Assume for a moment that your four years of college cost you $15,000 a year in out-of-pocket expenses and you give up another $10,000 a year in what you would have earned had you worked full time. Assume the real interest rate is 3 percent. Since the expenses incurred in the second, third, and fourth years are in the future, you must discount them by using the interest rate, in your case, 3 percent.