Implications of Risks and Rewards in College Decisions

Abstract: Despite a large and growing earnings premium for college graduates, growth in college enrollment and especially college attainment in the United States has been quite slow. The labor market's apparent lack of responsiveness to the earnings premium may be driven in part by the risks that marginally prepared students face when they go to college. Failing or dropping out could leave them with low wealth, high debt, and low earnings. Recent research indicates that neither further increases in the earnings premium nor reductions in college costs are likely to produce large increases in the college completion rate. And if technological change continues to increase the demand for skilled labor, both the earnings premium and income inequality will continue to grow.

JEL Classification: J4;

Access Documents


Bibliographic Information

Provider: Federal Reserve Bank of Richmond

Part of Series: Richmond Fed Economic Brief

Publication Date: 2013

Issue: June