More Bucks, Same Bang


At this time last year, Lily Jones and Sonika Mehta were both weighing their college options: private or public? East Coast or West? Big city or small?

Today, as first-year students at New York University, they’re each happy with their decision to seek their undergraduate degrees at one of the nation’s top schools. Just listen:

“I definitely do feel very bad,” says Jones. “I still feel kind of guilty.”

“I feel guilty all the time,” Mehta chimes in.

“Not bad,” clarifies Jones. “I just feel guilty.”

The two are discussing a topic on the minds of hundreds of thousands of high school seniors this fall as they consider college applications: tuition costs, which are rising at about double the rate of inflation, with no sign of slowing. Neither Jones nor Mehta receives grants or scholarship money, so they—or in this case, their parents, hence the guilt—are on the hook for the entire cost of an NYU education, which after housing costs can clear $60,000 a year.

Mehta, who considered some cheaper state universities before settling on NYU, says she ultimately decided the price would be worth it for the easy access to New York City and its cultural riches. “But I do realize how much money it is. It’s a ridiculous amount of money.”

Students who take on staggering debt loads or drain their parents’ savings to go to high-priced schools generally assume a payoff once they’re out in the working world. “Anyone can go to a state school,” explains Evan Lee, a sophomore economics major at NYU, of his decision to pay several thousand dollars more a year (after scholarships) instead of settling for State University of New York–Binghamton. “A lot of the job applications that I’ve looked at, they say ‘requires a high GPA from a top school.’ A school like Binghamton, they’re good, but if I go to Chicago, they might say, ‘What’s a Binghamton?'”

It’s common reasoning: A selective-college diploma may come at a high price, but it will open doors that might have been closed to you if you’d attended a cheaper public school. Except for one thing, say the authors of the most exhaustive study to track the post-graduation earnings of students by school selectivity: It’s hogwash.

“Where you go to school doesn’t matter near so much as who you are—how smart you are, how ambitious you are—in terms of how it affects your later income,” says Stacy Dale of Mathematica Policy Research, who, with Princeton economist (and former top Obama adviser) Alan Krueger, has conducted two major studies of selective colleges and their effects on future income. “Everyone looks around and says, ‘Wow, these people who went to Harvard make a lot of money.’ And it’s certainly true. But what people can’t really see is what they would have made had they not gone to Harvard.”

To account for this effect—that students at top schools are bound to be top students, and so more likely to be successful regardless of where they choose to get their diploma—Dale and Krueger concocted a clever workaround: They compared post-graduation income among cohorts who were accepted at the same schools—say, both the University of Pennsylvania and Pennsylvania State University. Their finding: There was no statistically significant correlation between choosing a more selective (and expensive) undergraduate program and future earnings.

“Our findings are very surprising to a lot of people,” says Dale. “I think everyone’s gut feeling is it’s got to pay off—why would people ever pay for Yale or Harvard if it doesn’t pay off?”

Sticker Shock

It’s hardly news that the cost of a college degree is soaring. Higher-ed experts cite elite institutions conducting bidding wars for top faculty and state cuts to spending on public universities as two prime reasons, but have few suggestions for how to stem the tide; in August, President Obama proposed cutting federal financial aid dollars for schools that overcharge for tuition, but this would require Congressional action, and in any case wouldn’t kick in until 2018 at the earliest.

In the meantime, college cost experts caution that prospective students weighing their college options should look not at sticker price—the

“tuition plus fees” number that is commonly highlighted—but at net cost, your expected total outlay after getting back any available grants and scholarships. It’s a calculation made easier by the net cost calculators that any schools wishing to receive federal student loan money have had to include on their websites since 2011; these allow applicants to plug in their family financial data and get back an estimate of what they’ll actually be on the hook for after available grants and scholarships.

In some cases, it’s a huge difference. Columbia’s cost calculator shows that a typical new student from a family with $100,000 in annual income could end up paying only about $15,000 of the school’s $64,000 in annual tuition, fees, and housing; the average cost per student is about $20,000, according to the school’s own figures. At NYU, the numbers are less dramatic but still significant: A school spokesperson says that its average student pays just 77 percent of the roughly $60,000 in annual costs, with those that receive financial aid paying an average of about $34,000.

Still, that’s a sizeable nut, especially compared to the roughly $10,000 per year that a City University of New York degree costs (double that if you require housing) before financial aid is factored in, even after the public school’s recent tuition hikes that spurred mass protests. Other schools in the five boroughs don’t come out much better in the comparison: A student at Fordham University whose family earns the New York City median income (about $57,000), for example, would still be on the hook for $46,000 of the school’s annual $57,000 in tuition and other costs.

Columbia dean of undergraduate admissions Jessica Marinaccio cites the university’s strong faculty, small class size, and exceptional resources as reasons to attend. NYU dean of admissions Shawn Abbott, while acknowledging that “NYU is an expensive university to attend,” says it’s worth it both for access to top professors, and for the contacts students can make there.

