Is there real Value to an Ivy League education?
It first started out when I wanted to grab lunch with an old high school buddy whom I’ll call “Frank”. Ironically enough, we were discussing our upcoming high school reunion and how some people had just fallen off the map or ended up far removed from the trajectory our high school had seemingly put them on. I point blank said,
What is insane to me is that it doesn’t matter what college you go to. There are 8 that matter and that is it. It is your degree and your effort. Call it a mix of grit/drive but that’s all you need.
What’s funny is that he actually went to one of those eight Ivy League schools. Do you want to know his response? Verbatim
Even those 8 man, I know people at Wharton with degrees waiting tables. Not a ton of them, but they are out there. Comes down to drive, being like-able, and sometimes luck. Where you went to school isn’t a great indicator of that.
I have often said that where you go to college doesn’t matter. “Frank” works for a private equity firm in New York that specializes in IT data security companies in hyper-growth stages. What exactly does that mean? It means that he looks at companies on the brink of greatness and determines how much money to invest and at what cost (how much do they fork over and how much of the company do they then own). Bottom line: you have to know your stuff. If a guy like “Frank” didn’t even believe the school name mattered, what does the data tell us?
So EDUsquared went digging. The results shocked even us!
It all started with an IFLscience article we read here titled, “How Does your choice of University affect your future?” To quickly sum up the article, Andrew Norton and David Carroll took a look at the results across varying universities in Australia. They wanted to control for a variety of items such as gender and degrees.
A 6% premium for your first job out of school. 6%?! That’s it.
But, get this! When they controlled for their admission exam scores (meaning they compared apples to apples, or groups of students that received the same entrance scores but attended different universities) that 6% premium was cut in half to 3% from their most prestigious universities compared to their mid-level universities.
This number shocked even us!
Essentially this study told us that in Australia at least, you only received a 3% premium for going to their elite programs when you control for everything else. It was so mind blowing to us because our automatic assumption was:
The US is not much different than Australia. Are the results the same?
Time for more digging.
A Times article from 2014 titled, “It Doesn’t Matter Where You Go To College”, cited pivotal research by Alan Krueger and Stacy Berg Dale that was first published in 1999. This original piece of work compared the US elite colleges with “Moderately Selective” schools. The study cited their findings below:
We find that the return to college selectivity is sizable for both cohorts in regression models that control for variables commonly observed by researchers, such as student high school GPA and SAT scores. However, when we adjust for unobserved student ability by controlling for the average SAT score of the colleges that students applied to, our estimates of the return to college selectivity fall substantially and are generally indistinguishable from zero.
Krueger and Berg Dale had controlled for all of the following items:
- Student High School GPA
- SAT Score
- Average SAT score of the colleges they applied for
- Number of applications they submitted
- Demographic factors such as race, sex, parental education
This time, we weren’t as shocked.
Australia seemed to have found the exact same results. Why would it be different in America? However, those were the results in 1999 and a lot can happen in 15 years. We had to keep digging. We couldn’t help but wonder if earnings could possibly grow faster when a student attended an elite school? To us, that surely wouldn’t be reflected in a student’s first job out of school. Lucky for us, Krueger and Berg Dale did a follow up study and released their findings in 2011 that you can read here.
They covered 19,000 college graduates and reached the exact same conclusion: whether you went to Harvard or Penn State, Princeton or Miami University of Ohio, the job outcome was unaffected when it came to earnings.
Honestly, we are ecstatic with the studies. We think it goes on to confirm how we have established our program here at EDUsquared by focusing on the majors and on reducing student loans.
There are, of course, caveats with all studies and we don’t want to be completely rosy so we listed a few as follows:
- Hispanics, African Americans, and children of parents who don’t have college degrees and who attended more selective schools earned more than those who did not.
- Krueger and Berg Dale selected 27 universities that are highly selective to compare against the elite eight. If one were to look at less selective universities, one would probably get different results but this leads us to believe the parity would not be nearly as large as one would think.
Most importantly there are a lot of reasons that can lead to income differences. There is a fantastic article by Cognito Mentoring here that discusses them.