College Is Worth It For Most Students

In a new working paper – ungated version here – Philip Oreopolous and Uros Petronijevic review the research on returns to college investment. The bottom line is that while there is considerable variation in the returns students may realize by spending money on college, “the investment appears to payoff for both the average and marginal student”.

There’s lots of interesting stuff in there, but here are some highlights:

  • The complexity of the financial aid system probably prevents a significant number of students from attending college. One experiment found that “students who received FAFSA  assistance were 25 percent more likely both to enter, and to stay in, college than those who did not.”
  • The apparent wage and employment premiums for college graduates appears only to have grown recently. For example, “in 1999 an adult with a bachelor’s degree earned 75 percent more over a lifetime than a high school graduate; by 2009 the premium had grown to 84 percent.”
  • Research – including various “natural experiments” – suggests very strongly that the relationship between college and earnings is causal.
  • The benefits of college attendance are not only financial: college graduates “hold jobs that offer a greater sense of accomplishment, more independence and opportunities for creativity, and more social interactions than jobs available to noncollege graduates” and “tend to enjoy better health outcomes on average.” At least some of these relationships also appear to be causal.
  • “[B]oth completing college and attending [a selective institution] increase the returns to attending college.”
  • “Net tuition fees are often lower than students think. One study, for example, reviews the literature and reports evidence suggesting that high school students overestimated the tuition cost of public four-year institutions by 65 percent; their parents, by 80 percent.”
  • The median student graduating from a public, four-year college leaves with only $7,500 in debt. While many factors determine whether a student is over-investing in higher education, “the popular media claim that levels of student borrowing are universally too high is simply not accurate”.

Because reformers’ rhetoric often emphasizes college attendance, reform critics sometimes defensively adopt the position that higher education is being oversold. This is unfortunate because there is considerable evidence indicating that, if anything, students at the margin are under-investing in college and should be encouraged (and prepared) to attend both for their own benefit and for society’s.

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