Newhouse News Service, September 2, 2004, Thursday

Copyright 2004 Newhouse News Service
All Rights Reserved
Newhouse News Service

September 2, 2004 Thursday

SECTION: FINANCIAL

HEADLINE: Elite Schools May Not Be Worth the Price for You

BYLINE: By CHRISTOPHER MONTGOMERY; Christopher Montgomery is a reporter for The Plain Dealer of Cleveland. He can be contacted at cmontgomery(at)plaind.com.

BODY:
After nearly two years of test-taking, soul-searching, college visits and prayers, your daughter just opened her acceptance letter from Dartmouth College.
It's fantastic news, but tempering your excitement is that Dartmouth information packet sitting on your desk. Or more to the point, the numbers it has inside. Tuition plus room and board comes to nearly $38,000 a year, and the aid package is pretty slim. For four years, you're facing at least $150,000.
Gulp.
For many families, regardless of their fears, the college-selection process would end right there. With an Ivy League acceptance in hand, they would suck it up and do everything necessary, short of selling the family farm, to send the kid to Dartmouth. How in your right mind could you turn it down?
But let's say, for argument's sake, that she was also accepted at a large state university and offered a financial aid package that's just short of a full ride. There's also an offer from a small private school, It's still pricey, but its financial aid office said it's eager to come up with a package that works for you.
With a set of options like that, you might want to hold off on a decision. There's no denying that Dartmouth and its elite ilk are venerable institutions, but economists can't agree on whether degrees from such schools are worth the price of admission. When it comes to finding the best college fit for your child and your finances, there's plenty more to consider than a school's brand name.
Alan Krueger, a Princeton University economist, and Stacy Dale, a researcher at the Andrew W. Mellon Foundation, raised a few eyebrows in 2000 when they published a study concluding that degrees from prestigious, highly selective schools aren't necessarily passports to higher earnings.
Their findings, predictably, showed that graduates of such schools do earn more over the course of their careers. But the problem with that data, they said, is that students at highly selective schools as measured by the average SAT score of enrollees would earn more regardless of where they chose to attend for the same reasons they were admitted by the elite school.
Princeton students, in other words, have high earnings potential not because they're at Princeton, but because they're bright, ambitious and self-confident.
To correct this so-called "selection bias," Krueger and Dale examined students who were accepted by comparable colleges. A student who turned down a highly selective school to attend a moderately selective school, they found, wouldn't suffer any hit to her earnings.
In the final analysis, they found that where students apply is a better predictor of future income. (They called this the Steven Spielberg Effect, referring to the Hollywood giant who was rejected by both the USC and UCLA film schools.)
Krueger and Dale found that the only students who clearly benefited from attending highly selective schools were those from economically disadvantaged backgrounds.
The point of all this is that there isn't a "one-size-fits-all model" for choosing a college, Krueger said in an e-mail.
"Parents and students should find the college that is best suited for them," Krueger wrote, "given the child's interests, talents, etc., the school's strengths, and the family's resources."
Ronald Ehrenberg, director of the Cornell Higher Education Research Institute at Cornell University, agreed that choosing a college should include more than just shooting for top-ranked schools. Some students want to go to large public universities, where they can enjoy big-time athletics; some are more comfortable at smaller schools in rural areas.
"There is no right choice," Ehrenberg said.
But he said that most studies, including his own, have found a positive correlation between a school's selectivity and future earnings.
For one, there are the powerful alumni networks at elite schools that help students land their first jobs. There are also the students themselves. Fraternizing with similarly talented and motivated classmates, the thinking goes, enhances your marketability.
"I joke with my students," Ehrenberg said, "that it's not me providing you with this great education, it's your contacts with other students."
There are situations in which elite schools clearly aren't a smart choice. Syracuse University economist Dan Black said that for students intent on pursuing careers with modest income potential, say education or social work, higher tuition costs simply aren't worth it.
That underscores the importance of factoring majors and potential careers into the decision process. If it's a choice between a well-respected program at a major state university that's tailored to your child's interests, Black said, and a high-priced private school that doesn't have a similar program, the state university is probably your best bet.
The bottom line, Black said, is that if "you get a motivated student and send him to a place that's maybe not Princeton, he's going to take advantage of everything that place has to offer and do just fine."
Loren Pope, a former education editor for The New York Times, is a major advocate of looking beyond the typical short list of prestigious colleges. One of his books, "Colleges That Change Lives," profiles 40 small, private, liberal arts schools that emphasize teaching (over research) and character development.
Pope said those kinds of schools help students to become better critical thinkers and promote value systems that are absent at more selective institutions. Beyond that, he said, a degree from a Yale or a Stanford simply doesn't have the heft it used to.
"Sixty or 70 years ago, we had an establishment society, an old-boy network where you got everything through connections," Pope said. "But now competence trumps connections. The old-boy network is becoming obsolete."
After you graduate, Pope said, "it's your own center of gravity that matters, not where you went to school."
Most economists agree that the pedigree of the graduate school you attend is much more important than where you spent your undergraduate years. Students who know they want to pursue a post-graduate degree are smart to consider less-expensive undergraduate options.
"If your ultimate goal is bigger than a four-year plan, then it might be worthwhile to bank some money," said counselor Gene Thomas at Western Reserve Academy in Hudson, Ohio. "You've got to do what's best for your long-term interests."