Making College Worth It: A Review of the Returns to Higher Education

Abstract

Despite a general rise in the return to college, likely due to technological change, the cost-benefit calculus facing prospective students can make the decision to invest in and attend college dauntingly complex. Philip Oreopoulos and Uros Petronijevic review research on the varying costs and benefits of higher education and explore in full the complexity of the decision to invest in and attend college. Optimal college attainment decisions are different for all prospective students, who diverge in terms of what they are likely to get out of higher education and what specific options might be best for them. Earnings of college graduates depend in important measure on the program of study and eventual occupation they choose. Students uninterested in or unable to complete a four-year college degree appear to benefit from completing a two-year degree. Prospective students may also face both financial constraints, which prohibit them from taking advantage of more education, and information problems and behavioral idiosyncrasies, such as reluctance to take on debt, which keep them from making optimal decisions about attending college. In their discussion of how student debt figures in the college investment, the authors note that some students borrow too little and, as a result, underinvest in their education. Carefully calculating the return on the college investment can help determine the “appropriate” amount of debt. Students are more likely to benefit from postsecondary education the more informed they are about the expenses associated with college and the potential options for financial aid, which can be extremely complex. To make the best college investment, Oreopoulos and Petronijevic stress, prospective students must give careful consideration to selecting the institution itself, the major to follow, and the eventual occupation to pursue. For any particular program at a particular school, anticipated future labor market earnings, the likelihood of completion, the costs, and the value of any student debt must all be factored into the assessment.