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Does It Matter Where You Go to School?

In a time of rising education costs and crippling student debt, future college students need to ask themselves whether the big ticket prices of certain colleges are worth it. In other words, does it matter where you go to school? Will graduating from a top-tier school bring you more financial success?

Using our extensive database here at PayScale, we decided to take a look at the typical earnings for graduates of common majors and how they differ across a set of schools with different levels of notoriety.

(Note: find out your earning potential at PayScale.com.)

In general, our research shows that unless you go to a top-tier name-brand school, what actually matters for your paycheck is your choice of career, which is largely driven by college major. Therefore, when determining whether a specific school is a good investment, future college students should weigh the school costs they will incur against the projected income for people graduating with a degree in their preferred major.

Not All Majors Are Created Equal
There is a wide spread in median mid-career earnings across majors, with petroleum engineering on top at $155,000/year and child and family studies on the bottom at $40,500/year. Therefore, when deciding between the $20,000/year in-state public school and the $45,000/year private school, a student should consider the income they could earn after graduation.

If the majors of interest are on the bottom of the pay scale, then the public school is a wiser and safer investment. On the other hand, those who wish to major in high-earning fields have more options for a good investment, but does it really pay to attend the premier private school rather than the cheaper public school?

Even within majors, there is a wide spread in potential pay as majors can filter into many different jobs. For example, the bottom 10 percent of mid-career economics bachelor degree graduates earn less than $50,700/year, while the top 10 percent earn more than $186,000/year. Therefore, to examine earning differences across schools further, we compare the median pay for five common jobs (rather than majors) across four groupings of schools: 1) Ivy League Schools, 2) Liberal Arts Schools, 3) Private Research Universities and 4) Public Schools. The results can be seen below.

Bachelor-median-pay-by-school-type

As seen in the above chart, massive pay differences between the schools simply do not exist. Most pay differences are within 5 percent. There are some larger bump ups for Ivy League graduates, particularly for staff accountants; however, one may argue that the typical (i.e. median) Ivy League graduate should be compared to a top-level graduate from a less notable set of schools. If we make this comparison, the pay difference largely disappears altogether.

Not Everything Is About Pay
Of course, there are many things to consider when choosing a school. Potential earnings are just one side of the die. Prestigious schools may be more expensive, but they also may offer other benefits such as a fully stocked library, extensive classes, plenty of extracurricular opportunities and a strong alumni network, among other things.

In fact, a strong alumni network, as well as a certain level of notoriety, are two benefits of prestigious schools that help graduates with one of the biggest issues they face – post-graduation job opportunities. With over half of Gen Y being underemployed or unemployed, anything that gets them noticed by potential employers is a win.

That being said, it takes more than a name-brand school on your resume to be successful. Simply attending a top-tier school is likely not enough; one must strive for excellence and work hard to stand out among the oversaturated labor pool. Research from the National Bureau of Economic Research found that “students’ motivation, ambition and desire to learn have a much stronger effect on their subsequent success than average academic ability of their classmates.”

In other words, it doesn’t matter where you go to school, it matters what you do when you get there.


Katie Bardaro is PayScale's lead economist and analytics manager. Katie holds a bachelor's degree in Economics from the College of the Holy Cross and a master's in Economics from the University of Washington.

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Keep the discussion on the value of education going on Twitter using hashtag #valueofedu.


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