Using data from a panel (N = 4,141) tested in the seventh grade and ag
ain as young adults as input to the LISREL VII program, we estimated a
theoretically informed model specifying effects of failure to finish
high school on the latent construct psychological functioning during y
oung adulthood, controlling for the effects of psychological functioni
ng in the seventh grade, gender, father's education, and race. The res
ults suggest a significant negative effect of not graduating on psycho
logical functioning. This observed adverse effect of dropping out on p
sychological functioning could not be accounted for solely by deprivat
ion of a college education because we observed the same effect when co
nsidering only subjects who did not go on to college (n = 1,675).