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Wednesday, May 04, 2005

Proving the obvious, once again

Sometimes this is what economics is good for. From today's Chronicle of Higher Education:
STUDENTS WHO TAKE OUT LOANS for college and then drop out are more likely to default on their loans and face economic hardship than their counterparts who graduate with debt, the National Center for Public Policy and Higher Education says in a new report.

This should not be surprising. We might think that students drop out of college in order to take a job, and this might be the case, but every year of school adds about $4,000 to the annual earnings of the individual. If you drop out after your sophmore year, you pass up at least $8,000 in initial earnings and the compounding over the first ten years of your career, where the greatest productivity/wage gains are typically enjoyed, are also foregone.

If those who drop out of college signal their inability or unwillingness to actually get through the curriculum, it would be natural to find that they have a higher default rate.

Economics is cool.

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