Opportunity Cost

The Opportunity Cost of Study Abroad Programs: An Economics-Based Analysis

The purpose of this article is to evaluate the opportunity cost of the study abroad program (host institution) versus student enrollment at a home institution. Opportunity cost is the cost that must be foregone by a firm in order to reap a benefit. In relation to the study abroad program, the question at hand is the cost associated with sending students abroad beneficial for the home institution. In order to economically decide which is better, one must analyze the practices, budgeting, and policies of both prospects from the institutions’ prospective.

First of all, most will agree that the cost of providing an education are not all covered by student tuition fees whether financial aid, scholarship, or cash payers and regardless of the students payment chose it does not affect the tuition revenues the home institution receives or the host institution gets. To say that is to say that the study abroad program is no different from other programs being offered at the home institution like science programs. They all incur additional costs that are not necessarily incorporated into the cost of tuition, but there are no revenue or cost consequences associated with choosing study abroad. This is one misrepresentation about the study abroad program that some tend to overlook when comparing this cost to those of home institutions.

Based on payments made to the host institutions by Muhlenberg College, a small residential college, the direct institutional cost of the study abroad program is $6,800.00 per student which is based on 200 students per semester. This is the amount the home institution has to forego for the program. Now consider the cost of those additional 200 residential students at his/her home institution. Based on each student taking 4.25 academic courses per semester and average class size of 20 students, Muhlenberg has to employ 7 additional fulltime faculties at a rate of $80,000...