The Student Makes the Difference, Not the College

I have been reading the best book I've ever read on preparing financially for college. The book is Debt-Free U: How I Paid for an Outstanding College Education Without Loans, Scholarships, or Mooching off My Parents and I've been sharing a bit of it over the past several days. Today I'll share a bit more. ;-)

In particular, I want to cover the book's line of thinking that says the following: it's not the college that the student attends that determines his ultimate career success, but the student himself (his skills, abilities, work ethic, etc.). What follows from this is:

• The "go to the best college you can get into" adage isn't really a good suggestion.
• A student can go to a less selective/prestigious college, save a boatload of money, and still be as successful as he would have been otherwise.

But I'm getting ahead of myself. Let's get into what the book says specifically and how it comes to this conclusion.

The book cites a study conducted by Princeton economics professor Alan Krueger. He surveyed 519 students who were accepted at both prestigious and less prestigious schools -- some of whom attended the most elite schools in the nation and others who didn't -- and looked at their career performance 20 years after graduation. The summary of his findings:

The results were startling: students who were accepted at schools like Yale and Rutgers but chose to attend Rutgers over Yale (most likely a financial decision) earned, on average, just as much as Yale graduates twenty years into their careers."

BTW, Krueger's article about this study is titled: "Children Smart Enough to Get into Elite Schools May Not Need to Bother." ;-)

The book goes on with a key paragraph the sums up its line of thinking:

Krueger offered this advice to prospective college students: "Don't believe that the only school worth attending is one that would not admit you. That you go to college is more important than where you go. Find a school whose academic strengths match your interests and which devotes resources to instruction in those fields. Recognize that your own motivation, ambition and talents will determine your success more than the college name on your diploma." 

Wow. I'm sure this will set someone off in the comments below. ;-)

Here are some thoughts from me:

• I believe that this information is true in general. Yes, there are exceptions. But I think that highly motivated and talented people will succeed no matter where they go to school (within reason, of course -- I think they still need to pick a "good" school, just not an "elite" one.) And unmotivated and skilled people won't be as successful, even if they attend Harvard, Yale, and so on.
• IMO, the key is getting your first job -- that's the primary impact a college has. After that, where you went to school has less and less of an impact on how your career goes (and experience/accomplishments have more and more.) The main difference is that graduates from elite schools may have a bit of a pay advantage to start but my experience shows that talent/skill closes the gap after five years or so.
• So if your college gets you the starting job you want, which would you rather take it with -- $50,000 in student loan debt or $10,000? That can easily be the difference between an elite school and a good school after graduation.
• If you get into an elite school and scholarships pay for you to go free or close to it, go for it if you like. Costs being the same, going to Harvard can't be worse than going to State School, can it? Well, maybe. There is some evidence that going to the latter, you'll probably have higher grades. And higher grades often translate into more interviews, job offers, etc. Something to consider. Again, if the student is motivated and skilled, he'll do well wherever he goes.
• I went to a "good" school (I couldn't get into an elite one) for graduate school (I went to an almost no-name undergraduate school, but I had stellar grades and extracurricular accomplishments) and ended it being a great financial move for me. My career certainly hasn't suffered. ;-)
• When I was hired into my first job, I came in with a "class" of new hires (all of us recent graduates of grad schools and undergrad business schools). In my division were people who went to Harvard, Wharton, Stanford, and the like. A few of us went to State Universities. After a few months, no one cared who went to what school -- we knew who the "winners" were based on their performance. And us State guys were performing just as well as the Ivy guys. The two differences: 1) they earned maybe $5,000 more than us per year to start (the gap was closed over a few years) and 2) they had (usually) $30,000 to $50,000 more in debt that we had. So, which was the better deal? ;-)

As I said, these comments should be taken in light that they generally are true (IMO at least) and there are many exceptions. But if we're looking at which is the best way to go for the most people, I think the thinking above is spot on.

What do you think?

Comments

[Everyday Tips]

Outside of football games, nobody cares where you went to school once you already started working. (You might care if you went to Ivy League, but nobody else does.) Once you get your foot in the door, it is up to you.

I know plenty of people that went to 'good' schools that are doing fantastic. I also know others that went to elite schools and do not have a very impressive career. The one thing an elite school may do for you is provide connections based on the students you are at school with. Also, some people might learn more if they are in smaller classrooms, which is more common with elite schools vs. state schools.

[MC]

It should ALSO be emphasized also that it's "what the student studies/majors in" that is critical, in addition to the student. Do not major in something worthless unless you have inherited wealth and will never have to work for a living!

It also makes a difference whether you get good grades in your major classes or not.

[Tyler]

I chose to attend a good state school instead of attending an expensive private school- but not what I would have called an elite/ top 10 school. I still believe this was a solid decision.

