I'll make another attempt to make this clearer:Let's say that you are admitted to a Ph.D. program in Literature with a scholarship that covers your tuition plus a stipend of $20,000 per year. However, the Literature job market is not so good, so you only expect to earn $40,000 per year after you graduate.Your friend tells you should do it because "it doesn't cost anything." In a certain sense, this is true. All of the cash flows are positive. You won't be paying for tuition, plus the school will even pay you (though you may have some TA responsibilities). But there is sense in which it does cost something - the opportunity cost. Perhaps your best alternative would be to find a job that pays $45,000 per year as a management trainee. This $45,000 per year job is the opportunity cost of the Ph.D. program - it is the opportunity that you forgo by choosing the Ph.D. program instead of the job. In this case, the "cost" is actually larger than the "benefit" of the Ph.D. (in a purely financial sense - of course, Literature majors are likely to say something about enriching the mind, etc.).Let's say that you are ABD in a Ph.D. program and are studying financial mathematics but estimate that it will take you three years to finish. You expect to get $20,000 per year for the next three years, and then an average of $200,000 per year for the following 40 years. Your friend tells you, "yeah, go for it, the Ph.D. program doesn't cost you anything." Your best alternative would be to work for a hedge fund as a junior quant. Here, you expect to earn an average of $100,000 per year for the next three years, followed by an average of $200,000 per year fo the following 40 years. The opportunity cost of finishing the Ph.D. program is the junior-level quant job. In this example, I made the cost larger than the benefit - my guess is that this is not realistic, but I really don't know for sure what the numbers should be.