One of the worst problems with conventional return to education estimates is that they ignore drop-outs.  That’s like a bank ignoring defaults when it calculates its return on loans.  According to a recent experiment, a lot of parents ignore drop-out risk, too.  From Andrew Kelly and Mark Schneider:

We asked a representative sample of one thousand parents of
high-school-age children in five states to choose between two public
colleges in their state based on their own judgments and information we
provided to them. Respondents were randomly assigned to a treatment or
control group. Treated respondents received the same set of basic facts
as the control group as well as information about each school’s
six-year graduation rate…

we found that providing graduation-rate information increased the
probability that parents would choose the institution with the higher
graduation rate by about 15 percentage points. [emphasis mine]

Particularly striking: Kelly and Schneider provide indirect support for a point Beaulier and I made about preferential admissions (a.k.a. affirmative action) in “Behavioral Economics and Perverse Effects of the Welfare State.”  Us:

Could giving minority students more choices make them worse
off?  It could if they are
unrealistically optimistic about their probability of success, leading them to
choose an opportunity beyond their capabilities.  Self-serving bias might also incline each
student to assume that he was admitted on his own merits: “If I were being
admitted because of affirmative action, I should be worried.  But unlike many other students, I was accepted on my merits.”

Consistent with this worry, Kelly and Schneider find that less-educated parents are much more influenced by the absence of information about the graduation rate.  Parents with no college were 23 percentage-points more likely to choose the more selective school when they weren’t told the graduation rate.  The information effect for parents with college degrees was only 7 percentage points.

If you wonder, “How much does this have to do with real-world college selection?,” Kelly and Schneider have a pretty good answer:

[B]ecause respondents were asked about
real public colleges and universities in their region and received true
information about school characteristics, the experiments discussed
below have considerable external validity.

Makes sense to me.