Are college costs worth it? How ability, major, and debt affect the returns to schooling

• This paper estimates the expected return of various college degrees.
• Present discounted values range from 85 to 300k depending on major.
• Highlights the importance of risk when evaluating higher ed returns.
• Various college cost and loan repayment scenarios are considered.

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.