In the recent debate in the United States regarding the government’s role in higher education, some politicians are calling for a system with free tuition for all students, similar to that of most Western European countries. Therefore, we want to explore the opportunity cost of the American and European systems, by analyzing which offers the best return on investment to its youth, assuming the student will work in the same region where he studied. Due to the numerous variables at play, we will consider the circumstances of both an average student of average income and of a highly academically-apt, low-income student.
One of the most-discussed countries in this debate is Germany, where tuition stands at zero dollars for higher education. According to The College Board, the average U.S. in-state tuition for a public four-year college is $9,650, yet the average total grant aid (including federal, state and institutional) is $5,010, received by half of all undergraduate students.
The misconception that higher education in the States is much more expensive originates in the distinct college culture in both continents. As a Spaniard, I have observed that whilst Americans consider the total cost of attendance, Europeans contemplate only tuition when making their college decision. For example, universities in Germany are not free: they are tuition-free, and room and board hovers around $9,980. The same situation occurs in Scandinavia. In Sweden, the average student will hold $19,000 in debt upon graduation, for although tuition is non-existent, it is not customary for parents to pay for the cost of living of their college-aged children, like in the U.S.
By comparison, in the U.S, namely at UCLA, the total cost of attendance is $34,047 for California residents, which not only includes $12,918 on tuition, but also on-campus housing, book and supplies, travel, health, gym and amenities, and other personal expenses. Some of these expenditures for a European college student would be considered luxuries. If the average American graduates with $15,900 in debt, he or she does so, in part, to pay for what my Spanish friends jokingly describe as “a resort to live, and maybe, study”. Of course, there are cases where this debt is shouldered by a lower-income student whose parents cannot pay for tuition, and the student did not qualify for financial aid or merit scholarships. For this, we will consider whether the student would have been better off with a German passport.
Data from the OECD database shows us how, after graduation, a U.S adult will have much more disposable income to pay off his or her debt. These calculations take into account taxes, and include social benefits, such as single-payer health care, as income. We have also adjusted to take into account cost of living in the different countries and states.
Considering these statistics, Germany has a median income of $25,528, lower than all U.S states, as do Finland and Denmark. Sweden has a median disposable income of $27,167, higher than only 6 U.S states. By comparison, median residents in states such as NH, CT, CO, MN, VI, and WA, among others, approach $40,000. On average, the U.S has higher disposable income than all OECD countries, except for the small nations of Luxembourg, Switzerland and Norway (whose ample social benefits are supported by a sovereign oil fund). In the U.K, where the tuition in public universities is $13,440, the median disposable income is $21,033.
Thus, the US median disposable income is about $6,000 higher than in Germany, depending on the state, leaving more than enough money to pay the debt for the $9,650 in-state tuition, while studying in some of the best universities in the world. If we specifically consider highly paid professionals such as engineers, the median American with a salary of $99,738 will be much better off than his German counterpart with an annual pay between $47,000 and $56,000, depending on the field.
In the U.S., in contrast with Europe, a low-income student with high motivation and intellectual capabilities will be offered the world’s elite private universities with need-based financial aid programs from which he will graduate debt free.
For example, Columbia University’s website states that families making less than $100,000 per year would pay less towards their children’s education that at in-state colleges. While the total cost of attendance is over $70,000, the median cost to those receiving financial aid is $12,000, with zero cost in tuition. Aid is received by 51% of the student’s population, and 94% of the country’s families are eligible. Some low-income families might even save money, since the grants include work-study opportunities and will pay for the students’ room and board, which would have otherwise been a household expense. I, for my part, am paying less to attend Columbia than to attend the tuition-free universities in Spain, which rank 200+ in the world.
In conclusion, in Western Europe, the upfront cost of college tuition will be negligible, yet this will later yield students lower salaries and higher taxes. However, in the United States, a student will usually pay college through a combination of scholarships, loans and his parents’ money, yet will later in life pay lower taxes, and will have a higher-paying job that will offset any debt incurred. The average U.S student, and especially the best and brightest, will be better off by studying and working in this country.