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How Risky is College Investment?

Lutz Hendricks () and Oksana Leukhina ()

Review of Economic Dynamics, 2017, vol. 26, 140-163

Abstract: This paper is motivated by the fact that nearly half of U.S. college students drop out without earning a bachelor's degree. Its objective is to quantify how much uncertainty college entrants face about their graduation outcomes. To do so, we develop a quantitative model of college choice. The innovation is to model in detail how students progress towards a college degree. The model is calibrated using transcript and financial data. We find that more than half of college entrants can predict whether they will graduate with at least 80% probability. As a result, stylized policies that insure students against the financial risks associated with uncertain graduation have little value for the majority of college entrants. (Copyright: Elsevier)

Keywords: Education; college dropout risk (search for similar items in EconPapers)
JEL-codes: E24 J24 I21 (search for similar items in EconPapers)
Date: 2017
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DOI: 10.1016/j.red.2017.03.003

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