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 experi...