I deal with people everyday that attended top 10 elite schools, and I dont feel at any disadvantage. So in my personal case, the person was more important than the school on the resume.

But here is where I will disagree... If you can get into a top 10 institution, you need to go. The brand name and the network are important. When you graduate from one of these programs you gain immediate legitimacy. These factors reduce the risk to a career and thus, on a risk adjusted basis, you earn more.

The study cited above looks at a world that is 20 years old. what didnt matter for them in their careers might matter in the future.

The bottom line- if you get into Harvard, go to Harvard. It certainly wont hurt you. Then again, if you are foolish enough to attend Rutgers over Harvard, maybe your acceptance to Harvard was a mistake.

[bb]

You can't compare top 10 schools with state schools. The school "name" is with you forever.

[Pop]

Many of the top law firms only interview candidates from the very top law schools- if you went to a very good law school and have perfect grades they won't even bother to interview you. Same with many high end medical practices. I've dealt with many of those people in my career, I know I'm as good if not better than many of them at what I do, but I could never get the job opportunities that many of them have, even after many years of experience- the only way would be if you have a huge book of business, then they would bend the rules and bring you in as a lateral hire, but more often than not it's to try to steal away many/all of your clients and then toss you out. The reality is, high end clients want to see that the people working on their cases went to Harvard, Yale, Stanford, etc., even 20 years after law school.

[Sallie's Niece]

In the interest of transparency, can I ask if you are being paid to review this book? I ask because this is the fifth post about the same topic on your blog in the past couple of days.

And my two cents - I went to an elite school for my undergraduate degree and it was worth every penny.

[Apex]

@Sallie,

Regarding your two cents: I went to your website and it appears that 16 months ago you had almost $138,000 of student loan debt and now have nearly $126,000 left.

So you are averaging about $750 of principal per month over the last 16 months.

So what exactly is it that was worth every penny about this elite degree that has left you with almost $140,000 in debt and has garnered you such a high wage that you can only chip away $750 dollars of it per month all while trying to live within a somewhat restricted budget?

I am not trying to be cruel about this but I think you may have just convinced yourself this was a good investment. I believe your situation is exactly the poster child text book example of everything this line of posts has been about. You might feel like it was worth every penny but, it's really hard to see how the numbers on your website can possibly make sense from a purely financial investment point of view.

For those that are wondering if this is a good path for you and worth every penny. I would say judge for yourself based on a real world example posted right here in the comments. Simply click on the link on Sallie's Niece's name in her comment and go read her own words on her website. See if that is the life you want to sign up for over the next 10 years trying to cut corners to pay down a $140,000 debt after you graduate from an elite school.

If you haven't made the choice yet you can choose a different path if you don't like the way Sallie's path turned out. If on the other hand you think that path looks appealing, sign up.

[FMF]

Sallie --

No, I'm not ever paid to review any book. But:

1. I LOVE this book! It takes unconventional wisdom and turns it on its head -- and makes us challenge our thinking regarding a college education.

2. You're going to be hearing more about it in days to come. There are many issues to cover on this topic that I feel are worthwhile to the readers here.

3. I'm living this right now. I have two close friends whose kids are college seniors, another who is a sophomore, and my son will be in high school next year. So this topic is something I'm very interested in right now.

4. If there were any publishers out there willing to pay me to write about a book I already loved, I'd take the offer!!!!! ;-)

[JJ in Idaho]

I attended a relatively unknown Division II school of 7,000 students on a sports and academic scholarship and graduated without any student debts. Class sizes were GREAT and I knew every professor personally throughout my 4 years. Even though my college was not "elite", I secured a great job before graduation and never felt disadvantaged by my university's name or the education I received. Although God has sent me on a different path that is not career-oriented, I have no regrets for attending the smaller, less prestigious school at NO COST and believe my degree and preparation were more than adequate for the career I eventually turned away from in order to obey God.

I am so thankful you are posting about this book. My husband and I feel like it's almost impossible to save for college for our 3 kids, ages 9, 11, and 12 in light of living within our means, saving for retirement, and funding current activities and expenses (including braces on the horizon!) I'm on the hold list at my library and can't wait to read more. Thanks!

[jim]

I think that both sides of this are right to an extent. If you are very smart and ambitious then it won't matter that much what college you go to. But if you go to Harvard then that will certainly help too.

You don't have to go to Harvard to succeed in life. Going to Rutgers will get you a degree and your own hard work can set you up successfully after that. But this isn't saying that Harvard doesn't help as well, it looks great on your resume and helps you get jobs and impress people. I'd rather have Harvard on my resume than Rutgers, wouldn't you?? On the other hand it all assumes you can actually succeed at Harvard. Flunking out of Harvard doesn't look that good either. Course I'm not sure that you need to worry about that too much they seem to have a 97% graduation rate. Not that its easy at Harvard but the people who get in are generally smart achievers who don't flunk out of stuff.

