My child is applying to college.
As those who’ve gone before me can well imagine, those six words are a death sentence for peace, sanity and intergenerational detente in my household. They also add up to a body blow to the family’s tangible net worth, since it’s likely to take close to a quarter million dollars to fund four years at the private selective institutions she’s aiming for.
Ray Martin, the curmudgeonly special contributor to CBS MoneyWatch, thinks there’s no rational justification for paying elite private college tuitions, and he tells me so in this video. Lynn O’Shaughnessy, the author of the great College Solution blog, has her doubts as well.
They have a point. It’s obvious that some kids from all kinds of colleges go on to make a ton of money. Gregg Easterbrook of The Brookings Institution, (a graduate of Colorado College) points out the undeniable fact that supposedly second-tier schools every year yield a profusion of wonderfully able graduates, and many of those schools turn more eventual Ph.D.s per capita than the Ivies. And the clincher: a 1998 study by Princeton’s Alan Krueger and Stacy Berg Dale of the Andrew W. Mellon Foundation that found that Ivy-caliber kids wind up making the same money whether they actually go to a high-SAT-score college or not.
Believe me, I wish a) I could believe that, so that I could b) treat my daughter’s college as a discretionary expense not an investment, and c) send her to Montclair State and apply all the money I saved to my aching 401(k). But a) I don’t, and b) it isn’t, and c) I can’t.
There are serious problems with the Krueger and Dale study. For starters, it contradicts much other research that shows a real payoff from attending an elite school. One example: a 1996 National Bureau of Economic Research (NBER) working paper by Dominic Brewer, Eric Eide and Ronald Erhrenberg, found not only that there was a significant return for attending a selective private college but that the benefit seemed to be growing over time.
But what’s more problematic is this: Krueger and Dale found that if they defined “selective” by criteria other than SAT scores-namely, Barron’s rankings or tuition costs-the top schools actually do have an edge in building human capital. Citations of their study rarely mention this key hedge:
Nevertheless, we still find a significant payoff to attending more elite colleges as measured by Barron’s selectivity rankings and tuition costs.
Caroline Hoxby, an economics professor at Stanford, reviewed all the relevant studies this fall and concluded that my daughter is right to aim high.
The long and the short of it is that studies with moderate to strongly credible identification strategies suggest that the returns are such that the typical student is sensible both when that student applies to selective colleges and when that student enrolls in one of the more-selective colleges among those that offer admission.
So this year, I’m going to join the anxiety-ridden hordes and gamble that an expensive education is a good investment in my kid’s human capital. Does it burn me that so much of my tuition dollar will be spent on fancy gym facilities and gourmet dining halls? Don’t get me started. Is there a hint of parental vanity in all this? Guilty as charged. On the other hand, my daughter earned the grades that put her in the running for these colleges. So she did her job. Now it’s my job to fund the education she earned.
(And by the way, Yale is not the real name of her first choice college. I just don’t want to jinx her.)
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