“The reality is that our students intern and work regularly with little fanfare at places I only dreamed about as a college student in rural New Hampshire,” writes Abbott via e-mail. “My classmates and fraternity brothers didn’t intern at MTV, or Vogue, or with the New York Yankees. We didn’t write for the Village Voice, and we didn’t spend early morning hours before class at the New York Stock Exchange.” As a result, he says, more than 92 percent of last year’s NYU graduating class were employed within six months of graduation, with an average annual salary of around $52,000.

Yet Dale responds that, according to‘s college salary data (which is drawn from employee surveys), the average starting salary of a SUNY–Binghamton graduate is nearly as much, at $47,200—and that’s not accounting for the fact that NYU students are likely drawn from a higher-talent, higher-income pool to start with. “I think it is hard to come up with concrete examples of things that elite colleges teach (and that less elite colleges do not teach as well) that would translate to higher earnings,” she writes via e-mail.

Exceptions to the Rule

For all the cold water that Dale and Krueger have thrown on the value of a high-priced college education, their studies have shown one group for whom a degree from a more selective school does lead to greater rewards. “For racial and ethnic minorities (black and Hispanic students) and for students whose parents have relatively little education,” they wrote in a 2011 update of their original 1999 study, “our estimates [of the income benefits of a selective-college degree] remain large, even in models that adjust for unobserved student characteristics.” Why would all diplomas be equal for most students, but not for these? Dale’s theory: “For the upper-middle-class kid who could have gone to Harvard, even if he didn’t go, he’s well-connected, his parents probably have decent jobs and can help him find a job after college.” Students of color or those without college graduates in their family tree are less likely to already have those connections, “so going to a selective college really gives those kids a boost in terms of their networking.”

The trouble is, those aren’t the students who are, by and large, going to the Harvards of the world. In July, Jeff Strohl and Anthony Carnevale of the Georgetown University Center on Education and the Workforce released “Separate and Unequal,” a report that investigated how American higher education is becoming increasingly stratified by race and class. More than four-fifths of incoming white students go to top-ranked schools, explains Strohl, while nearly three-quarters of black and Hispanic students begin at open-access two- and four-year colleges. This disparity occurs in graduation rates as well, he says, even if you account for the fact that more selective schools attract better students. Students of color who scored in the top half of college entrants graduate about 40 percent of the time at open-access schools, but 73 percent at the more selective schools.

“Our data shows that if you take minority students who score well and put them in a good school, they’re going to do better,” says Strohl.

Strohl agrees with Dale that more affluent students don’t get much additional benefit from the added resources at pricier schools, but poorer and minority students do. He calls it the difference between “having the middle- or upper-class cocoon or not,” pointing to himself as an example: “My parents were professors, I grew up on a college campus. There’s a whole set of supporting mechanisms that pick you up when you fall down.”

There are two obvious solutions, though neither is easy to implement: either get more students with poor resources into top schools, despite the high cost; or somehow reallocate the riches that selective colleges have at their disposal to the cheaper schools where low-income students already congregate.

“If we moved $1,000 of educational resources from Harvard to Howard, what would happen to the graduation rate at Howard?” asks Strohl. “We don’t know the answer because we’ve never had that experiment.”

New Scorecards in the Works

There is some hope on the horizon for students wishing to know what bang they’ll get for their tuition buck. Earlier this year, notes David Bergeron, a former Obama education official now at the think tank Center for American Progress, White House Domestic Policy Council deputy director James Kvaal promised that the Education Department would start publishing earnings data on each school’s graduates, filling in a space on its College Scorecard that has long been left blank.

The new numbers would be generated by an ingenious end run around limits on tracking earnings: Instead of relying on alumni surveys, the government intends to cross-reference financial aid payment information with Social Security earnings data to generate average income figures for each school—albeit just for those students who receive financial aid. Bergeron, who was at the Education Department when it first began developing the college scorecards, says he expected the figures to be available this month—though “clearly it won’t happen now,” after the department lost two weeks to the government shutdown. “The department fully understands this time we’re in right now is when high school seniors are deciding where to apply.”

In the meantime, students weighing their college options are left to calculate schools’ relative costs and benefits on their own. For Anthony Sganga, a New Jersey native who transferred from Bergen Community College to NYU, his initial determination was that it wasn’t worth it: “I would not take out $60,000 in loans.” But after discovering a scholarship program for community college students that could reduce his debt load to $12,000 a year, slightly more than it would have cost him to transfer to Rutgers, he changed his mind. “In my case, it’s a no-brainer, because 12 grand is a large chunk, but there aren’t that many schools today where you’re going to get that little to pay for college.”

Is this kind of financial calculus typical of many of his peers? “Not enough. I don’t know if two years ago, when I first came out of high school, I would have done the same amount of research,” says Sganga. “When students are 18, you just say, ‘That’s my dream college, I want to go there.’ I don’t think enough students do that—and then four years later they get the bill and think, ‘How did this happen?'”