The Changing Role of Family Income in College Selection and Beyond

Previous literature has established that the role of family income has grown substantially at predicting college entry decisions when comparing the 1979 and 1997 National Longitudinal Surveys of Youth (e.g., Belley and Lochner (2007)). In this article, I further examine the changing role of family income as a determinant of college quality choice, degree attainment, and post-schooling earnings. I document that the role of family income has remained important and relatively stable at explaining college quality choice, its importance increasing only for the choice of four- over two-year colleges. In contrast, pre-college academic achievement has become much more important at predicting college quality choice, indicating a substantial strengthening of student college sorting. I also document that for a given college type, family income has remained an important predictor of graduation outcomes, its effect staying similar in magnitude. However, its role in explaining the post-schooling earnings of college graduates has dropped substantially. In contrast, the quality of the degree-granting college has become a much stronger determinant of both graduation outcomes and post-graduation earnings. I argue that all of these findings are consistent with the hypothesis of rising returns to college coupled with tighter financial constraints./ Because tuition is not reported in NLSY79, I obtain tuition estimates for the older cohort from the High School and Beyond survey, conducted by the National Center for Education Statistics.