Undergraduate Honors Theses

Thesis Defended

Spring 2019

Document Type

Thesis

Type of Thesis

Departmental Honors

Department

Economics

First Advisor

Dr. Richard Mansfield

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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