The recent college admissions scandal is an eye-opening example of how far some families will go to get their children into elite colleges. The FBI investigations are still ongoing, but so far, 50 people have been charged with participating in the scheme. The allegations include cheating on standardized tests and bribing college coaches and athletic officials to designate students as recruited athletes.

Some parents paid between $15,000 and $75,000 per exam to help their children get higher scores on the SAT and ACT. Others funneled money to university coaches. One family paid a Yale soccer coach $1.2 million to get their daughter into the school.

Lower Acceptance Rate, Higher Pressure

Admission to elite universities has become increasingly competitive. Each year, Ivy League schools and other top colleges advertise their low acceptance rates as a badge of honor. In 2019, Harvard and Columbia accepted a record low number of applicants. This exclusivity creates a vicious cycle; the more selective schools are, the more students and parents want in.

Source: CNN

Some families will do just about anything, including breaking the law, to help their children gain admission to Ivy League schools. There are plenty of legal ways wealthy families try to gain an advantage as well, including alumni donations, campus visits, and investing in college consultants and SAT tutors. The frenzy has become an ingrained part of American culture.

A 2008 documentary, “Nursery University,” chronicled the epicenter of this cutthroat competition. It followed parents living in New York City as they tried to get their toddlers into feeder preschools that they believed were the first step toward Ivy League admission. Many of the schools cost more than $30,000 per year. Some families even wrote six-figure donation checks just to get their children on school waitlists. One father, who worked as an investment banker on Wall Street, said:

All of this begs the question: Is an education from a prestigious Ivy League institution worth it? Or would a high school student with a 4.0 GPA and high SAT scores do just as well at a local state college?

To find out, we analyzed data from College Tuition Compare and PayScale to contrast the value of an Ivy League degree with that of one from a public or private college. Here are a few key takeaways.

Summary of Findings

Ivy League alumni earn approximately $1.6 million more throughout their careers than graduates of private and public colleges.

Public college education generates the best relative return on investment, while an Ivy League degree yields the strongest absolute return.

Ivy League schools cost 198% more than in-state public colleges. If a person invested the difference between these costs in the stock market at age 18, the money would likely grow to approximately $22.9 million by the time they turned 67.

Under a standard 10-year student loan repayment plan, public college graduates are left with approximately $900 more in monthly take-home pay than alumni from Ivy League schools and private colleges.

Ivy League grads are likely to need more years to pay off their student loans. If they allocated 20% of their annual pre-tax salary toward loan payments, it would take them 33 years to get out of debt. By comparison, it would only take public college grads 13 years.

Ivy League Schools Cost Significantly More

We added tuition, fees, and living costs provided by College Tuition Compare to calculate the total cost of attendance at each Ivy League college for the 2018 to 2019 academic year. We then looked at the average historical inflation of these expenses over the past 10 years for each school to determine how much a four-year degree would cost students matriculating in the fall of 2019.

Here’s what we found:

Columbia is the most expensive school in the Ivy League; the total cost of attendance from 2019 to 2023 is approximately $340,000. Princeton is the least expensive at $310,000, but that’s still a hefty price tag. Here’s how these numbers compare with public and private colleges:

The average Ivy League school costs 71% more than nonprofit private colleges and 198% more than public colleges for in-state residents. Ivy League colleges are renowned for their academic resources and professional networks. But is the steep price worth it?

Ivy League Grads Earn Higher Salaries

We used data from PayScale to determine lifetime earnings. First, we charted annual salaries from ages 22 to 67 using PayScale’s research on pay growth. We took the average of wage growth for men and women starting at age 22 to chart how much a typical college graduate will earn each year of their career.

Next, we multiplied the rate of annual pay growth by the average starting salary for alumni who earn a bachelor’s degree and do not go on to earn additional degrees. In order to calculate starting salaries, we used PayScale’s data on median salaries for alumni with zero to five years of work experience. We then took early salary averages for graduates of the eight Ivy League schools, 1,050 private colleges, and 604 public colleges.

