Should you pay a $120,000+ premium for an elite college?

by Grace

A trend among higher income families is not to pay the premium for an elite college.

Twenty-two percent of students from families with annual household incomes above $100,000 attended public, two-year schools in the 2010-2011 academic year, up from 12% the previous year, according to a report from student-loan company Sallie Mae.

The combination of a prolonged “recession”, skyrocketing college costs, and student loan horror stories  are making many people more wary about overspending for a college degree.  This Wall Street Journal story profiles some students who could have attended elite colleges but decided it was not worth the extra money.

Mr. Schwartz, 18 years old, was accepted at Cornell University but enrolled instead at City University of New York’s Macaulay Honors College, which is free.

Free!  It’s hard to beat free money.

Jesse Yeh, a 20-year-old California resident, chose the University of California at Berkeley over Stanford University. Tuition at Berkeley, a state school, is about $14,460 for in-state students. At Stanford, it’s $40,050.

But Yeh has been shut out of some classes and is concerned that he may not graduate in four years.

Natasha Pearson, 19, questions her decision to attend the City University of New York’s Hunter College. She says she turned down an offer from Boston College after the school said her family would need to pitch in $30,000 annually.

She says there’s a “wide variety” of academic ability among her Hunter classmates and that many of her courses are taught by graduate students, rather than by full professors.

“I can’t help but wonder, had I gone to BC, where that could have taken me,” she says.

As touched upon in this article, the added value of an elite school usually includes an enhanced alumni network, a more appropriate peer group, and the sometimes important cachet of that impressive degree.  Additionally, a student is less likely to be lost in the crowd and more likely to graduate in four years.  Can a student find all these advantages in a less expensive college?  Yes, but it depends on the field of study and is much less probable.

It’s complicated

The college search and selection process is made more complicated by the need to factor in the financial as well as the academic and social aspects of the appropriate fit for a particular student.  Even if a student can gain admission, it is not always worth the extra premium to attend an elite school.  And it’s never right if it means taking on excessively burdensome debt.  One rule of thumb is that a student should never graduate with student loans that equal more than his first year of salary.  However, given the shaky outlook for job prospects today, even that rule of thumb might be too risky.


3 Comments to “Should you pay a $120,000+ premium for an elite college?”

  1. As opposed to the preppy and wealthy vibe at BC? 🙂 So it all depnends on the kid and what’s a good “fit”.

    I’ve heard that BC has a very strong alumni network. Hunter’s is probably less, although that may depend on the field.


  2. Your last degree matters most—the network for PhD students is crucial for getting a job.

    If you look at engineering firms, you tend to see a concentration of graduates from a small number of schools (different schools for different firms). People who have think that they have gotten a good education at a school will tend to trust the school to produce other competent graduates, even without explicit alumni networking.


  3. Bonnie, you make a good point about the difference between an alumni network and the other factors that are more about the school’s relationships and reputation. I tend to lump them all together in thinking about the value of going to a particular school, and of course that particular benefit is often specific to a particular field. My experience working in the oil patch certainly showed that. A UT Austin or Texas A&M degree had tremendous value in that industry, whether you were working for an independent West Texas drilling company or a multi-national corporation operating in Saudi Arabia. Part of it came from the caliber of the school and part was the alumni network.


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