As college tuition and student loan debt continue to soar, many students are naturally trying to do the math when choosing colleges. But making your decision based on cost alone may be short-sighted, since attending elite colleges may be more financially beneficial in the long run, depending on who you are.
One well known paper on the subject published in 1999 found that college quality made a significant difference in wage amounts, even with the cost of tuition factored in, with top private university students making 20 percent more than students in bottom-tier public schools.
The same authors also concluded in another paper that attending elite colleges significantly increased your likelihood of attending graduate school.
But what about students trying to choose between a pricier, elite college and a top state school? One study attempted to answer this question by comparing data from students who attended selective colleges to students with similar SAT scores and class rank who attended less selective schools either by choice or because they had been rejected from a top college.
The findings showed that earnings of those graduates were about the same, with one important exception — the study authors noted that students from disadvantaged backgrounds earned more over time if they attended more selective colleges, meaning they financially benefit the most from choosing an elite school over a state school.
This finding isn’t entirely surprising: the selectivity of a school may not make as much of a difference for students from well-off families, who already have access to networks of resourceful contacts, but for disadvantaged students, the quality of the contacts they make in college may make all the difference for getting better job prospects and opportunities upon graduation.
There are also other factors to consider. For example, many Ivy League schools come with generous financial-aid packages that often represent a better deal than cash-strapped state schools. At Yale and Harvard, students of families earning $60,000 or less pay no tuition.
The cost-benefit analysis also depends on your choice of major. Students studying more practical subjects such as engineering and aim to get a job immediately upon graduation might find a top state school to be a better value. On the other hand, students who want to study law may want to choose the school with the better name recognition and contacts.
If you’re interested in getting a quick idea of the value of your college degree, Bloomberg Businessweek teamed up with PayScale and used self-reported earnings data from users to estimate the yearly return on investment for each school, along with graduation rates, total cost to graduate, and the 30-year net return.
When choosing a college, remember that tuition cost shouldn’t be the only way to calculate the value of your degree — investing in schools with better internships, contacts or special programs can help you continue to build wealth years after you graduate.
Dedrick Asante-Muhammad is the senior director of the NAACP Economic Programs. To learn more about personal finance, check out the NAACP Financial Freedom Center Facebook Page or on Twitter @naacpecon.
The opinions expressed here do not necessarily reflect those of BET Networks.
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(Photo: Jacob Russell via Wikimedia Commons)