Opportunity cost of debt for college students

According to the Department of Education over 30% of college students leave after the first year and almost 50% never graduate. The leading reason for this problem seems to be a lack of money. To make matters worse credit card companies have started invading college campuses offering credit cards to students. They offer free items such as t-shirts, water bottles and sports bags in exchange for a complete credit card application. So not only do 50% of college students never finish college but they leave with student loans and credit card debt.

According to Nellie Mae, in 2004, the average undergraduate owed $2,169 on credit cards, while the average graduate student owed $8,612 in 2006. What a great way to start out your new career! The debt alone isn’t the real problem, the opportunity cost of debt for college students is the major problem.

Opportunity cost, as us college graduates learned in our first economics class is the value of a product forgone to produce or obtain another product. In this case 50% of the students who enter never finish because of financial concerns. According to www.earnmydegree.com the average college graduate earns $52,200, the average person with some college earns $36,800, while a high school graduate earns $30,400. The opportunity cost of not finishing college will cost you an average salary of $15,400 per year! A more dramatic number is over a 35 year period of working you will lose almost $540,000!!!

The lesson to be learned here is don’t pay $540,000 for that t-shirt from the credit card company. There are so many financial temptations while in college and it’s not worth starting out your career in debt. Do yourself a big favor and buy yourself a $10 t-shirt and laugh at the credit card companies all the way to the bank.