A low-skill worker in the U.S. might expect to earn $600k in a lifetime. Going to 3 year college would cost him $70,000 in tuition and living expenses and \$30,000 in forgone earnings. People graduating from college have a 70% chance of earning $2M in a lifetime and a 30% chance of earning $600k (ie, the same as the low skilled wage.) 6. What is the expected value of an investment in education in the US? 7. Assuming risk aversion, show the average person's expected utility in from investing in education in an equation, and with a suitably labelled graph. Compare to the utility from not educating. 8. American student loans must be paid in all states of the world. (In fact, the debt cannot even be removed by bankruptcy.) British student loans are income contingent: they are only paid in the 'good' state of the world. Repeat question 7, but with a 'British-style' student loan. Very briefly - what do you think would be the effect on enrolment? Optional: what would moral hazard look like in this context? A low-skill worker in the U.S. might expect to earn $600k in a lifetime. Going to 3 year college would cost him $70,000 in tuition and living expenses and \$30,000 in forgone earnings. People graduating from college have a 70% chance of earning $2M in a lifetime and a 30% chance of earning $600k (ie, the same as the low skilled wage.) 6. What is the expected value of an investment in education in the US? 7. Assuming risk aversion, show the average person's expected utility in from investing in education in an equation, and with a suitably labelled graph. Compare to the utility from not educating. 8. American student loans must be paid in all states of the world. (In fact, the debt cannot even be removed by bankruptcy.) British student loans are income contingent: they are only paid in the 'good' state of the world. Repeat question 7, but with a 'British-style' student loan. Very briefly - what do you think would be the effect on enrolment? Optional: what would moral hazard look like in this context