2/23/2011 11:37 AM ET|
Is the Ivy League a waste of money?
The merits of elite schools are open to debate, but there's no question that a college education is now essential -- and that aspiring students need to set practical goals.
Princeton professor and economist Alan Krueger set out to prove an Ivy League education paid off. He wound up proving exactly the opposite.
Well, sort of. In 1999, Krueger and fellow researcher Stacy Berg Dale discovered (.pdf file) that students who were good enough to get into Ivy League schools but who attended other colleges earned just as much after graduation as those who actually went to the more elite schools.
A new version of their study (.pdf file), which includes more data and tracks subjects' income for decades longer, was released this month. It came to the same conclusion: Elite colleges don't pay off financially for most graduates.
The only grads in this group of highly qualified students who seemed to enjoy any significant financial advantage from attending Ivy League schools, the researchers found, were African-Americans, Latinos and people from low-income homes or whose own parents hadn't gone to college.
The researchers' findings, however, seem to have had no discernible impact on the arms race that the elite college admission process has become. Last year, Princeton, for example, was the most selective it's ever been, offering acceptance to a scant 8.18% of the record 26,247 students who applied. Other Ivy League schools reported a similar surge in applications for their finite number of openings.
|2010 acceptance rates at Ivy League schools|
|School||Acceptance rate||School||Acceptance rate|
|Cornell||18.40%||University of Pennsylvania||14.22%|
|Source: The New York Times|
Whether or not an Ivy League education makes a difference, parents and students think it does, so they continue to battle to get in.
Other studies have shown that attending elite private schools does give graduates a financial advantage, especially when measured against the least selective schools. A widely cited study by researchers from Rand, Cornell and Brigham Young University, which was released the same year as the original Krueger-Dale study, found that alumni of an elite school earned more than those who attended a middle-ranked private institution and much more (as much as 39% more) than those who attended one of the least selective public universities.
Measuring an education's worth by future earnings is just one metric. It's also certainly true that elite colleges invest a heck of a lot more in their students' educations than the least selective schools -- and that the gap has widened dramatically in the past couple of generations.
Caroline Hoxby, a Stanford economics professor -- and a Harvard graduate who disparages the Krueger-Dale study -- notes that the elite schools spent about 4.5 times as much per student in 1967 as the least selective colleges. The gap had widened to 7.75 times ($92,000 for the elites, versus $12,000 for the bottom-ranked schools) by 2007.
I'll stop with the studies at this point, because my purpose here isn't to decide the relative value of an Ivy League education for any individual. My purpose is to get parents and students thinking about something else that needs to be a factor, which is what they can really afford. To that end, I'd like to make two points:
- An education is like anything else you can buy. It's possible to overspend, sometimes dramatically when borrowing is involved.
- If the choice is between chaining yourself to a lifetime of horrific debt and going to a good public university, the public school should start looking better.
I'm not one of those who warns against the evils of all debt. I see federal student loans -- with their fixed rates, many consumer protections and forgiveness options -- as good debt when used in moderation. That's especially true these days, when a college education is pretty much a requirement to get into the middle class (or keep from falling out of it).
In fact, I worry about those who refuse to take on any debt and so don't get a college degree. Here I'll quote researchers Richard Settersten and Barbara Ray, who parsed a decade of longitudinal and panel studies of people in their 20s for their new book "Not Quite Adults":
"Debt is not the main reason young adults are failing to launch," they wrote. "In fact, not taking on debt is sinking the futures of many young adults. Fearful of the burden of college loans, they are underinvesting in themselves at this critical time, letting their immediate worries compromise their long-term security. . . . Not taking on college debt in this knowledge economy is a costly decision."
But borrowing a huge pile of money, either as a student or a parent, on the assumption the education will pay off no matter what -- well, that's just foolish.
This may not be an issue for actual Ivy Leaguers. As college student Zac Bissonnette points out in his provocative book "Debt-Free U," graduates of Princeton, Harvard and Yale are among the students who graduated with the least amount of debt in U.S. News & World Report's 2006 study. That's probably because the schools have generous financial-aid packages to lure the students who might not otherwise be able to afford the costs, while many others who attend have rich parents.
