The opportunity cost of something, in economic terms, is the best feature that a person foregoes when choosing between two or more mutually exclusive options. To give a simple example, if a person cannot have both chicken and steak for dinner, the opportunity cost of eating chicken is steak. Any decision a person makes necessitates the foregoing of other potentially beneficial options. For example, the opportunity cost of college includes both monetary and time-related costs — the money a student could be earning if they didn’t go to school, as well as the time the student could be investing in other activities.
In 2010, the average cost of a year’s tuition and fees at a public four-year university in the United States was around $8,000 USD, excluding books and living expenses. For a year of college, this could be considered the “explicit cost.” However, the opportunity cost of college, also known as the “implicit cost,” is the sum of this amount plus what the student could have earned if he or she had not chosen to attend college.
Of course, the exact figure depends on what other job opportunities are actually available to the individual. If a potential student earns $50,000 (USD) per year as an experienced electrician, the opportunity cost of college after leaving this job is $50,000 (USD) per year plus the explicit cost. On the other hand, this person could be a recent high school graduate with little to no work experience or practical skills, earning $15,000 (USD) a year in an unskilled job if not attending college, in which case the opportunity cost would be relatively low. Interestingly, during times of economic recession, when a person is less likely to find a well-paying job, the opportunity cost of college is significantly lower.
A potential student should also consider the opportunity cost of not going to college when deciding whether or not college is worth the money. In 1999, college graduates in the United States earned $20,000 (USD) per year more than high school graduates who did not complete college. Attending college would be a good long-term financial choice if the course of study is likely to provide the student with higher-paying job opportunities that would cover the opportunity cost in a reasonable amount of time.
Of course, money isn’t the only consideration for a prospective student. College courses can be exhausting in terms of both time and energy. Attending classes, reading, studying, working on projects, and other activities all have an opportunity cost in terms of what else the person could be doing. Gaining work experience, spending time with family, or even sleeping are examples of these activities. This is especially true for nontraditional students, who are more likely to have spouses, children, or a job than those who enroll directly after high school.