College: Is prestige worth the price?
In the long run experience is far more important than a brand-name degree.
NEW YORK (CNN/Money) - If you dream of sending your child to an Ivy League school, you should brace yourself for the premium you'll pay for a designer education.|
The average annual cost for tuition, fees, and room and board for private colleges and universities is about $24,000, according to the College Board. The average total price tag for Harvard, Yale, Princeton and their elite cousins is about $34,000. And you can count on prices inflating 2 to 5 percent each year.
Yes, college is an investment. And yes, the old adage that you get what you pay for can apply to higher education. But whether you get a higher return on a brand-name degree is still up for debate. In fact, some experts believe that parents' money might be better spent at smaller, lesser-known institutions.
One way to try to understand a school's relative value is to look at the school's total budget compared with the tuition it charges.
"You'll see that the difference between what the school pays and tuition can vary dramatically," said Don Heller, associate professor for Penn State's higher education program.
But this is not a perfect measure because it includes all expenses, such as faculty salaries, research and sports programs. "Does spending more per student lead to increased learning? That's a difficult one," said Heller. "At many schools, the faculty is being paid for its research abilities, not its teaching skills."
According to Loren Pope, director of the College Placement Bureau, "What's more effective than faculty with outstanding credentials are the teachers who really want to work with the students and be a spark plug for their education."
Although post-college salary is by no means an indicator of the quality of an education, comparing alumni's average salaries might be one way to gauge what you get out of your six-figure investment.
According to a study published in 1999 for the National Bureau of Economic Research, students who attended a school with a 100 point higher average SAT score earned 6 percent more than graduates of less selective schools. It noted, however, that students who attend more selective colleges do not earn more than students who are accepted at comparable schools but attend lower ranked, less pricey colleges.
It's the students who make the school, not the other way around, argues Martha Phillips-Patrick, who was director of college counseling at the Madeira School in Virginia and Amherst High School in Massachusetts. She is also the mother of a Stanford junior.
"We are paying Stanford for its ability to assemble an extraordinarily talented, stimulated group of undergraduate students in one community," she said. "Whether [this community] is worth $150,000 remains to be seen."
Something else to keep in mind before you're wooed by stats on alumni earning power is that some schools steer their students toward certain professions. According to a recent survey by Peterson's, graduates of higher-priced schools end up practicing law and medicine at nearly twice the rate of graduates from other schools, while moderately priced schools graduate far more teachers, counselors and health professionals. Comparing alumni tax brackets is really comparing apples to oranges.
We would be lying if we said that employers aren't the least bit influenced by where a job candidate went to school. Elite schools do give their students an advantage early in their career, primarily because these schools attract more on-campus recruiters than less prominent schools. Over the long run, however, on-the-job experience matters far more than the diploma hanging on your wall.
"At a certain point it doesn't matter where you went to school," said Paul Ray, CEO of the executive search firm Ray & Berndtson. The firm did a six-year study with Harvard Business School and 1,600 companies on return on leadership values and found that experience eventually becomes more important than a person's alma matter. "The most recent example is Treasury Secretary Paul O'Neill, who went to Fresno State College in California. Obviously at this point where Paul went to school doesn't matter," Ray said.
These days, Pope, of the College Placement Bureau, said the success of any college graduate depends upon their ability to make their own connections. "We're in a new world where the old boy network is getting obsolete."
That's especially true as the new economy sputters. "Layoffs do not discriminate between Harvard and non-Harvard grads," said Pope.
Another factor to consider when weighing collegiate options is the student-to-teacher ratio.
It's difficult to prove whether a school can take credit for its graduates' salaries, said James Day, CEO of the Hardwick-Day consulting firm, which created a national database using surveys of alumni from colleges and universities across the country. But "what is clear in our data is graduates of smaller, private liberal arts colleges feel that they are better prepared for life and career than their counterparts at other types of institutions," said Day.
His data show that students of such schools are more likely to graduate in four years than students at larger institutions. They experience more interaction with faculty, are more likely to find a mentor and in turn are more satisfied with their education.
While there are some public institutions with cozy atmospheres, most small liberal arts schools are private and costly. The good news is that such schools go out of their way to woo the best students, offering everything from scholarships to low-interest loans. "Smaller schools have high tuition, but they bust a gut to make you come," said Pope. "There's a hell of a difference between the sticker price and what most middle-class families pay."
This is not to say that a small private school is for everyone. Some students might actually feel smothered in this environment. "There are great educations to be found at large universities," said Francine Block, president elect of the Pennsylvania Association of College Admission Counseling. "Teaching Assistants are fine, being part of a huge football stadium cheering crowd is very exciting, the chance to be unknown as you walk around campus is comforting for some."
The bottom line: When you're searching for a college, try to look past brand names and focus on finding schools that best fit your (or your child's) personality and aspirations. There are more than 20,000 four-year universities and colleges in the United States and Canada, and thanks to technology, it's possible to sift through this universe easily online and come up with a suitable college wish list.
"I'm convinced you can get great quality of education at a huge variety of schools," said Penn State's Heller. "And that's coming from someone who is a graduate of Harvard."