Is College Worth the Cost?

Presented By:

Thomas Bishop

Sejla Karalic

Anzhelika Lyubeivko

Nathan Grace

Research Criteria

Discount Rate: 8% Change in College Tuition: 6.3%

(estimated based on public 4 year institution, avg.= $5,492.00)

High School $6,588 (cost of raising 1 child) Beginning Salary: $18,326/yr

Bachelors Degree $13,903 (cost of raising 1 child) Beginning Salary: $44, 002/yr

Annual Standard of Living: 4.1%

Results

High School Grad Lifetime earnings:

$10,515,064.64

Lifetime earnings with 1 child: $10,330,974.30

Lifetime cost of child: $184,090.34

Results

Bachelors Degree Lifetime earnings:

$16,577,452.91

Lifetime earnings with 1 child: $16,179,008.28

Lifetime cost of child: $398,444.63

Results

College graduates with a bachelors degree spend and average of 2.4% of their lifetime income to raise one child.

High school graduates spend an average of 1.7% of their lifetime income to raise one child.

College graduates with a bachelors degree spend an average of 0.7% more than high school graduates to raise one child.

Difference attributed to substitution for inferior goods.

Results

High School Net Disposable Income

Bachelors Net Disposable Income

High School Net Disposable Income with 1 Child

Bachelors Net Disposable Income with 1 Child

Total $10,515,064.64 $16,975,897.54 $10,330,974.30 $16,577,452.91

Results

High School Grad: Starting Salary: $18,326.26 Salary (5 years):$26,927.29

Bachelors Degree: Starting Salary: $44,002.05

Difference in Salary: $17,074.76

ResultsPercentage Earnings Differentials

Total high school earnings/total college earnings = 62% 100%-62%=38%

College graduates without children earn 38% more than high school graduates without children

College graduates with children earn a little more than 38% percent less than high school graduates without children

Results

Conclusions

NOT having children AND completing a bachelors degree would result in $367,299.74 of extra disposable income to invest.

Other externalities that may affect a person’s decision to attend college exist: performance in high school, family responsibilities, family educational background, loan availability, medical conditions, etc

If you receive an 8% rate of return you will see substantial income increases around the age of 42.

The cost of college can easily be paid off within the first few years of employment and having a child also does not pose too big of a financial burden.

Conclusions

College is definitely worthwhile according to our analysis

Overall, we recommend as much education as possible

We do not recommend having children

Is it Feasible?

Donald Bishop $4,200 in 1973 1st work year $68,000 in 2008 Year 36 $182,395 in 2022 Year 49

About 8% yearly increase Consumption:

Raised 4 children Investment options

Brand new home 5 rental homes Diverse portfolio

All things are possible with hard work.