Is university education worth the investment? The expectations of upper secondary school seniors and the role of family background

This study assesses students’ expectations about the profitability of the investment in university education. We consider Italy as a test case and provide fresh high-quality data on students’ expectations concerning the costs, economic returns and chances of success of this investment. These are compared with data on the corresponding actual values. We find that the estimates provided by upper secondary school seniors are highly inaccurate, highly uncertain and systematically biased. Students overestimate the returns to university degrees, while they are over-pessimistic regarding university costs and drop-out risks. These results confirm previous studies on perceived university costs, but they challenge the dominant view that students can realistically forecast graduate earnings. We trace this discrepancy to two methodological shortcomings of several previous studies on expected graduate earnings. Moreover, we find that information barriers are not equally distributed among social groups. High-status students overestimate the economic returns to university more, and they are more optimistic regarding their chances of success in Higher Education, even after allowing for their higher objective returns and chances of success. Our interpretation of the importance of information barriers focuses on the interaction between cognitive biases and institutional constraints.