Macroeconomics, Third Edition
How much is a college education worth? In the text, we supposed a col- lege education raised a person's wage by $30,000 per year, from $40,000 to $70,000. Assume the interest rate is 3% and there is no growth in wages, then answer the following.
- (a) Suppose you are a high school senior deciding whether or not to go to college. What is the present discounted value of your labor income if you forgo college and start work immediately?
- (b) As an alternative, you could pay $20,000 per year in college tuition, attend for 4 years, and then earn $70,000 per year after you graduate. What is the present discounted value of your labor earnings under this plan? (Compute this value from the point of view of a high school senior.)
- (c) Discuss the economic value of a college education.