Prestige doesn’t always maximize the value of a degree
Imagine you’re a high school senior who has been accepted to several colleges, including a few that carry a bit of “prestige.” Weighing your options, you might think those few could lead to greater earning power down the line. Were that true, your choice would be simple: the most prestigious college that’ll take you. But to what extent does that logic hold?
Economists from California State University, San Diego, and Brigham Young University found the impact of college prestige on wages highly depended on a student’s course of study. For business and other liberal arts majors, prestige could lead to as much as an 18% increase in earnings for graduates of more selective schools. But for science and engineering majors, there were no differences in average earnings between graduates of more selective and less selective institutions.
And if attending the more prestigious college means taking on additional student debt, the ROI – return on investment – will decline.
Although the annual U.S. News & World Report best colleges rankings offer zero caveats to college hopefuls as to where prestige matters more or matters less, other resources do. PayScale, a compensation software and data company, has a college ROI ranking system that can help an individual compare the cost of attending a specific college (even distinguishing between in-state and out-of-state tuition) with the average wages earned in the 20 years after graduation.
Of the top 100 schools ranked as best value colleges by PayScale, only 24 also appeared in the top 100 universities ranked by U.S. News & World Report.
As the costs of higher education keep going up, long-term affordability may be more of a priority than prestige. One researcher found that “the average student can expect to recover college costs in about 13 years when graduating in four years, but in 31 years with a six-year graduation horizon.” Think about that: Some college grads won’t break even until they are in their 50s.
High costs and related student debt are likely contributing factors to the dramatic decline in college admissions. About 1 million fewer students have enrolled in college since 2019, according to data from National Student Clearinghouse Research Center. “[This] could be the beginning of a whole generation of students rethinking the value of college itself,” especially if enrollment doesn’t bounce back,” researcher Doug Shapiro told NPR.
It’s a trend that high school counselors like Steve Schneider, who works at South High in Sheboygan, Wisconsin, have seen as well. “College is a product. It’s big business,” Schneider told “Marketplace Morning Report.”
“It doesn’t make sense to me that you would purchase products without knowing their purpose, right? That doesn’t make sound economic sense for anybody.”
As soon as Schneider realized that half of his students weren’t going to college after high school, he reframed how to prepare them for life after high school. His goal is to help students intentionally prepare for the career they want and creatively figure out how to obtain the skills they need to be successful.
Whether or not it is in their economic interest, there’s some evidence that people still value prestige. Despite the pandemic (and scandals like the one at the heart of this month’s documentary), acceptance rates continue to drop at elite private and public universities nationwide.
This month, Econ Extra Credit has been exploring the economics of prestige in higher education. If you haven’t already, we invite you to watch the film “Operation Varsity Blues,” which is available to stream on Netflix. What did you think of the film? We’re at firstname.lastname@example.org.
There’s a lot happening in the world. Through it all, Marketplace is here for you.
You rely on Marketplace to break down the world’s events and tell you how it affects you in a fact-based, approachable way. We rely on your financial support to keep making that possible.
Your donation today powers the independent journalism that you rely on. For just $5/month, you can help sustain Marketplace so we can keep reporting on the things that matter to you.