But cost is an issue for the vast majority of families whose kids don't get into the Ivies but who may be lured by a "dream school" that charges a small fortune or that provides inadequate financial aid. Just look at the list of schools from the same U.S. News study whose graduates left with the most debt:
- Seton Hall University
- New York University
- Worcester Polytechnic University
- University of North Dakota
- Pace University
As Bissonnette rather delicately puts it, "none of these institutions is likely to stand out on a résumé to the extent that Yale, Harvard or Princeton might." In other words, these students -- and others who attend expensive schools that aren't in the first tier -- may well be paying a premium for an education that doesn't justify it.
I'm not concerned just about the Leah Cowels of the world -- the students who overdose on debt. Cowels accumulated nearly a quarter of a million dollars in debt attending Ithaca College in New York to get a bachelor's degree she never used. And she's far from alone, as the testimonies on sites such as StudentLoanJustice.org can attest.
I'm also fearful for the parents who may drain their retirements and home equity, or pledge themselves to a life-shattering amount of debt, to buy their kids an education.
In too many families, discussions about what is and isn't affordable don't happen until the acceptance letters -- and the painfully inadequate financial-aid offers -- are in hand. And that's way too late.
By the time your kid is a freshman in high school, you should have a pretty good idea of your resources, including your savings. You can then go to the financial-aid calculator at FinAid.org to estimate how much your family will be expected to contribute to your child's education.
Set limits now on how much you'll borrow through federal student loan programs. The most that students can borrow for an undergraduate degree is typically $31,000. Parents can borrow up to the total cost of an education through the PLUS federal loan program, but they shouldn't agree to any loan that would prevent them from saving adequately for retirement. Any loan bigger than that -- or any student loan that doesn't come directly from the government, with its federal student loan protections -- is a sign you're over your head.
Armed with those numbers, you can start searching for schools that fit your budget.
If your kid does get into an Ivy League school, congratulations. Chances are pretty good that its financial-aid programs will make the tab affordable, especially now that many of these schools have adopted "no loan" programs that award grants and other discounts.
Otherwise, be wary. In education, you don't always get what you pay for.
Liz Weston is the Web's most-read personal-finance writer. She is the author of several books, most recently "The 10 Commandments of Money: Survive and Thrive in the New Economy" (find it on Bing). Weston's award-winning columns appear every Monday and Thursday, exclusively on MSN Money. Join the conversation and send in your financial questions on Liz Weston's Facebook fan page.
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The real advantage of Ivy-League schooling is - and always was - networking. An Ivy degree opens doors that others simply don't. This is most certainly not a good thing, but it is a fact. Especially in the professions, the "old-boy network" continues, though in a much weaker fashion than in the past. Excellent non-Ivy schools graduate more and more of our most talented men and women, and the gap is narrowing, but an Ivy education is still an asset that often has no relation to the quality of the graduate.
Disclosure: I went to a non-Ivy college and two Ivy professional/graduate schools; they were all good. The education I got depended more on me than on the schools. I studied for some courses like mad and slept through others. My kids followed the same pattern; we are all "well-educated," but those Ivy schools shine - if only on our resumes.
-President Obama (Columbia undergrad and Harvard law)
-President JFK (Harvard undergrad, Harvard named their govt school after him...)
-President Woodrow Wilson (Princeton undergrad, Princeton named their govt school after him...)
-President George Bush Sr. (Yale undergrad)
-President Clinton (Yale law school)
-President FDR (Harvard undergrad, Columbia law)
-Ban Ki Moon - UN Secretary General
-Bill Gates (dropped out)
-Mark Zuckerburg (dropped out)
-Warrent Buffet (Columbia MS, Upenn undergrad for two years)
-and a number of Nobel Prize winners in every category they offer (all Ivy Leagues)
This list goes on a on, but this doesn't mean there aren't very reputable state schools. Univ of Michigan produced President Gerald Ford. Stanford and MIT, although both are private, are basically ivys and produced the Google founders and other world-changing leaders. Actually, one Google founder attended Michigan undergrad and the other attended Univ of MD undergrad. I just don't think it is fair to bash Ivy leagues, or anyone institution, without the facts.
Please do research next time before you answer because for some reason 2 people gave your response a thumbs up. I don't want them to be misinformed. Also, I did NOT go to an Ivy league, but I don't discredit the type of education you can get there. Also their endowments are so big, you basically pay nothing or the same amount that you would pay for a state school.
