Debt Makes College a Risky Investment

Our findings, especially those that examine household decision-making, emphasize that while the return to higher education is high, it is not a safe investment for many households. The deterrent effect of risk survives the ability of agents to feasibly debt finance college with student loans. The main force here is that debt makes higher education riskier for student borrowers, suggesting that alternatives that are mindful of risk may be more effective. In turn, the focus of the policy experiments we consider is on direct subsidies and need-based aid, both of which help lower the risk over future utility induced by college.


Folksonomies: education risk debt student loans

/education (0.583295)
/law, govt and politics/armed forces/army (0.577459)
/finance/personal finance/lending/student loans (0.238605)

feasibly debt finance (0.900930 (neutral:0.000000)), higher education (0.893071 (positive:0.325210)), household decision-making (0.712452 (neutral:0.000000)), deterrent effect (0.710187 (negative:-0.815897)), Risky Investment (0.704495 (negative:-0.502131)), need-based aid (0.682315 (positive:0.228988)), direct subsidies (0.657781 (neutral:0.000000)), student borrowers (0.652001 (neutral:0.000000)), main force (0.647750 (negative:-0.230006)), safe investment (0.637195 (neutral:0.000000)), policy experiments (0.628363 (neutral:0.000000)), student loans (0.627137 (neutral:0.000000)), future utility (0.623872 (negative:-0.366859)), college (0.521520 (negative:-0.434495)), households (0.473222 (neutral:0.000000)), findings (0.461060 (negative:-0.502131)), return (0.455499 (neutral:0.000000)), alternatives (0.451333 (neutral:0.000000)), turn (0.448531 (negative:-0.285293)), ability (0.447788 (neutral:0.000000))

Debt (0.956468): dbpedia | freebase
Finance (0.892116): dbpedia | freebase
Higher education (0.836659): dbpedia | freebase
Risk (0.766062): dbpedia | freebase
Loan (0.713718): dbpedia | freebase | opencyc
Interest (0.710304): dbpedia | freebase | opencyc
Investment (0.692269): dbpedia | freebase | opencyc
Default (0.640445): dbpedia | freebase

 The Education Risk Premium
Periodicals>Journal Article:  Athreya, Kartik and Eberly, Janice (December 22, 2010), The Education Risk Premium, American Economic Association, Retrieved on 2015-03-08
Folksonomies: economics education


08 MAR 2015

 Is College Worth It?

Are PhDs a pyramid scheme? Are college returns worth the risk of failure and massive debt?