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Financial Literacy

Financial Literacy

Home Financial Literacy Home Economics Opportunity Cost: Private Vs. Public School – University Shmooniversity

Opportunity Cost: Private Vs. Public School – University Shmooniversity

OK, you’ve gotten the gist from the “free” Super Bowl tickets example (you won them free and clear from a radio station giveaway – you chose to go to the game rather than sell them – they weren’t “free”) and the Taurus $8,000 thing. Apply the same concept to your schooling.

Private school: $250,000 (tuition, room, board, retail textbooks)

Public school: $100,000 (tuition, room, board, Chegg account)

Over 4 years you save $150,000 going to your state’s public school vs. the lovely ivy-and-brick covered private institution. Odds are good that the quality of the education is about the same. Regardless, it’s hard to prove with hard data that private schools (other than the elite few) yield particularly more earnings for you in your life. On the other hand, they will definitely help you develop a healthy superiority complex, however justified. Makes sense; it’s not Private Enemy Number One.

That $150,000 that you’d save would buy a really nice Porsche. Or be a great down payment on a condo. Or you could just invest it – make 8% a year without being a hero or taking tons of investment risk – and there’s $12,000 a year in returns without getting off your butt. Speaking of which, you could also use that money to buy yourself a really, really, really, really nice armchair.

What’s “worth it?” Why do private schools collect such a premium? Maybe a relic of old world education when public school was looked down upon?

Apply this thought to your major/core area of study.

Starting salary averages:

Women’s Studies: $32,000 and lots of begging for the job on your part
Computer Science: $56,000 and employers begging you to come

In an odd way, you could say that it “costs” you $24,000 a year to have majored in Women’s Studies. That’s $2,000 (albeit pre-tax) a month for your major. $70 a day, roughly. Every day. Was it worth it? Are you $70 a day happier to have studied women? Maybe. And maybe you go to law school and then… the financial picture gets a lot rosier. Except now you’re responsible for sentencing the occasional innocent woman to jail time. Not exactly going to get you on Gloria Steinem’s good side. Still, all the extra cash in your pocket makes the medicine go down easier.

We realize that this analysis is insanely narrow. but it helps to have the perspective. So perspect away.

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