Yellowstone Financial, Inc.

Should You Go to the Most Elite College

The death of labor economist Alan Krueger earlier this month was mourned by many.  He excelled in his ability to recognize real-world economic experiments that could be used to test theories.  In the higher education world, he is best known for his and co-author Stacy Dale’s papers on the value of an elite higher education.

The conventional wisdom is that a high school student should aspire to attend the most selective college possible.  The faculty will be more renowned, the fellow students of a higher caliber, and there will be countless opportunities for the networking needed in order to secure a high-paying or otherwise reward position after graduation.

Clearly the wealthy and connected clients of the newly notorious college consultant Rick Singer concluded there was tremendous value in their children gaining admission elite universities.  It mattered enough that the parents were willing to allegedly donate funds to a phony foundation, commit tax evasion, and be complicit in bribery and fraud, all so their child could attend a college with a higher ranking by some magazine.

But what if all this fraudulent finagling were for naught?  It’s an important question to ponder before bribing a college coach for a golden ticket, but also for parents who are consider college acceptance letters and wondering which one their child should take.  Most students who can secure admission to elite schools could presumably command scholarships at a less competitive school or attend a college with a lower cost of attendance.  Should you then pick the college with the lowest net cost?

This question gains increasing urgency as the total cost of college attendance has far exceeding inflation in recent decades.  With Millennials we’re seeing the results of crushing student debt, which has the impact of delaying adulthood milestones.  Those with big student loans tend to marry later in life, and delay having children.  Attending an expensive university can put the financial crush on parents as well, if they take out Parent PLUS loans or home equity lines of credit.

Back to economist Alan Krueger.  In his papers co-authored with Dale, using Social Security Administration data he analyzed the earnings records of thousands of attendees of selective universities.  In their later works, they were able to see the progression of career earnings over thirty years from college entrance.  Then the authors used another survey to determine which colleges those same people applied to, and where they were admitted and ultimately enrolled.  Here’s what they found.

College selectivity was most important for those from lower education families and other groups. A clear trend emerged that the impact of more selective colleges was greater for those students who did not have college educated parents.  Also, African American and Latino students showed significant improvement in career earnings attending the most selective colleges.  Keep in mind most of the colleges in the study had competitive admissions.  It’s just that for these groups of students the more selective the college was, the greater the student’s earnings tended to be after college.

Most students saw no significant impact going to a more selective college.  For most students, the selectivity of their ultimate college had no measurable impact on earnings after graduation.  So choosing the most competitive college made no difference in how much they earned over time.  Strangely, the authors found there was a relationship with selectivity of the colleges the student applied to and lifetime earnings.  But it didn’t matter if the student was admitted or not or decided to enroll in the most selective university.

That Krueger’s death and the college admission bribery cases came out at the same time was ironic.  He demonstrated that one major proxy for success, career earnings, was not affected by going to a more selective college.  This lack of impact was particularly clear for those students from college educated families.  Meanwhile we may see members of most privileged families convicted of felonies due to their desire to see their children attend an elite university.  Maybe it was just about the bragging rights?