Forecasting Prospective Financial Health in the Context of Postsecondary School and Major Type

Undergraduate Honors Thesis

Citations

Citeable URL: https://scholar.colorado.edu/concern/undergraduate_honors_theses/9593tv64v

Abstract

Abstract This paper investigates the relationship between collegiate school and major type and prospective graduate financial health. The model relies on data from the National Survey of College Graduates 2013 and 2015 cohorts. Using a method of backwards induction combined with probabilistic expectation, the model seeks to explain how initial school type (as measured by Carnegie Classification) and major type predict the expected years of financial distress and present-discounted net future earnings for undergraduates. Findings suggest that colleges characterized by higher selectivity and funding forecast better overall financial health through reduced years of distress and higher earnings value. This relationship holds when controlling for student debt and beginning salary, which both show a significant impact on expectations as well. Interaction terms suggest that mismatch between school focus and major type exacerbates the prospects of negative financial health. Results from this paper show the potential for informing policy-makers and students alike. Limitations and future applications for the paper’s methodology are also discussed.

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