Are college costs worth it? How ability,major, and debt affect the returns to schooling |
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Institution: | 1. University of Pittsburgh, 5918 Wesley W. Posvar Hall, 230 South Bouquet Street, Pittsburgh, PA 15260, United States;1. Department of Economics, Stokely Management Center, University of Tennessee, Knoxville, TN 37996-0570, United States;2. Center for Analysis of Longitudinal Data in Educational Research, American Institutes for Research, 1000 Thomas Jefferson Street, NW, Washington, D.C. 20007, United States |
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Abstract: | This paper examines the financial value over the course of a lifetime of pursuing a college degree under a variety of different settings (e.g. major, student loan debt, individual ability). I account for ability/selection bias and the probability that entering freshmen will not eventually graduate.I find the financial proposition of attending college is a sound investment for most individuals and cost scenarios, although some scenarios do not pay off until late in life, or ever. I estimate the present discounted value of attending college for the median student to vary between $85,000 and $300,000 depending on the student’s major. Most importantly, the results of this paper emphasize the role that risk (e.g. the nontrivial chance that a student will not eventually graduate) plays in the cost-benefit analysis of obtaining a college degree. |
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