[Sallie's Niece]

@Apex - well going to law school is a WHOLE other story (read my blog for more) but my undergrad was a small liberal arts school where I received much more than an education. The alumni network is so strong that it continues to open doors for me 8 years after graduation. I met two former presidents while attending my school, was able to get amazing internships and travel internationally. I could go on and on.

It was probably my love of learning enriched by this experience that led me to go to law school and assume $90k in additional debt. But, like I said, that's another story.

[Sallie's Niece]

Also I wanted to add that yes my blog is about paying off lots of student loans and it affects my lifestyle in many ways...but I don't think you can measure the value of a school in purely economic terms.

I think I'll write my own response entry soon, thanks!

[Apex]

@Sallie,

"but I don't think you can measure the value of a school in purely economic terms."

That may very well be true and for different people with different goals there are different reasons they are going to school.

The whole point of this entire series of posts is going to school to get a good education that will get you a good job that will be a good ROI on the cost of that education. ROI really is just about the numbers. As you said, it may not always be just about ROI. But even when it is not, don't you think it is fair to point out that if you are interested in other things than ROI that in order to get those things and those experiences and internships and amazing travel and all of the things that you get that there could very well be a very large economic cost to doing that? A cost that could have an impact on someone's life for a decade or two to come.

I don't want to diminish the value of what you did get but I think your situation is a very good test case for someone who might choose your course.

As you write your follow-up post it might be interesting to lay out what you see as the benefits and then to point out very directly what the impact of those benefits has been and will continue to be for you in a financial sense. It would be a great case study for someone trying to make the choice themselves.

[Sallie's Niece]

Thanks for your response, Apex. I have a bunch more to say but I'll save it up for my post. I hope you check it out.

[Chalmers]

There's one important clarification that need to be made:

Elite colleges aren't necessarily more expensive than less prestigious ones. In fact, in many cases, due to their multibillion dollar endowments, they can offer aid packages that make the cost of attending comparable to a state school. Case in point, my classmate at Duke came from a poor family but wound up choosing Duke because it turned out his aid made it cheaper than attending Florida State, where he was from. My family was a bit better off, but still paid way less than sticker price for my education. I believe Harvard expects no parental contribution (tuition) from family's making less than $60k a year.

So you won't necessarily save a boatload of money going to a lesser college.

[MBTN]

I totally agree Chalmers.

I have been saying that in every comment in this series of posts, but people are blind to the facts. They assume that the tuition in the brochure is the price that you pay. A family making $100K will end up paying only $10,000 a year to have their child attend Princeton. I don't see how anybody would choose Rutgers over Princeton if they are the same price.

[bobsmith]

It's the student. Most learning takes place outside the classroom.

[Apex]

@MBTN - that's only true if you don't have any assets or savings to your name. I ran the numbers for my situation through the Princeton calculator. They gave me 3K leaving me responsible for about 53K.

[MBTN]

@Apex:

Here is the scenario that I ran..

Parent's income $100,000
Parent's checking/savings $50,000
Parent's investments $50,000 (excluding retirement investments and equity on primary home, which doesn't count towards aid)
Family of 4 with 1 child in college (i.e. the applicant)

Total cost $53,880 (i.e. sticker price including room, board, and other expenses)
Estimated family contribution $12,100 - $13,000
Total family need $40,780 - $41,780

Note also that the estimated aid was 100% grants. No loans, no work/study.

Obviously your individual situation may vary, but the scenario that I ran is NOT for somebody who is has no assets or savings to their name as you assert. $100K salary and $100K in savings/investments certainly puts one in the top 10% of most Americans if not higher. My point still stands.

By the way, I just looked up Rutgers and their tuition, room, board, fees comes to $23,466 for NJ residents. Their financial aid site doesn't have an estimator, so I can't determine what type of aid that they would give. However, given that Rutgers is a state school, it is under certain fiscal pressures that a private school like Princeton doesn't have.

[MBTN]

More facts about Princeton's financial aid from their website:

- Average financial aid award: $38,350 (96% grants, 4% work/study, 0% loans).
- On average, families with income <$60,000 received full tuition, room, board.
- 100% of those making $180,000 or less who applied for aid received some sort of aid.
- Average grant for families in the $160,000 - $180,000 income range was $26,450 (about half scholarship).

Bottom line is that this myth that a selective, private school is more expensive than a non-selective state school has been busted. The facts just don't back it up!

