Does an Elite College Really Pay?
I think it's clear that a college education is well worth the time and money spent on it. If you disagree, check out these posts:
- College is Expensive, but Well Worth It Financially (Or: Give Four Years and $40,000 and Get an Extra $1 Million)
- Education is the Key to Getting a Good Job
- The Value of an Education
- The Value of an MBA
But here's a more difficult question: is an elite college (Harvard, Yale and the like) a better investment than any other college? Here's what MSN Money says:
The economist Alan B. Krueger teaches at Princeton University, but in his view, it's probably not worth the money it takes to send your kid there.
Not in terms of future earnings, anyway. Krueger ignited a minor furor when he and Stacy B. Dale, a researcher at the Andrew W. Mellon Foundation, concluded in 1998 that elite colleges do not pay off in higher earnings. They only appear to do so, the researchers contended. Krueger and Dale claimed that, in most cases, the higher earnings piled up by graduates of elite schools were attributable to elite individuals, not their college education. In other words, if you're smart enough to get into Princeton, you're smart enough to make a lot of money wherever you go to school.
Whether or not Krueger and Dale's research holds up--and the jury is still out--tuition-paying parents will want to follow the debate closely.
The article then goes on and on debating the subject. However, it does end with some suggestions on what we should all do as we ponder this question for ourselves and our children:
If your kid intends to become a social worker or minister, an Ivy League education will never pay off in financial terms. And if your child wants to study studio art but is admitted to Cal Tech, there's no point paying for Cal Tech. Spend the money on a school with a better art program.
If you live in a state with a premier public institution--a school such as UC Berkeley, the University of Virginia, or the University of Wisconsin--it's hard to justify going elsewhere, unless elsewhere is one of the very best private schools. Even then, in the view of Dan Black, you should pick your state school.
Under no circumstances should you pay for a mediocre private school. These make no sense at all.
If you are made of money, send your kid to the most selective school you possibly can. It can't hurt.
If you are African American and your kid gets into Yale, do whatever you can to send him or her. Krueger and Dale found that black students get a bigger financial bang from a top-tier school. There is also some evidence that the same applies to students from economically disadvantaged backgrounds generally.
This decision is still a long way off for me and my family, so it's not pressing for us. However, this information will be food for thought for several years down the road.
For those of you focused on saving for college -- any college -- here are some posts from Free Money Finance that could help you:
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