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An empirical investigation of the financial value of a college degree

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  • Bento J. Lobo
  • Lisa A. Burke-Smalley

Abstract

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.

Suggested Citation

  • Bento J. Lobo & Lisa A. Burke-Smalley, 2018. "An empirical investigation of the financial value of a college degree," Education Economics, Taylor & Francis Journals, vol. 26(1), pages 78-92, January.
    • Handle: RePEc:taf:edecon:v:26:y:2018:i:1:p:78-92
    DOI: 10.1080/09645292.2017.1332167
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