A 17-year old is contemplating whether or not to go to university.  

• Lay out carefully how the earnings profiles of graduates and non-graduates might influence the decision (including giving equations for the main calculation). Be sure to explain how the rate of interest will affect the decision. (If you want to use an earnings profile in discussing this, base it approximately on that for males in figure 5 of Britton et al.)
• Now consider how an individual should choose what to study, remembering that people do not have the same talent in every subject and that degree-class might matter. What information do you need to know to make this decision, and how would you use it?
• Will changing the terms of student loans affect the choice between different disciplines? Assume the loan scheme reflects the UK’s current student loan regime (in which graduates pay 9% of their income in excess of £25,000 towards paying off the loan; any remaining debt is cancelled after 30 years and the interest rate is 3% p.a. in real terms.) Consider, in turn, changing the rate of repayment (the 9%), the cancellation time (the 30 years) and the real rate of interest.
• Suppose that the individual opts to study economics but that there is a probability of one half that half-way through their working life the subject matter of a degree becomes irrelevant (i.e. from that point on, all degrees command the same premium above non-college-educated earnings. How might this affect our individual’s decision?
• What interest does society have in this decision beyond the individual maximizing her welfare? Consider, among other things, the effect of your proposals on inequality in various dimensions.
• Sources:

  [1]You may want to use the details of the student loan repayment rules: graduates pay 9% of their income in excess of £25,000 towards paying off the loan; any remaining debt is cancelled after 30 years. The interest rate is 3% p.a. in real terms.
  [2] Perloff and Varian text books.
  [3] Britton J (2017) ‘The degrees that make you rich... and the ones that don't’, http://www.bbc.co.uk/news/education-41693230.
  [4] Britton also has materials on the student loan scheme on the website mentioned in the article.
  [5] Moretti, E. (2006). Private and social returns to education. Rivista di Politica Economica, 96(5/6), 3.
  [6] Oreopoulos, P., & Petronijevic, U. (2013). Making college worth it: A review of the returns to higher education. The Future of Children, 23(1), 41-65.
  Do not worry, but focus on the results and think how reliable they might be.

  The task is to

  Make or spell out any assumptions that can be made (may have to make some to complete the analysis) and asked, at least briefly, whether they are reasonable and some analysis. Show enough detail of the calculations that it is understandable what you are trying to do and make sure you discuss any conclusions you reach. Its necessary to explain what you are doing and what you conclude. 

Answer rating: 100% (QA)

Research shows that earnings of graduates on average are 75000 which of nongraduate is 45000 so earnings of graduates 30000 quite not graduates The co... View the full answer