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 and time preference parameters to determine their consumption value of college attendance. Estimates suggest an average annual consumption value of college as high as $15,110 with considerable heterogeneity across students. Accounting for these benefits raises the average expected return to college by as much as 18% and substantially lowers the estimated willingness-to-pay for higher student loan limits.