37 Chapter 3: Investment analysis Since we do not know the actual jobs that students hold while attending, the 21% in foregone earnings serves as a reasonable average. Working students also give up a portion of their leisure time in order to attend higher education institutions. According to the Bureau of Labor Statistics American Time Use Survey, students forego up to 0.1 hours of leisure time per day.25 Assuming that an hour of leisure is equal in value to an hour of work, we derive the total cost of leisure by multiplying the number of leisure hours foregone during the academic year by the average hourly pay of the students’ full earning potential. For working students, therefore, their total opportunity cost is $13.5 million, equal to the sum of their foregone earnings ($12.4 million) and foregone leisure time ($1.1 million). Thus far we have discussed student costs during the analysis year. However, recall that students take out student loans to attend college during the year, which they will have to pay back over time. The amount they will be paying in the future must be a part of their decision to attend the college today. Students who take out loans are not only required to pay back the principal of the loan but to also pay back a certain amount in interest. The first step in calculating students’ loan interest cost is to determine the payback time for the loans. The $2.1 million in loans was awarded to 393 students, averaging $5,268 per student in the analysis year. However, this figure represents only one year of loans. Because loan payback time is determined by total indebtedness, we assume that since SUNY WCC is a two-year college, students will be indebted twice that amount, or $10,536 on average. According to the U.S. Department of Education, this level of indebtedness will take up to 15 years to pay back under the standard repayment plan.26 This indebtedness calculation is used solely to estimate the loan payback period. Students will be paying back the principal amount of $2.1 million over time. After taking into consideration the time value of money, this means that students will pay off a discounted present value of $1.4 million in principal over the 15 years. In order to calculate interest, we only consider interest on the federal loans awarded to students in FY 2021-22. Using the student discount rate of 4.4%27 as our interest rate, we calculate that students will pay a total discounted present value of $602.9 thousand in interest on student loans throughout the first 15 years of their working lifetime. The stream of these future interest costs together with the stream of loan payments is included in the costs of Column 5 of Table 3.2. The steps leading up to the calculation of student costs appear in Table 3.1. Direct outlays amount to $30.5 million, the sum of tuition and fees ($27 million) and books and supplies ($8.6 million), less federal loans received ($2.1 million) and $3.1 million in direct outlays of personal enrichment students (those students are excluded from the cost calculations). Opportunity costs for working and non-working students amount 25 American Time Use Survey. 2018, 2019, and 2021. Last modified July 12, 2022.ttps://www.bls.gov/tus/data.htm. 26 Repayment period based on total education loan indebtedness, U.S. Department of Education, 2022. https://studentaid. ed.gov/sa/repay-loans/understand/plans/standard. 27 The student discount rate is derived from the three-year average of the baseline forecasts for the 10-year discount rate published by the Congressional Budget Office. See the Congressional Budget Office, Student Loan and Pell Grant Programs – May 2022 Baseline. https://www.cbo.gov/data/baseline-projections-selected-programs.
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