How Risky is College Investment?

Lutz Hendricks and Oksana Leukhina

No 5203, CESifo Working Paper Series from CESifo

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.

Keywords: education; college dropout risk (search for similar items in EconPapers)
JEL-codes: E24 I21 J24 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: How Risky is College Investment? (2017)
Working Paper: How Risky Is College Investment? (2015)
Working Paper: How risky is college investment? (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_5203

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