How risky is college investment?
Lutz Hendricks and
Oksana Leukhina ()
No 502, CFS Working Paper Series from Center for Financial Studies (CFS)
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, nep-lma and nep-mac
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Journal Article: How Risky is College Investment? (2017)
Working Paper: How Risky Is College Investment? (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:cfswop:502
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