Top College May Not Mean Top Pay, Study Finds

What’s the value of an Ivy League degree?

With high school seniors facing a deadline today for deciding which colleges to attend, and the cost of four years at top-ranked private schools exceeding $130,000, the question of whether all that tuition is worth it is getting served up as a hot topic around many dinner tables.

For years, studies have backed up the popular assumption that a degree from an elite college puts a student on a path to prosperity with fatter paychecks than those of graduates from less exalted institutions. Many studies still support that position.

But recent research from, of all places, Princeton University, challenges that belief.

At least for top students, what really matters is the student’s drive, not the school, according to Stacy Berg Dale, a researcher at the Andrew W. Mellon Foundation who researched the question with Princeton economist Alan B. Krueger.

“What seems to matter is a person’s ambition or self-confidence,” Dale said. The most ambitious students “will do well in life,” regardless of their alma maters, she said.

Not all researchers are convinced. “For parents whose kids are considering colleges far apart in the rankings, the long-term investment in the better school is really going to be worthwhile,” said Caroline M. Hoxby, an economist at Harvard. Her recent study found significant increases in income for students who moved up from third-tier to first-tier colleges.

At least some Californians have easier decisions than families elsewhere in the country. That is because of the quality of the state’s public universities, where tuitions are held down by taxpayer subsidies that average $8,600 a year per student.

“In California, the best of the public institutions are among the best institutions in the country, public or private,” said UCLA Chancellor Albert Carnesale. “That’s not the case if you live in New York or Connecticut or Massachusetts. Those public institutions are not in a class with Harvard or Yale.”

As the head of a public university, Carnesale has an obvious bias, but most experts agree with him that the top UC campuses are among the best bargains in higher education, with fees that now run about $4,000 a year, compared with tuitions of $22,000 or more at comparable private universities.

It’s a deal that’s not lost on parents.

Jan Guerrero, who helps counsel La Canada High School students on their college choices, wanted to let her son Sean make up his own mind. In recent weeks, Sean narrowed his choices to UC Irvine and Loyola Marymount University in Westchester. He was leaning toward Loyola Marymount because he preferred the smaller, more intimate feel of the campus.

To his parents, the difference in costs was breathtaking: $13,000 a year at Irvine versus $28,000 at Loyola Marymount. “We kept sending him back to UC Irvine,” Jan Guerrero said.

After his fifth visit to the campus, Sean was satisfied that Irvine’s classes wouldn’t be too big. He also concluded that Irvine was more likely to help him get into a well-respected MBA program.

His mother is, well, relieved. “Even though we had been planning for this for years,” she said, “his choice makes a big difference. We can breathe a little easier now.”

Arguing Over a Brand Name

Jessica Gottlieb, a senior at El Camino High in Woodland Hills, is leaning the other way. She has all but decided to take Yale’s invitation and to reject a few others, including one from UC Berkeley.

“My father is more gung-ho for Berkeley because of the price,” the 17-year-old said. “However, both my parents feel that I worked really hard to get in [to Yale]. They’re willing to let me get the education that I want.”

Of course, only a small fraction of this year’s high school seniors have the luxury of worrying about choosing among multiple offers from the nation’s best schools.

Most guidance counselors try to calm the frenzy caused by so many students--nudged by their parents--clamoring to get into the top 50 of the nation’s 3,500 colleges and universities.

Counselors argue that a brand name is less important than finding a college that suits the student’s needs and interests. Too many students fail to find the right fit and drop out, they say.

But with the stratification of wealth in American society, many economists say that anxious parents and their students have got it just about right: It matters more these days where one goes to college.

“The club of tremendous success is harder to join for people who don’t have the right pedigree,” said Morton Owen Schapiro, a USC vice president and economist.

“It’s a terrible indictment of our winner-take-all society.”

Schapiro spent part of last week counseling anxious students and parents wrestling with the same question: public versus private.

