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Getting health insurance in America is intimately connected to choosing whether and where to work. Therefore, it should not be surprising that the U.S. health insurance market may influence, and be influenced by, the market for higher education—which itself is closely tied to the labor market. In this post, and the staff report it is based on, we investigate the effects of the largest overhaul of health insurance in the United States in recent decades—the Patient Protection and Affordable Care Act of 2010 (ACA) -- on college enrollment choices.
Rajashri Chakrabarti, William Nober, and Wilbert van der Klaauw
The rising cost of a college education has become an important topic of discussion among both policymakers and practitioners. At least eleven states have recently introduced programs to make public two-year education tuition free, including New York, which is rolling out its Excelsior Scholarship to provide tuition-free four-year college education to low-income students across the SUNY and CUNY systems. Prior to these new initiatives, New York, had already instituted merit scholarship programs that subsidize the cost of college conditional on academic performance and in-state attendance. Given the rising cost of college and the increased prevalence of tuition-subsidy programs, it’s important for us to understand the effects of such programs on students, and whether these effects vary by income and race. While a rich body of work has studied the effects of merit scholarship programs on educational attainment, the same is not true for the effects on financial outcomes of students, such as debt and repayment. This blog post reports preliminary findings from ongoing work, which is one of the first research initiatives to understand such effects.
Economic analysis is often geared toward understanding the average effects of a given policy or program. Likewise, economic policies frequently target the average person or firm. While averages are undoubtedly useful reference points for researchers and policymakers, they don’t tell the whole story: it is vital to understand how the effects of economic trends and government policies vary across geographic, demographic, and socioeconomic boundaries. It is also important to assess the underlying causes of the various inequalities we observe around us, whether they are related to income, health, or any other set of indicators. Starting today, we are running a series of six blog posts (apart from this introductory post), each of which focuses on an interesting case of heterogeneity in the United States.
Rajashri Chakrabarti, Michelle Jiang, and William Nober
In an earlier post, we studied how educational attainment affects labor market outcomes and earnings inequality. In this post, we investigate whether these labor market effects were preserved across the last business cycle: Did students with certain types of educational attainment weather the recession better?
In our last post, we showed that the cost of college has increased sharply in recent years due to the rising opportunity cost of attending school and the steady rise in tuition. This steep increase in the cost of college has once again raised questions about whether college is “worth it.” In this post, we weigh the economic benefits of a bachelor’s degree against the costs to estimate the return to college, providing an update to our 2014 study. We find that the average rate of return for a bachelor’s degree has edged down slightly in recent years due to rising costs, but remains high at around 14 percent, easily surpassing the threshold for a good investment. Thus, while the rising cost of college appears to have eroded the value of a bachelor’s degree somewhat, college remains a good investment for most people.
College is much more expensive than it used to be. Tuition for a bachelor’s degree has more than tripled from an (inflation-adjusted) average of about $5,000 per year in the 1970s to around $18,000 today. For many parents and prospective students, this high and rising tuition has raised concerns about whether getting a college degree is still worth it—a question we addressed in a 2014 study. In this post, we update that study, estimating the cost of college in terms of both out-of-pocket expenses, like tuition, and opportunity costs, the wages one gives up to attend school. We find that the cost of college has increased sharply over the past several years, though tuition increases are not the primary driver. Rather, opportunity costs have increased substantially as the wages of those without a college degree have climbed due to a strong labor market. In a follow-up post, we will consider whether college is still “worth it” by weighing the benefits relative to the costs to estimate the return to a college degree.
Jaison R. Abel, Tony Davis, Richard Deitz, and Edison Reyes
Community colleges frequently work with local employers to help shape the training of students and incumbent workers. This type of engagement has become an increasingly important strategy for community colleges to help students acquire the right skills for available jobs, and also helps local employers find and retain workers with the training they need. The Federal Reserve Bank of New York conducted a survey of community colleges in New York State with the goal of documenting the amount and types of these kinds of activities taking place. Our report, Employer Engagement by Community Colleges in New York State, summarizes the findings of our survey.
Amid dialogue about the soaring student loan burden, questions arise about how educational characteristics (school type, selectivity, and major) affect disparities in post-college labor market outcomes. In this post, we specifically explore the impact of such school and major choices on employment, earnings, and upward economic mobility. Insight into determinants of economic disparity is key for understanding long-term consumption and inequality patterns. In addition, this gives us a window into factors that could be used to ameliorate income inequality and promote economic mobility.
Rajashri Chakrabarti, Nicole Gorton, Michelle Jiang, and Wilbert van de Klaauw
This post is the second in a two-part series on student loan default behavior. In the first post, we studied how educational characteristics (school type and selectivity, graduation, and major) and family background relate to the incidence of student loan default. In this post, we investigate whether default behavior has varied across cohorts of borrowers as the labor market evolved over time. Specifically, does the ability of student loan holders to repay their loans vary with the state of the labor market? Does the type of education these students received make any difference to this relationship?
Rajashri Chakrabarti, Nicole Gorton, Michelle Jiang, and Wilbert van der Klaauw
This post seeks to understand how educational characteristics (school type and selectivity, graduation status, major) and family background relate to the incidence of student loan default. Student indebtedness has grown substantially, increasing by 170 percent between 2006 and 2016. In addition, the fraction of students who default on those loans has grown considerably. Of students who left college in 2010 and 2011, 28 percent defaulted on their student loans within five years, compared with 19 percent of those who left school in 2005 and 2006. Since defaulting on student loans can have serious consequences for credit scores and, by extension, the ability to purchase a home and take out other loans, it’s critical to understand how college and family characteristics correspond to default rates.
Liberty Street Economics features insight and analysis from New York Fed economists working at the intersection of research and policy. Launched in 2011, the blog takes its name from the Bank’s headquarters at 33 Liberty Street in Manhattan’s Financial District.
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