In these polarized times, “college is too expensive” is a rare uncontroversial statement. Since 1990, tuition has risen by 181%, after controlling for inflation. The total student debt in America is almost 1.8 trillion – debt that is generally not dischargeable in bankruptcy.
Solutions, however, are more polarizing. The debate often centers around excess administrative staff, poorly paid majors and student debt. Individually, the dilemma is about where to attend college. Almost every student assisted by their parents has to discuss how far the assistance goes. For students that don’t get help, cost constrains their choice of where to attend even more.
The choice of where to enroll and the reasons tuition has gone up are complicated. In the face of such complexity, students’ best response may come from economics 101: when something gets more expensive, buy less of it.
College careers that end in three years with a diploma are rare, but not unheard of. Even students that are capable of finishing in three typically opt to stay an extra year.
“I know a lot of people that kind of drag out college because of FOMO (fear of missing out) reasons, and that makes sense,” said Bianca Cooper, a UT alumna who graduated a year early. “At the same time, why are you spending money that you don’t need to?”
The “spending money” side of the argument is easy to estimate. A naïve model would suggest savings of 25%. For those with unsubsidized student loans, it could be even more because of compounding interest.
The “missing out” concern is harder to quantify. Everyone’s situation is different, but there are several cases where “FOMO” is less of a concern.
Graduates staying in Austin can easily keep the social perks of UT student life without being a student. Rather than missing out, they may find their social life enhanced by an income. For others, there could be lifestyle changes, but a quick analysis may reveal that social life is not worth paying an extra year of tuition.
Many students who do leave Austin go straight to graduate school. An undergraduate resume is typically unimportant after graduate school, implying that an early graduation is optimal. However, a fourth year well spent could help students get accepted to top graduate schools.
“If you’re planning on trying to go to a top graduate program, then I think you’re very likely messing yourself up (by graduating early),” said Bryan Caplan, author of “The Case Against Education” and an economics professor at George Mason University.
However, on the job market, things could be different.
“If you have already been able to line up your dream job and they are happy for you to finish in three years, then go for it,” Caplan said.
Even if early graduation is not always a good choice, it is always a good option. Students who position themselves to graduate in three years have more chances to apply to grad schools or recruit for jobs. If the strategy works out, it saves money and gets you a head start in your field. If it doesn’t, students get another chance and don’t just leave it to the “luck of the draw.”
We are all familiar with the colloquial fifth-year “Victory Lap.” Perhaps it’s time to add the “Austerity Shortcut” to the book.
McKinley is a Second-Year Finance PhD student from Houston, Texas.