Elite private institutions provide substantial economic boosts to their graduates, said Schapiro, who has made the economics of higher education one of his specialties. But all the benefits go to the child, he said, not to the parents.

Consider it an intergenerational transfer of wealth.

“I tell parents to think of it as an early inheritance,” Schapiro said. “They are going to have less money to leave their kids when they die, but can give it now when it can make a difference. If they can find the money to send their kid to Yale or Williams, they are going to do incredibly well.”

That’s an easy position for Schapiro, who has spent his entire career bouncing between two expensive private institutions: USC and Williams College in Massachusetts. He will return to Williams later this year as its next president.

The financial dilemma is concentrated largely on America’s middle and upper-middle classes.

The fabulously rich, of course, are insulated from these financial worries.

So are the brightest students from lower-income families, given scholarships, discounts and other financial aid that generally make the cost of public and private education about the same. Several studies have shown that students from low-income families benefit the most from education at elite schools.

An aid package made it easy for Qi Janet Zhou of Northridge to pick Caltech over Berkeley or UCLA. Reviewing her financial aid offers, she realized she and her family would have to pay $14,400 (of the total $30,575) to pursue an engineering degree at Caltech--slightly less than for Berkeley or UCLA.

Either choice would certainly pay off. On average, college graduates earn about twice as much as those who hold only high school diplomas--up from about 1 1/2 times as much in the late ‘70s.

But according to most studies, the more prestigious the college, the higher the average salary.

In a study titled “Does It Pay to Attend an Elite College?” Cornell economist Ronald G. Ehrenberg and two other scholars answered their own question with a resounding “yes.”

Graduates of elite private colleges tend to do better than those of lower-tier schools or top public universities, they said.

The salary spread is more pronounced among law school graduates than for those with undergraduate degrees, given the wide range of career choices, Ehrenberg said. “If a student wants to go on to become an elementary teacher, the high-quality private institution will not have any impact on his or her salary.”

All of these studies have limitations. They do not explain, for instance, why attending an elite private college increases income.

Is is something learned in smaller classes? Greater attention from professors? Or is it the connection to the fellow in the dorm, who just happens to be the son of a Fortune 500 company chairman?

The studies don’t take into account outside factors, such as the hiring and recruiting practices of top employers. Big firms commonly rely on the nation’s best colleges to pre-screen applicants for them, figuring that someone who got into Stanford, Harvard or MIT is probably smart and motivated and has learned something.

Moreover, all the studies struggle with “selection bias”: The best colleges tend to accept students who have the greatest potential for making more money. So that raises the fundamental question: How much are the heftier salaries attributable to the college, and how much to the students themselves?

“Ideally, you would like to clone people and send them to one place and another and then study them 30 years later,” said Mark R. Rosenzweig, an economist at the University of Pennsylvania.

He and fellow Penn economist Jere R. Behrman did just that--sort of. Using a database of identical twins, they compared the work histories of siblings who attended different colleges. Their findings supported the conventional wisdom: Those who went to higher quality schools earned substantially more than their twins who went to less-prestigious institutions.

Krueger and Dale approached the problem in a different way--and reached their contrarian results.

Using the Mellon Foundation’s “College and Beyond” database of about 14,000 graduates from 30 colleges, they identified matching sets of college graduates who had applied to and been accepted by comparable schools in 1976. Some chose to attend the more prestigious schools, others went elsewhere.

Comparing results for students in those matching sets, they found that the incomes were very close, no matter what institutions the students actually attended.

In fact, those who turned down schools such as Yale and Penn to attend moderately selective colleges such as Tulane and Pennsylvania State University earned slightly more than those who went to the more selective universities, Krueger said.

But Krueger, who presented the findings to Stanford’s economics department earlier this month, cautioned that parents should not make too much of the findings.

“We are talking about averages, and averages don’t hold for every student,” he said. “Each student’s considerations are going to be different. A student who wants to be an engineer would be making a mistake to go to Harvard rather than UCLA, where there is a strong engineering program.”