Managing Your Money : DOES HARVARD PAY? : Weighing the Sheepskin Against the Big Expense
Last year, at a cost approaching $90,000, Julie O’Leary got a BA from Colgate University in Hamilton, N.Y.
Jorge Rosales, by contrast, got his degree from Cal State Northridge, where tuition runs about $400 a semester.
O’Leary and Rosales are both embarked on promising careers, and both attend prestigious graduate schools, which raises a question.
Was Colgate worth all that money?
The issue is more urgent now than ever. This year U.S. college students paid an average of $14,403 for tuition, room and board at four-year private institutions versus $5,488 at public ones, according to the College Board, a nonprofit higher education association.
The nation’s most prestigious private schools--as well as some that aren’t so prestigious--are costlier still. A freshman who entered Stanford University in September without financial aid will spend close to $100,000 before graduating.
Is a degree from Stanford--or Harvard, or any such school--worth such enormous expense?
It depends. America’s costliest universities continue to turn out a disproportionate share of the nation’s elite, and such graduates on average probably out-earn those of lesser schools. A Fortune magazine survey last year, for example, found that 19% of chief executives at Fortune 500 companies studied at Ivy League schools.
Job applicants with a degree from Harvard or Princeton benefit from the imprimatur of their alma mater as well as the not-so-remote chance that someone in power is himself a graduate.
Despite skyrocketing costs, elite private schools continue to succeed in the education marketplace, attracting far more applicants than they can accept. Clearly, to many people, they are worth the price.
If the benefits are sometimes difficult to translate into dollar terms, the costs are not. The difference in tuition alone between Colgate and Cal State Northridge is likely to reach $80,000 over four years.
Consider what would happen if one were to invest that difference. Assuming a 7.5% return--conservative by historical standards--on a 60/40 mix of stocks and bonds, a 22-year-old graduate who had decided to forgo Colgate for CSUN would have $165,000 a decade later, $340,000 at age 42 and $1 million by age 57. His biggest problem would be paying the taxes.
This assumes one has the money for tuition to begin with. Most people don’t, according to Robert Thompson, president of Tuition and Fees Inc., a company that helps parents save for college. He says only 3% to 4% of Americans have a formal savings plan for their children’s higher education. Thompson says 24% have no plan whatsoever--and gripe loudest about escalating college costs.
But most students at the priciest colleges don’t pay full freight. For example, the Consortium on Financing Higher Education says that in 1991, 42% of students at its 32 elite private schools got an average aid package of $10,371. That includes hefty loans, which must be repaid.
Still, the decision to spend $100,000 on college is fraught with intangibles. Assuming that elite private colleges have smaller classes and brighter students, does the education really justify the price tag?
For investment writer Andrew Tobias, the question is preposterous. “Should you go to Harvard as opposed to going to some community college in Florida?” Tobias asks. “Of course the answer is yes. Being able to say you went to Harvard definitely carries weight. It would make sense to borrow, say, $8,000 to go to Harvard. You only live once.”
But to Charles Sykes, author of “Profscam” and “The Hollow Men,” big-name universities are coasting on their reputations and charging exorbitant prices without delivering a lot of substance. He contends that students can graduate from Harvard unable to write a good business letter.
“In many ways,” Sykes says, “these diplomas have become the junk bonds of education.”
Graduate degrees are increasingly important in the workplace, where advanced training can command a premium. Many students, in fact, find that it pays to get a cheap undergraduate education and put their money into graduate school. Rosales, for example, is working toward a graduate degree at Stanford.
Even if Harvard’s undergraduate education isn’t worth the money, education isn’t the only thing you buy from a college. Admission to Harvard is also admission to a potentially invaluable old-boy (and, increasingly, old-girl) network.
Maurice Levin, 35, a corporate real estate broker for Goodglick Co. in Los Angeles, got his Harvard undergraduate degree in 1978 and went to work as a corporate lending trainee at Bank of America in New York. “They contacted only two or three schools for those jobs, so I might not even have found out about the opportunity at another school,” Levin says. “That was a real plum job.”
Later, after his first year at Harvard Business School, Levin spent a summer at Lehman Bros. as a corporate finance associate, which led to a full-time job when he completed his MBA.
“An Ivy League degree,” Levin says, “is an entry visa to much of the East Coast power establishments.”
Not just the East Coast, and not just the Ivy League: “I’d say the school tie factor is a very vibrant mechanism in today’s society,” says Robert S. Rollo, managing director at Korn/Ferry International in Los Angeles.
“It’s not what you learn,” Raymond Loewe says. “It’s who you meet.”
Loewe is president of College Money, a New Jersey financial planning firm that helps people deal with education costs. He’s also a graduate of the University of Pennsylvania’s Wharton School of Business--and a former classmate of Donald J. Trump.
Even dropouts of prestigious schools often seem to do well. William H. Gates III, now chairman of Microsoft Corp., left Harvard without graduating; he’s now one of the richest men in the world. And Reed College dropout Steven P. Jobs co-founded Apple Computer.
Graduates of prestigious universities often won’t denigrate their alma mater even if they haven’t reaped the usual financial rewards. Laurence O. McKinney (Harvard class of 1966, Harvard Business School class of 1969) is president of Cambridge Pharmaceutical Laboratories, which makes cannabis-based medicines. He says he is an embarrassment to his fellow graduates.
“I’m in the lowest 2% in terms of earnings. I haven’t made $20,000 either of the past two years,” he says. But he insists that his Harvard education was worthwhile: “I can actually enjoy the level of poverty that I’m at.”
Others turn up at prestigious universities after they get rich.
Russ Solomon gave up on high school in his senior year and started selling records when he was 16.
Now he’s 66 and owns Tower Records, with 75 stores worldwide and sales that he hopes will reach $600 million this year. He recently made the Forbes 400 list of richest Americans.
“And,” he adds, “we’re opening a new store in Harvard Square this October. You see, I’m getting to Harvard somehow.”
And O’Leary, now working at Simon & Schuster Inc. in New York, insists that her costly schooling was worth it: “I got this job through Colgate. Their career planning office is really phenomenal.”
