Does It Matter Where You Go to College?

The big surprise: Selectivity didn't matter. Academic siblings ended up making just about the same wages after college regardless of how choosy their school was. In fact, where the students applied, and their final class rank in school, were much better correlated with earnings than their school's admissions standards. If you were smart enough to get into Yale, or even take a shot at it, you were probably smart enough to earn like a Yale grad.

There was a big caveat, however. Although tough admissions standards didn't count for much, tuition prices did. Students who went to more expensive schools consistently outearned their peers during life after college. Dale and Kreuger theorized that spending per student may have been the explanation. While an ambitious sophomore could probably find like-minded classmates to study with anywhere, they couldn't make up for their school's resources. The authors also allowed that students at posher colleges might come from wealthier families, which could have an effect.    

Actually, yeah. You might be.

In a 2009 paper, Texas A&M professor Mark Hoekstra used a somewhat simpler experiment to try and solve the elite college question. He compared the earnings of white, male students who had barely missed the admissions cut-off for an unnamed public flagship university to those of students who had barely been accepted. Although the subjects were roughly similar in academic terms, the differences in their future earnings were profound. Enrolling at the flagship increased wages by 20 percent, a divide illustrated vividly in the chart below. 


They should, and they do. Exceptional students at superior schools get the biggest lift.

Not all of a college's graduates will earn the same. A student's grades, major, and innate talent all make a difference. Professors at the University of Texas at Dallas, University of Tulsa, and Cornell have tried to capture that dynamic in a new working paper that looks at the range of wages earned by students who went to college in Texas between 1996 and 2002. 

The study looked at four sets of schools: University of Texas, Texas A&M, the rest of the state's non-flagship colleges, and its community colleges. Both Longhorns and Aggies earned more than their peers at less prestigious schools, even after controlling for other variables. But the returns varied dramatically, depending on the student.  

The two graphs below compare the earnings curve of each flagship to Texas' other four year schools. Surprisingly, the typical A&M student does better than the typical UT-Austin student. But exceptional students at UT-Austin beat everybody.


In other words, it was much more important to be in the top 1 percent at UT Austin than at A&M. Why the difference? The authors suggest that A&M's general emphasis on engineering, a broadly lucrative major, may be giving the middle chunk of its students a leg up compared to liberal arts grads from Austin.


So speaking very broadly, better schools yield bigger paychecks. But does that mean they're always worth the price? Bloomberg Businessweek has teamed up with Payscale, which collects self-reported earnings data from its users, to estimate the return on investment for more than 500 colleges. Topping the list: MIT, with lifetime ROI of about $1.8 million for graduates, or 12.6 percent a year. It's followed closely by fellow elite engineering school, Cal Tech. The upper ranks of the list is dominated by elite private colleges, though, on percentage basis, some of the best deals are top state colleges, such as Georgia Tech and University of Virginia. The report's methodology might not be as exacting as the studies above, but it's a good quick guide to what an education is worth.


* There are a few important caveats about this study: First, almost all of the colleges involved were fairly selective institutions by the standards of most Americans. Second, at least one critic has questioned the study's sample size.

** At Austin, a student at the 97th percentile 31.6% percent more than their counterpart at at a less prestigious. At the median, a students made 12.1 percent more. At A&M, students' returns maxed at the 99th percentile, where they made 22.8 percent more than similar non-flagship students. But between the 28th and 90th percentile, they earned a consistent premium between 17.6 percent and 21.8 percent.

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Jordan Weissmann is a senior associate editor at The Atlantic.

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