An empirical investigation of the financial value of a college degree

We generate selection-adjusted NPV and IRR estimates for a bachelor's degree in the U.S. which account for time-to-graduation, debt financing and tuition levels. We find that a college degree is generally worthwhile, but the private value of the investment is a declining function of time-to-gra...

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Bibliographic Details
Published inEducation economics Vol. 26; no. 1/2; pp. 78 - 92
Main Authors Lobo, Bento J, Burke-Smalley, Lisa A
Format Journal Article
LanguageEnglish
Published Abingdon Routledge 01.01.2018
Taylor & Francis Ltd
Subjects
Ability
Academic degrees
Auswahl
Baccalaureate degrees
Bachelors Degrees
breakeven analysis
College
Debt
Debt (Financial)
Debt financing
Economics
Educational Attainment
Educational Finance
Empirische Untersuchung
Financing
Higher Education
Hochschulabschluss
I221
internal rate of return
Investments
Kapitalwert
Majors (Students)
Mehrwert
net present value
Present value
Risk
Salary Wage Differentials
selection effects
Self financing
Statistical Analysis
Student Financial Aid
student loans
Students
Thresholds
Time to Degree
time-to-graduation
Tuition
Value of a college degree
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Summary:We generate selection-adjusted NPV and IRR estimates for a bachelor's degree in the U.S. which account for time-to-graduation, debt financing and tuition levels. We find that a college degree is generally worthwhile, but the private value of the investment is a declining function of time-to-graduation. Selection-adjustments show that for students at the lower end of the ability distribution and in some areas of study, a college degree may never be a good financial proposition; as such, we provide breakeven thresholds for tuition at which college remains viable. Debt financing generates higher returns but greater risk compared to self-financing.
ISSN:1469-5782
0964-5292
1469-5782
DOI:10.1080/09645292.2017.1332167