The Consumption Value of College

Abstract

This paper uses the Euler Equation and novel data from Berea College students on their consumption expenditures during and after college, desired borrowing amounts, beliefs about post-college earnings, and elicited risk-aversion parameters to determine their consumption value of college attendance. Our preferred estimates suggest that the average annual consumption value of college is about $14,000 with some heterogeneity across students. Accounting for these benefits raises the average expected return to college by nearly 20% and substantially lowers the estimated willingness-to-pay for higher student loan limits.