How Risky is College Investment?
CESifo, Munich, 2015
CESifo Working Paper No. 5203
![](https://cesifo.org/DocImg/cesifo1_wp5203.jpg?c=1689236871)
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.
Economics of Education
Labour Markets