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
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
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.
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
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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