Overall, we found that the mean starting salary for Ivy League graduates is $69,425. By comparison, it’s $48,620 for alumni of public universities and $47,853 for private colleges. Here’s how those starting pay figures translate into annual salary over a career:

As the chart shows, Ivy League grads earn significantly more than other grads. In the course of their careers, they bring in $5,339,554. Alumni of public colleges earn $3,738,879, while private college graduates earn $3,679,894.

Public College Provides the Best Relative ROI

Although Ivy Leaguers earn more than their counterparts, that doesn’t mean they get the most bang for their buck. We weighted the total cost of attendance against lifetime earnings to calculate relative return on investment (ROI):

An Ivy League degree generates a lower relative ROI than one from a public or private college. Public university education yields the strongest relative return by far.

Ivy League Yields the Best Absolute ROI

These percentages don’t tell the whole story, though. One must make the distinction between relative ROI and absolute ROI. In order to calculate absolute ROI, we took the difference between lifetime earnings and how much a person with a high school degree or GED would earn over their lifetime with four additional years in the workforce, and then subtracted the total four-year cost of attendance at an Ivy League, public, and private college.

By these calculations, in absolute terms, an Ivy League degree generates the strongest return.

More Expensive Education Is a Trade-Off

There’s an important opportunity cost to consider when choosing a college: Money today is more valuable than money in the future. Inflation causes the price of goods to increase, lowering money’s purchasing power over time. In addition, dollars today can be invested to earn interest or dividends.

An Ivy League education costs $215,000 more than a public university education. If you were to invest that difference in the stock market, here’s what your returns would look like:

Since 1926, the S&P 500 has generated an average annual return of approximately 10%. Assuming historical averages, in 49 years, your initial investment would grow to $22,971,575. If we account for an annual inflation rate of 3%, that equates to approximately $5.4 million in today’s dollars.

Obviously, this is a hypothetical situation. Past performance does not guarantee future returns. Also, there are many intangible experiences in education that cannot be monetized. But if you consider the value of a college degree dispassionately as strictly an investment, this projection provides a frame of reference.

Regardless of College Type, Many Students Take on Debt

It’s no surprise that the Ivy League is expensive. Fortunately, these sought-after institutions offer generous financial aid based on a family’s ability to pay. In fact, several schools provide admitted students a full ride if their families earn less than $60,000 per year. Some have even adopted financial aid policies built on grants instead of loans so that students can graduate debt-free. However, Ivy League schools are prohibited from offering athletic or academic scholarships; financial aid is entirely need-based.

Despite these generous financial aid packages, student debt remains a pervasive burden for many Ivy League students. The U.S. Department of Education reports that 30% of Cornell undergraduates, 24% of Dartmouth students, and 23% of students at Brown and Columbia took out federal loans.

But the debt story doesn’t end with Ivy League schools. In fact, a significant number of students at public and private colleges take on debt too. According to Sallie Mae, 35% of students at private colleges and 38% at public colleges took out federal student loans during the 2017 to 2018 academic year.

Ivy League Grads Are Likely to Be in Debt Longer

Student loan debt has reached crisis levels. As of 2019, Americans owe more than $1.5 trillion in student loans. Student debt has now surpassed credit card debt as the second-largest source of household debt behind mortgages. For many people, their monthly payments are unmanageable. By 2023, nearly 40% of borrowers are expected to default on their student loans.

Not only is spending decades paying off debt frustrating, but it can also keep you from reaching your goals. It can impede your ability to buy a house, launch a business, or start a family. Zelia Gonzales, a student at Cornell, told The Hechinger Report that she wanted to become a teacher, “[b]ut debt makes a difference in what you’re going into.”

So who’s more likely to be able to pay back their student loans?

To answer this question, we looked at what would happen if college graduates applied 10% of their annual pre-tax salary toward their outstanding student debt. Assuming the current fixed interest rate of 5.05% for federal loans, here’s what the numbers would look like:

Public college graduates would fare the best, paying off their balances in 30 years. Both Ivy League and private college grads would end up underwater. Neither group would be able to make a dent in their principals; instead, their loan balances would increase. After 45 years, Ivy League alumni would have accumulated more than $1.3 million in debt, while private college graduates would have racked up nearly $658,000.

Pro tip: If your interest rate is currently higher than the national average, it might make sense to refinance your student loans with a company like SoFi. This can help you save thousands of dollars in interest.

