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We present a dynamic model of college education where the students face uncertainty about their income stream after graduation due to unobserved heterogeneity in their innate scholastic ability. As students write exams, they reevaluate their expectations and may find it optimal to drop out and join the workforce without reaping the whole benefit of college education. The model shows that, in accordance with the data, poorer students are less likely to graduate and are more likely to drop outdoi:10.2139/ssrn.1799734 fatcat:i7bvdxtbzvhwjdtlg3w3lebh74