By Richard Vedder
Everyone who enters college ultimately drops out. My wife and I did --but only after receiving three degrees (our son did us one better--he earned four). The question is one of timing. Using the framework of modern economics, we can predict that people will stay in college as long as the expected future marginal benefits of college attendance equal or exceed the expected marginal costs. When the marginal costs of attendance rise above the marginal benefits, college attendance lowers satisfaction, and so people drop out. In calculating benefits, however, people estimate the expected benefits of continued attendance even if at the moment the benefits are low relative to current costs; the lure of a diploma months or years ahead raises the perceived future benefits, and keeps people attending school.
In reality, the learning benefits of college probably decline slightly as one proceeds through school--the latter doses of knowledge obtained are probably a little less vital than those earned early on. Nevertheless, the financial benefits from attending college are modest and low for several years of attendance ---and then soar when the piece of paper is given out certifying "graduation." At that point, most people "drop out."
The actual marginal financial benefits are very low through most of the college career but become huge at certification points --getting an associate’s degree, bachelor’s degree, master’s degree, etc. The same is true of law school. Those going for two years do not get two-thirds of the financial benefits of completing a three year program and passing the bar exam. This is because information costs to employers are high, so they allow the certification (diplomas) to guide their hiring decisions, when in reality there are students who have earned 97 percent of a bachelor's degree who are almost as well trained as those with 100 percent.
Maybe we should tell employers –“Joe (or Joanna) has earned 82 percent of a bachelor's degree.” Instead, it is a binary situation --you either graduated from college or you are a college dropout. Maybe we should increase the certification points --all students at four years colleges would get an associate’s degree after two years of satisfactory work, a normal bachelor’s degree after three years, and a super-bachelor’s after four years. If employers are educated in such a system, we probably would have fewer students lingering around waiting for a degree which has huge financial value. In redefining student progress, we should consider making the three year degree the bachelor norm, as in Europe, maybe giving a master's degree after 4 or 4.5 years of work. I think this might reduce the dropout rate, and increase the welfare of students and society alike.