[Apex]

@MBTN,

You may be right for most people who can get into Princeton, Harvard, & Yale. The endowments start to drop off quickly after that with other 5 ivies having much smaller endowments with some 1/10 the size of the big ones. Outside the ivies, no one has anything even remotely comparable to these kinds of endowments. In addition Princeton has the largest endowment per capita meaning they can afford to be the most generous. They also are the only ivy league school to offer aid in the form of 100% grants with no loans.

Princeton had 17,000 applicants for 2010 and of that they accepted 1,200 into the freshman under graduate program. Yale does about the same and Harvard slightly more. The other Ivies accept about the same accept for Penn and Cornell which accept about double that.

So you chose your myth buster example very well as Princeton has the most lucrative aid package in the USA. Of the 1,200 freshman who can get accepted into Princeton, most can in fact do so quite cheaply as you stated. It appears this would also hold although somewhat less so for the 1,200 at Yale and 1,500 at Harvard as well. After that the endowments at the others just aren't big enough to offer nearly as generous of packages although I am sure they are still pretty good.

So out of the well over 2 million entering freshman each year it appears 4,000 (less than 1/5 of 1%) can get a really sweet deal. Another up to 4/5 of 1% can probably do not too bad. So for that 1% the myth might be busted. For the other 99%, not so much.

[frodo]

I think most employers are smart enough to realize that the college you went to only reflects how well you did in high school. It is realized you weren't fully mentally mature yet. If an employer wants to hold you liable for those awkward years instead of looking at your long list of accomplishements since college, you probably don't want to work there anyways. On another note, we have a guy that graduated from MIT at my office. I went to a no-name school and passed his pay grade a long time ago.

[MBTN]

Apex:

You make a fair point that Princeton is very generous with the aid - probably more generous than most. However, the assumption that FMF and the author of his reviewed book make is that "selective private college" is more expensive than "non-selective public college". I am just providing a counter example.

My main point is that you can't assume that selective private school is more expensive than non-selective public school. You are right that in some cases selective private college might not have as generous an aid package, but in some cases it will. The bottom line is that you can't make blanket assumptions; you have to do your homework.

By the way, Cornell is an Ivy, but it also has several divisions which are considered "state schools" as they are publicly supported by the State of New York. So you have the best of both worlds and go to a "public Ivy"!

[Apex]

@MBTN,

You are right and you opened my eyes to it in the cases where it exists. While I knew that the ivies had some generous aid packages I didn't expect that some of them would actually be cheaper than a public school if you come from an average wealth family.

Thanks for pointing out the fact that it is not always true.

Too bad it's not available at more than just a select few rather small elite colleges.

[FMF]

MBTN --

As I'm sure you realize, an exception (or a few) to a general principle doesn't make the general principle less valid since it applies to the vast majority of the people while the exception applies to a relatively small percentage.

Written in my best IRS wording style... ;-)

[Deserat]

I'm late to this, but I have to agree with the conclusion of the author. I'm close to 25 years past my undergraduate degree and 20 past my graduate degree. In my case I was accepted to the best biomedical engineering graduate program in the US - they just didn't offer me any $$$ - back then it was $24K per year for just tuition. I had saved that amount hoping to pay cash so that we wouldn't be buried in loans. However, I had done my homework about programs ahead of time and had telephone conversations with several students in several different programs. I ended up hearing about a program in New England which combined a masters degree and practical internship for two years and it was a paid program. In my case, they had the clinical institution you were interning at pay your tuition and fees as well as a stipend. In two years I had my graduate degree, two years of experience and no debts. I believe that helped set me up for my now very successful career which has spanned working with several clinical institutions as well as now I own my own consulting business. Also, I will be able to retire early due to not having huge school debts of any kind.

With regards to people I've worked with who went to the Ivies or Privates - very few of them are more intelligent or educated than I. After a few years, it just doesn't matter as your work performance is the gauge, not your alma mater. Rarely have I seen the alma mater making the difference - and when it does, I don't want it.

[Jack Urban]

My son is a high school senior and I'm not sure and worried about what we'll have to pay for college. I am disabled and my wife has only a moderate paying job. Our total adjusted income is about $58,000. We have no savings and don't own our own home. My son is an excellent student with a 4.379 GPA (4.0 scale), a 28 ACT,is an excellent athlete (but probably D3 level), an has been involved in many extra-curricular activities (NHS,KeyClub,Debate, etc.). He has also captained both his baseball and football teams. He would like to pursue a career in sports medcine. Any advice on how we should balance school choice and finances would be greatly appreciated. We just don't have alot to contribute!

[FMF]

Jack --

I'll post your question as a "Help a Reader" post (it will get more attention/feedback there than it will on an older post like this one.) Look for it on or around Dec. 13.

Good luck!!!