Graduates from Ivy League and private colleges must make more sacrifices to be able to manage their student loan debt. Here’s a chart that shows what would happen if college grads allocated 20% of their salary to paying off their student loans:

Under this scenario, public university alumni would pay off their debt in 13 years. For graduates from private colleges, it would take 25 years, and it would take 33 years for Ivy League grads.

Public College Grads Have More Take-Home Pay

The standard repayment plan for federal student loans puts borrowers on a 10-year track to pay off their debt. What would this scenario look like for each cohort?

To find out, we used FinAid’s loan calculator to determine each group’s monthly payments. We forecasted approximate income after taxes using SmartAssets’s paycheck calculator. For consistency purposes, we assumed each group was living in Georgia, a state with middle-of-the-road taxes. We then subtracted the monthly payments from income to arrive at the final take-home pay for each group.

So who comes out ahead?

The clear winners are public college graduates. They come away with approximately $900 more in their pockets per month than those who earn degrees from Ivy League or private colleges.

If Ivy League grads want to pay off their student loans within 10 years, they only have about $1,700 left to cover their monthly living expenses. Nearly 67% of their income will go toward paying off their student loans. Extending the life of their loans will result in less expensive monthly payments but a higher amount of total interest paid.

Higher Cost Means Greater Cumulative Interest

College graduates who take out loans to pay the full cost of tuition and fees pay more than the sticker price. Here’s what the numbers would look like under a 10-year repayment plan:

The more debt a person takes on to finance their education, the more interest they pay over the lifetime of their loan. Under a standard 10-year repayment structure, Ivy League graduates would pay nearly $90,000 in interest. By comparison, individuals from private colleges would pay approximately $52,000, while those who attended public colleges would pay just over $30,000 to service their debt.

Final Word

The college admissions scandal demonstrates how competitive applying to elite schools has become. Parents were willing to cross legal and ethical boundaries to help their children gain an edge. For many Americans, a diploma from an Ivy League institution represents a ticket to upward economic mobility. But is it worth the extra cost?

The assumption that an Ivy League education is the best path to financial security needs to be reconsidered. Although Ivy League grads earn more on average, students should take into account how much debt they will take on to pay for their education. It’s also important to factor in opportunity costs, such as the time value of money. For example, the money you save by attending a less expensive college could be invested to generate a return elsewhere.

An Ivy League education can be a good option for students from lower-income families who qualify for financial aid; the opportunity could change the trajectory of their lives. In fact, a 2017 study by economist Raj Chetty concluded that low-incomes students who attend elite colleges are more likely to reach the top 1% of the earnings distribution than those who attend mid-tier public universities.

Any Ivy League degree can also benefit affluent families who can pay full tuition. For them, the prestige and connections may outweigh the high cost. However, a high achieving student from a well-off family who earns admission into an elite institution would likely be successful because of their inherant advantages, regardless of where they go to school. Another study by Raj Chetty published in 2014 in The Quarterly Journal of Economics found there is a strong correlation between the income of parents and the income their children will earn as adults. Those who are fortunate to be born into the upper echelon levels of society are likely to remain at that level.

For others, public university may be a better option. Students from middle-class families who don’t qualify for aid, but who also can’t pay out of pocket, may want to think twice before accepting an Ivy League offer letter. Our analysis suggests these students face an uphill battle when it comes to paying back their student loans. Compared with graduates of public universities and even private colleges, they must allocate a much higher percentage of their income toward monthly repayments. As a result, they’ll likely spend many more years paying off their student loan debt. Richard Kahlenberg, a senior fellow at The Century Foundation, told CNBC, “The middle-class gets squeezed. Not just the poor are in need.”

Of course, this data makes many assumptions about tuition costs, income figures, salary growth, and interest rates. Shifting these numbers in one direction or another could generate very different outcomes. Ultimately, each person’s situation is unique.

To a certain extent, college is what you make of it. It doesn’t matter which school you attend if you don’t take advantage of the available opportunities and resources. Warren Buffet, one of the top investors in history, attended the University of Pennsylvania before transferring to the University of Nebraska where he earned his undergraduate degree in economics in 1950. During a campus visit in 1994, he told students:

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