Because, statistically, they're going to earn a lot more money over the course of their careers (especially when you factor engineering students out of the state school equation).
http://www.usnews.com/education/blogs/the-college-solution/2...
I get the feeling most of the people that say money cant buy you happiness have never been dirt poor. I'm not saying money buys happiness, but its damn hard to be happy when you r stressed out over how to pay the rent.
Also anything above $2mm is gravy where happiness is concerned.
Current rent: 1595/mo ~= 19k/yr
Add 2% each year for inflation(probably wrong, but gotta start somewhere) and sum up 42 years (25 to 67) comes to just shy of 1.3M, merely paying your rent. Take taxes out of that 2M and rent+food+retirement is about the only things you can pay for and thats cutting it close.
2M to live in the place I was born just isn't going to cut it. There are of course optimizations, you could buy a condo or marry someone who also works to up it to 4M, but for a quick back of the envelope calculation its close enough.
My original estimation of 20M is probably off by a factor of 2 to 4, depends who you brown nose it with in the ivy leagues.
But basically, every time i think about my current costs and inflation, i realize that the estimated 2M average lifetime earnings potential of my education doesn't get very far.
I definitely agree that your estimation of the benefit to graduating 4 years early is off by a few factors, still.