Oh and Steve Jobs? I guess you define respectable by how cool of the products his/her company makes? Because Steve Jobs is nowhere to be found on any list of top philanthropists. Actually, when he became CEO of Apple, he took away "charitable contribution matches" at Apple as a cost saving measure and has never put it back. I am sure he gives in private but he doesn't win awards for savings lives like Bill Gates.
I did not realize that 1 + 1 does not equal 2 in non ivy schools. Higher education has become big business in America and it is now more about pumping out fee-paying customers, than delivering quality and knowledgeable students. With an ivy school, you are effectively purchasing a name and quite often at the tax payers expense; considering they're allowed to use public student loans.
How many Ivy League equivalent schools does China, India, Europe and so forth have? Yet look at the caliber of the student they are educating, and in significantly higher numbers as well. To the contrary, Harvard (for example) is able to pick the crème de la crème of students; which means, regardless of what is being taught at a school, such students will do extremely well anyway.
Uh, before you crack on people you need to keep you're own back porch clean.
Yes, it is true the President Kennedy graduated from Harvard, but you fail to mention that he attended LBE first, and then transfered to Princeton before ever ending up at Harvard. He earned a degree in Science, which had nothing to do with Governement. The Kennedy school of Governement is as much named for his Father and Brothers as it is for him. he also attended Stanford Business school, but withdrew. Seems to me that Kennedy moved around a lot, but only graduated when he was close to home and Daddy's deep pockets.
President Clinton went to Yale Law, but his undergrad was from Georgetown, afterwhich he was a Rhodes Scholar at Oxford. He is/was much smarter than Kennedy ever was.
It's important to paint a complete picture. You get out of college what you put into it...Period. I don't care where you attend. Perfect example--> President Carter. He started out at Geoergia Southwestern College, then transferred to Georgia Tech, then transferred to and graduated at the United States Naval Academy at Annapolis. Also, probably our greatest president in the last century was far from attending an Ivy league school. He attended Eureke College, and later went onto act in Movies and become Governor or California, and then the President of the United States...Ronald Reagan.
"They are perhaps the best-educated generation ever, but they can't find jobs. Many face staggering college loans and have moved back in with their parents. Even worse, their difficulty in getting careers launched could set them back financially for years."
Entire population is awash in debt! That is the problem. Current debt levels are still huge compared to GDP. History shows debt to GDP ratio will snap back to the mean. This makes a case for deflation to continue. In this deflationary environment the best thing you can do is to avoid going into debt! Stay away from debt and save your dollars. They will be worth more at the bottom of the coming depression. Google for CONQUER THE CRASH KONDRATIEFF WAVE to understand the economic problem we are facing as a nation.
Let's see...it wasn't UNeducated people who created weapons of mass destruction; or created industries or products that exploit the natural resources of the planet (which happen to belong to all the species over the entire life of the planet); or created the majority of the conditions which is leading to the death of this planet; or created the ONGOING suffering of people being raped or exploited. But, it is the Educational System which has failed to acknowledge the value (or lack thereof) of specific information, allowing anything which can be conjured up in the mind be manifested through archaic principles of self-absorbtion, self-indulgence, entitlement. If something didn't resolve the human condition in the past, it is not going to solve anything now. Time for a new look at 'knowledge.' To NOT do so, is corrupt. It is not a matter of free speech which will solve anything; but the freedom to choose the better option for the (human) species, which so happens is NOT going anywhere soon (en mass) off the planet. If the truth (only) is not taught, why teach anything at all?
don't know what Ivy League schools cost today or what kind of jobs graduates can find. But they use to pay off very well in the past.
But I went to an Ivy League school in the South which most of you have probably never heard of Rice University 30 some odd years ago and had like $24,000 of student loans and got a job out of college paying $40,000 a year. Not quite sure what I blew the money on but in 12 years I had the loans paid off and brought a house which has been paid off for 4 years now.
That $24,000 has more than paid for itself I figure I have made 1/3 more than I would have or about $600,000 more. growing $24,000 to $600,000 in 26 years is a rate of return of 14 percent much better than the stock market.
So unless you are getting a bad degree (money wise) like an art degree and can only find a $32,000 a year job and have $110,000 loan you should be breaking even or getting ahead.
George W. Bush is a first U.S president with MBA from Ivy League in our history. Most of the executives from Wall-Street, Finance and Banking Industries came from Ivy League.
Steve Jobs, Bill Gates, and may respectable leaders did not come from Ivy League.
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