Opportunity Costs

"Everything we do in life has its own opportunity cost. From all possible things we could be doing at a given time, determining which one is of most value to us tends to be our biggest challenge in terms of allocating our time resource efficiently" - Gil, Fausto

Going to college is not the best choice for everyone. I don't regret going to university, but both circumstances and some of my choices meant that it cost me an awful lot of time and money to actually get a degree. If I had the chance to do it over again, the main difference would have been getting a technical degree in something like engineering or architecture, instead of selling myself short by doing a comparative literature degree.

The going advice at the time was to "do what you love", but I would have been better off doing something that challenged me. Let's face it, a CompLit degree is just an over-qualification for prospective jobs where I could probably be fired for saying things like, "Would you care for some pommes frites to accompany your repast?" instead of the standard line.

My mother died of breast cancer just before I turned eighteen. She was diagnosed when I was about sixteen. Between my mother's illness, the aftermath of her death and the dissolution of my family, and a lifetime habit of underachievement, I didn't apply to any universities immediately before or after graduation. A bad investment blew away the life insurance money, but even with that money I would have had to work and probably take out a few student loans to get a degree, especially if I'd gone to a four-year university right away.

Instead, I spent nearly five years supporting myself with various menial jobs, attending the local community college when I could. In my first semester after finally transferring to a university — which was only made possible by borrowing money from a friend and mentor — I asked myself whether school was really worth it. Prompted by the introduction of the concept of opportunity costs in my economics class, I sat down and figured out what school had cost me already, and what it would cost me to continue to go to school.

I looked at the kind of semi-skilled labor that I thought would be interesting enough that I wouldn't want to blow my brains out, but would be relatively easy to get qualifications for. My grandfather was a machinist. My father worked at an automobile factory and as carpenter for several years. I figured welding would split the difference.

The average income for a welder was about $32,000 at the time. I was living right at the poverty line while going to school, making about $10,000 a year at jobs paying just over minimum wage. That income didn't change much during the rest of the time it took me to finish school. With more ambition and experience behind me, I applied for better-paying jobs and so only had to work part-time for about the same amount of usable income when I was attending university. I had to take out student loans to pay for tuition, books, and to supplement my wages.

A welding certification would have taken me about a year to complete and cost about $6,000–7,000. I assumed I would be bringing in the same amount of money during training as I was while going to school, and would have to borrow money from somewhere to take the course. For simplicity, I assumed borrowing from the same person who gave me the opportunity to go to school.

I ran the numbers: 4 years of income at $32,000 following a year of training at minimum wage income = $88,000 more than minimum wage, minus a high of $7,000 tuition and materials for certification, which would have been mostly covered by the $5,000 I borrowed. Already, by the time I transferred to university, I was over 80,000 dollars behind someone who simply got a technical certification and started working in semi-skilled labor a year out of high school.

Community college was very cheap: $13 per unit. Books actually cost more than most of my classes did. I estimated my direct costs for community college at just over $1,000 for courses, maybe double that in books: $3,000 total for 77 units, only 70 of which counted for transfer.

It took me another 7 semesters to actually graduate from university, and it cost me about $15,000 in annual tuition and books per semester, so about $52,000 to $53,000 for the time I was there — and I went to a relatively cheap State University. I paid for part of that myself, qualified for a few grants, and paid for the rest through student loans. Add another 3 years to my welding income, and even at the low end I would have made another $56,000 more than my student income.

At the time I graduated, assuming I maintained the same style of living the whole time, I would have saved about $136,000, excluding compounded interest from savings or investments, instead of owing $28,000 in student loans. Those student loans — which I actually paid off early — cost me close to another $9,000 in interest. In other words, I could nearly have bought a house in cash with the difference in income and expenses incurred over the nearly 8 years it took me to work my way through university.

I think that one of the worst disservices being done to high school students is in overselling the value of a university degree. Vocational schools, technical training, and simply working while gaining other qualifications all deserve more attention than they get. While your top wages might not be as high, the lower cost of certification or training, and the 3–5 year head start in wages and savings following a vocational program, over the time it takes the average student to obtain a BA/BS (currently about 5 years) offsets a large fraction of the difference.

The magic of compound interest that we all learned about in middle school works for you the longer you have to save. I was over 30 before I was able to save anything beyond an emergency buffer, since my first priority had to be paying off debt. Unless my income doubles — or more — in the next 10 years, I'll have less of a retirement than my alternate-reality welder self would have. At this point, if I can retire at all before I'm so old and decrepit that I'm simply forced out of work, I'll count myself lucky.