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How Risky is College Investment?

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.

Language: Englisch

Bibliographic citation: Series: CESifo Working Paper ; No. 5203

Classification: Wirtschaft
Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
Human Capital; Skills; Occupational Choice; Labor Productivity
Analysis of Education

Subject: education
college dropout risk

Event: Geistige Schöpfung

(who): Hendricks, Lutz
Leukhina, Oksana

Event: Veröffentlichung

(who): Center for Economic Studies and ifo Institute (CESifo)

(where): Munich

(when): 2015

Handle: http://hdl.handle.net/10419/107345

Last update: 10.03.2025, 11:42 AM CET

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Object type

Arbeitspapier

Associated

Hendricks, Lutz
Leukhina, Oksana
Center for Economic Studies and ifo Institute (CESifo)

Time of origin

2015

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Arbeitspapier