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Another study, “US university degrees: High cost, high reward,” shows that completing college is a good financial deal. But this one is a bit different in that it looks at the return of investment on a risk-reward basis. As researchers Jeffrey Brown, Chichun Fang, and Francisco Gomes explain, “College-educated workers are less likely to experience unemployment than workers without a high school diploma, but they also face much higher uncertainty in their career paths and lifetime earnings.”
And remember, this all assumes humans are risk averse. Investors, for instance, would rather have a low-risk portfolio than an high one if investment returns are equal otherwise.
From the study:
Calculating the risk-adjusted value of college education naturally requires assumptions about individual risk preferences, and thus we report a range of valuations that depend on risk aversion. We estimate the risk-adjusted value of college education to be between $225,000 (for very risk-averse people) and almost $600,000 (for less risk-averse people). These correspond to increases in total present-value lifetime wealth of 35% to 48%, even after adjusting for risk. …
It is nevertheless important to point out that even in the most conservative estimates the value of college education is still positive even after we account for the (direct and indirect) cost. The rate of return to attend a public (private) college is 76% to 353% (74% to 180%), depending on individual risk preference. Hence, the value of college education is still quite large and our results suggest that college education still a worthy investment.
And again, completing college is a lot different than merely attending college. AEI’s Andrew Kelly:
For me, a more effective message would be to tell a prospective student that yes, completing college is, on average, worth the time and money. But not all postsecondary options are created equal, so choose the one that reflects your talents and abilities and gives you the best chance of success. And if you choose to go, work your tail off to make sure you finish.