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How Risky Is College Investment?

Lutz Hendricks () and Oksana Leukhina ()
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Lutz Hendricks: University of North Carolina, Chapel Hill

No 2015-014, Working Papers from Human Capital and Economic Opportunity Working Group

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 J24 I21 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge, nep-edu and nep-mac
Date: 2015-11
Note: M
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Downloads: (external link) ... a_2015_how-risky.pdf First version, November 2015 (application/pdf)

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Journal Article: How Risky is College Investment? (2017) Downloads
Working Paper: How risky is college investment? (2015) Downloads
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