and loan servicing becomes difficult, the person has to default which hampers their ability to borrow for important future events (like housing loans)

Overall, the studies have suggested that benefits outweigh the cost as people with education are doing better off in their long term careers and are more satisfied.