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Is a more prestigious college worth the money?

Graduates at New York University this spring.
Graduates at New York University this spring.
Andrew Burton/Getty Images

Study after study has shown that graduates of elite colleges tend to earn more later in life. Does that mean their sticker price of up to $60,000 per year is worth it?

Economists have researched this question for decades, and the answer is surprisingly complicated. In general, the better the college, the more money graduates make later in life. But because elite colleges are filled with academically talented students who disproportionately come from wealthy families, it's hard to disentangle cause from effect.

Do elite colleges really change the trajectory of students' lives and earnings? Or are they just better at picking out students who were going to succeed in the first place?

The research shows that the answer to these questions depends heavily on who you are.

The scenario: You're choosing between paying full price at a prestigious college and a full-ride scholarship at a less prestigious college

Is it better to take the free education, or to pay much, much more for a more prestigious name?

Carolyn Hoxby, a labor economist at Stanford University, examined data for colleges with varying levels of admissions selectivity and estimated the return on investment for jumping up two selectivity levels — say from St. Lawrence University to Tufts University. Hoxby's data only include men, using lifetime earnings data for students who started college in 1982 to predict outcomes for students who entered college in 1997. In general, after taking students' college aptitude into account, she found that a more prestigious college still led to higher lifetime earnings.

Hoxby's findings made a free ride look like less of a good deal in some, but not all, cases. A student who turns down a free ride at a private college considered "very competitive plus" (St. Lawrence, for example) and paid the full price at a "highly competitive plus" college instead (Tufts) would break even after 15 years and earn more for the rest of his life.

The biggest problem with applying Hoxby's findings to today's college students is that many colleges have become much more competitive since the paper was published. Many of the colleges she includes as examples of colleges that are selective, but not as competitive as the Ivy League and some exclusive liberal arts colleges, are now in the top tier of selectivity. That doesn't mean her findings are invalid, but it makes it more difficult to apply to individual situations now.

The scenario: You're the first in your family to go to college, or you're from a black or Hispanic family

A more selective college is likely to pay off over the long run. Two economists, Stacy Dale and Alan Kreuger, have researched whether elite colleges really lead to higher lifetime earnings when you take other factors into account, such as students' academic background and the other colleges where they were admitted. The colleges they examined were a fairly small group that ranged from selective but less prestigious institutions such as Wesleyan and Xavier to Yale, Stanford and Harvard.

Dale's and Kreuger's research found mixed results for many groups on whether attending Stanford over Wesleyan was worth it. But for students from disadvantaged backgrounds, or for students who were black or Latino, they found that attending a more elite college really did boost lifetime earnings.

Because Dale and Krueger looked at decades of earnings data, they researched students who started college decades ago, in 1976 and 1989. But their rationale seems as if it could be true for today's students as well: "While most students who apply to selective colleges may be able to rely on their families and friends to provide job-networking opportunities, networking opportunities that become available from attending a selective college may be particularly valuable for black and Hispanic students, and for students from less educated families," they wrote.

The scenario: You're a student from a college-educated family who applied to several prestigious colleges and is trying to decide which to attend


You may be the kind of student who will succeed whether you attend Wesleyan or Yale. Dale and Krueger's research found that if you take not just students' own academic backgrounds, but their parents' education and the other colleges to which students applied into account, the earnings advantage for the most elite colleges virtually disappears.

Students who were admitted to a highly selective college but ended up enrolling at a slightly less selective one had almost identical earnings at age 35. And it turns turns out that simply aspiring to attend a highly selective college is a strong predictor of lifetime earnings. As Dale wrote about her research in Forbes magazine, "Who you are matters more than where you go to college."

Whether that's ultimately reassuring or depressing depends on your point of view.

The scenario: You're debating between a state flagship university and another, less prestigious public university

The verdict: The state flagship university is probably worth it, at least if you're a white man. Mark Hoekstra, an associate professor of economics at Texas A&M University, compared white male students who just missed the SAT cutoff for admission to the most elite public university in an unnamed state with those who were just above the cutoff. The men who were admitted to and attended the flagship university earned about 20 percent more between ages 28 and 33 than the men who did not.

The study has some weaknesses — chief among them that it's not clear where the men who weren't admitted to the state flagship actually attended college, although enrollment patterns in that state suggest that they did attend other, less prestigious in-state public universities. For women, the effects were less clear, in part because women's earning patterns vary more if they take time away from work to have children.

The caveats

Much of this assumes that highly priced is the same as high quality. Particularly for working-class and middle class families, the most elite colleges aren't always the most expensive. College pricing is complicated, and the colleges with the biggest endowments can often afford the most generous financial aid.

Second, this research often compares colleges that, in the grand scheme of American higher education, are all considered selective. The question researchers tangle with is Penn versus Penn State, not the Ivy League versus a local community college — a pressing issue for the students who can get into both, but less important considering that the majority of students go to nonselective public colleges.

Third, while economists use lifetime earnings as the way to measure the value of a degree, they're far from the only way to determine whether or not students got a quality education.

Finally, because studying lifetime earnings requires a long time frame, much of this research looks at students who entered college in the late 1970s or early 1980s. Since then, the price of college tuition has increased and many of the most selective colleges have become even more selective. It's not clear how this might affect the results.

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