This week’s college admissions scandal revealed, amid many other sordid details, just how much financial value some parents place on getting their children admitted to a name-brand college.
These parents were paying in part for intangible prestige: the glow of boasting at a cocktail party that a child attends an Ivy League or similar school. But the calculation surely also involved the assumption that attending such colleges boosts one’s earning potential, perhaps by quite a lot. And so it is possible to ask, from a purely economic perspective: Were these bribes — made to people who helped falsify test scores, or to falsely present students as high-value athletic recruits — “worth it"?
The answer is: probably not. The best research on the topic finds that the “wage premium” of attending a prestigious school is modest at best. There are specific circumstances in which the choice of school can make a difference to long-term earnings. But it appears that so long as you compare like to like — examining students with similar grades and test scores who happened to choose different routes — the ones who opt for less-prestigious schools fare just fine.
It is certainly financially advantageous to attend college rather than not attend. On average, the median college graduate will earn about $900,000 more than the typical high school grad over their lifetime. After adjusting for differences in test scores and demographics — to compare students who might have gone to college but didn’t with those who did, among other things — and translating future earnings into today’s dollars, the added value appears to be around $350,000. (This present-value figure is a useful point of reference because the bribes were paid in today’s dollars rather than over the course of the students’ lifetimes; a dollar today is worth more than one in the future.)
It is well known that students from higher-ranked schools earn more than those from lower-ranked institutions. According to Payscale.com, which produces an annual report on salaries and majors for most colleges in the United States, Harvard graduates earn $760,000 more in the first 20 years after college than the average bachelor’s degree holder. But that’s different from saying that Harvard “caused” the earnings bump. After all, on balance students at highly selective schools have higher grades and standardized test scores, and so might be expected to continue to outperform their peers by various measures.
In a 2002 study, with a more comprehensive follow-up in 2014, economists Stacy Dale of Mathematica Policy Institute and Alan Krueger of Princeton explored elite colleges’ influence on earnings by examining students who had similar admissions experiences but who chose different schools. They examined the career earnings of more than 18,000 students who attended 30 schools over two entering cohorts (1976 and 1989). These students got into both — for example — the highly selective University of Pennsylvania and somewhat less selective Pennsylvania State University, and then chose one institution over the other. (The authors looked at hundreds of similar pairings of schools.) Dale and Krueger then looked at the students’ earnings over 25 years.
Because the students had similar admissions outcomes, we can assume their credentials were comparable. And on average, Dale and Krueger found that attending the more selective school provided no earnings premium.
There were important exceptions to that overall trend, however. Students from low-income backgrounds, as well as black and Latino students, saw an income bump: a roughly 10 percent return to attending a school with a 100-point higher average SAT score. But students from the kinds of families who took part in the bribery scheme did equally well with whichever route they chose. One reason for the discrepancy may be the importance of job networks in labor market success; the wealthy already have access to them, while those from low-income backgrounds are gaining something they did not have before.
Other scholars have found earnings premiums linked to other kinds of college choices. Mark Hoekstra, for instance, an economist at Texas A&M University, took advantage of a “natural experiment” to study how students fared at flagship state universities vs. second-tier state schools. Unlike the more “holistic” methods used by Ivy League institutions, many public universities use a combination of GPA and test scores to create a rule-of-thumb cutoff to help make admissions decisions more manageable. Having a score just above this cutoff, vs. just below, could mean the difference between a 90 percent chance of admission and a 10 percent chance. And yet, as with the Dale-Krueger study, these students would be roughly comparable in their credentials.
Hoekstra found that attending a state flagship university (such as my alma mater, the University of Florida), as opposed to a second-tier school, improved earnings between ages 28 and 33 by more than 20 percent.
Why? It turns out that graduating is incredibly important when calculating the return on investment in college. The typical college graduate out-earns a college dropout by more than 50 percent. Under-resourced schools, including many public non-flagships, have significantly lower graduation rates. If the resources available at the flagship make it far more likely that a student graduates, that’s a strong reason for choosing the flagship.
My own work — forthcoming research done with Ben Ost of the University of Illinois at Chicago and Victor Pan of Georgia State University — finds that college major is a much stronger predictor of future earnings than the institution you attend. Given two students with equal high school grades and test scores, choosing engineering over English makes far more of a difference than opting for Penn over Penn State.
To be sure, there are plenty of non-monetary benefits that come with attending the schools implicated in this week’s scandal: family pride, the rosy glow of prestige, and possibly a more pleasant experience during school, resulting from lavish amenities such as gyms, nicer dorms and maybe even better food.
What’s more, the students involved in these scandals are a special case. Their high school grades and skill on standardized tests are presumably significantly below the average at the colleges where they ended up. (Hence the need for those bribes.)
But the idea that a name-brand college offers a guarantee of an earnings boost remains remarkably stubborn, and drives parental hysteria over admissions. The data suggests that the belief is largely a myth.