Education

Does It Matter What School You Go To

By David Krug David Krug is the CEO & President of Bankovia. He's a lifelong expat who has lived in the Philippines, Mexico, Thailand, and Colombia. When he's not reading about cryptocurrencies, he's researching the latest personal finance software. 11 minute read

They (students and parents) often think that getting into a top school is the only way to ensure a successful and comfortable future. In fact, there is some truth to this notion, since data shows that the majority of the country’s highest-paid graduates attended elite institutions.

However, getting into a top university may be out of reach for a lot of people. Perhaps they never receive an admission letter despite their excellent grades and full calendar of extracurricular activities. There were 281,060 applicants for admission to the eight Ivy League universities in the 2017–2018 school year, and less than 10% of those applicants were offered admission.

Harvard and Stanford, two of the most competitive universities in the country, both have admission rates of around 5%, according to U. S. News. This means that just 12% of people who apply to these elite schools actually receive an acceptance letter. The admission rates of other prestigious institutions are almost the same.

Others, however, may receive an admission letter but not a package of financial help sufficient to cover the costs of attending. The 2018 College Hopes & Worries Survey conducted by The Princeton Review found that “level of debt to pay for the degree” was the number one worry among parents and students, followed by the worry that their children “will get into [their] first-choice college, but won’t have sufficient funds/aid to attend.” When you consider that tuition at some very selective institutions may easily exceed $60,000 per year, these concerns are understandable.

What options do students who won’t be accepted to elite schools have? Are they condemned to earn less than others who attended prestigious universities? What’s the big deal if you go to a different university?

The response is often reassuring to kids. Multiple studies demonstrate that the individual student, rather than the institution, may be the most important variable in terms of academic success.

The Advantages of Attending an Elite School

Attending a prestigious university undoubtedly has its advantages. A degree from a prestigious university like Harvard, Princeton, or Stanford can open doors to better employment opportunities. Some companies give preference to applicants who attended elite universities like Harvard, reasoning that the admissions office has already done the heavy lifting in finding the best individuals.

This is why these institutions are sometimes referred to as “feeder schools”; some of the best companies in the world will let these institutions do the hiring for them. Especially so in the cutthroat worlds of business, law, and finance. For instance, leading banking firms like Goldman Sachs, Morgan Stanley, and Citigroup all rely heavily on graduates from the University of Pennsylvania, which is part of the prestigious Ivy League.

In addition to providing students with access to extremely successful and powerful alumni, the networking possibilities available to them at exceptional colleges are significantly higher. 

Ivy League and other prestigious colleges have produced presidents, CEOs, and wealthy entrepreneurs, as well as justices of the United States Supreme Court. There is a strong connection between these powerful alums and their alma maters, as seen by their continued donations to the schools’ endowments and their preference for hiring other alums.
U.S. Department of Education data also shows a large wage gap between graduates of top schools and those of less prestigious schools.

In this way, going to a prestigious university may provide you with far more than simply a solid education; it can really provide you with boundless possibilities in the sector of your choice. In any case, the term “can” should not be overlooked. If you didn’t get into your dream school or decided against attending a famous institution due to factors like financial inability or cultural compatibility, you aren’t doomed.

Other Factors Influencing Success

It’s true that attending a prestigious institution may help students go ahead, but ultimately it’s the students themselves who are the most telling of their future success.

  1. Student Characteristics

Statistics can be deceiving, so don’t assume that graduates of top schools will automatically earn more money than those who did not go. To some extent, high achievers may be destined to attend prestigious universities. To put it another way, perhaps the sort of student whose abilities and established networks already assure them success is overrepresented at the most selective colleges.

According to a 2017 survey funded by the Internal Revenue Service and the United States Treasury Department, the vast majority of students at prestigious institutions come from the wealthiest 1% of households.

Stacy Berg Dale of the Mellon Foundation and Alan B. Krueger of Princeton attempted to circumvent this issue in a 2002 study by comparing only the earnings of students who applied to and were accepted by similarly ranked colleges, thereby guaranteeing that the students in their sample were of similar ability. As a result, they were able to ascribe the disparity in earnings to the universities rather than the students’ innate abilities.

Dale and Krueger found that the correlation between college selectivity and graduates’ future earnings disappeared when they controlled for the quality of students, in contrast to other researchers who merely compared average salaries among schools’ graduates without regard for the differences among students. There was no difference in earnings between students who attended a more selective institution and those who were accepted to the same college but chose to attend a less selective one.

Over a decade later, Dale and Berg redo their analysis, this time adjusting for applicants’ SAT scores relative to the school’s average SAT score. A greater sample size was also used. This second research found even more strong evidence that it doesn’t matter where you go to college: the average incomes of students who applied to prestigious colleges but were denied were the same as those of students who attended elite schools.

That is to say, your future earnings potential won’t change whether you go to Penn or Penn State. No matter where you enroll in school, it is your academic prowess that will define your future.

  1. Type of Major

A more nuanced finding was reached in a more recent study conducted by Eric Eide and Mark Showalter of Brigham Young University and Michael Hilmer of San Diego State University.

The results of this study show that graduates of elite institutions earn an average of 12% more than those of middle-tier institutions, particularly in the fields of business and engineering. On the other hand, many other majors’ graduates saw little to no change in salary.

As was said above, this might be because business majors at top universities have greater access to internships and professional networks. Majors in business and finance are popular among those who get degrees from Ivy League universities.

Schools that place an emphasis on STEM (science, technology, engineering, and mathematics) produce some of the best earners after graduation, according to PayScale. While it is true that a degree from a top university like MIT or Caltech may lead to a better starting salary than one from a less prominent institution, the constant expansion of the technology industry has led to rising wages for everyone.

  1. Student Motivation and Ambition

The numbers don’t determine your fate. There are numerous examples of successful people who did not go to elite schools, and there are many examples of unsuccessful people who did.

Think about how few CEOs of Fortune 500 companies attended Ivy League universities. In&T’s Randall Stephenson attended Central Oklahoma, Apple’s Tim Cook attended Auburn, Walmart’s Doug McMillon attended the University of Arkansas, and Whole Foods’ John Mackey attended the University of Texas at Austin (and never finished).

While more U.S. senators and representatives have degrees from Harvard than any other institution, more than half of current members of Congress earned their degrees from less selective institutions, such as public state colleges.

While the networking environments at top institutions tend to be the greatest, many of the same possibilities can be found at other schools; you may simply have to put in a little more effort to locate them. Even if you don’t attend a top-tier college, you may still get the experience that prospective employers care about by participating in internships, going to networking events, and doing volunteer work.

Reasons to Avoid Attending an Elite School

Even if you were admitted to a prestigious university, you might want to think again about taking the plunge.

  1. Instructional Quality

Even if their law and medical schools may be among the best in the country, undergraduate education at these prestigious institutions is not necessarily on par with the rest of the country. Due to the universities’ dedication to cutting-edge research, some of its faculty members may place less value on student instruction than on their own research.

A student who has been admitted to an Ivy League or similarly rigorous institution may find that their education is enhanced by attending a smaller, albeit still extremely selective, college that accepts students only at the undergraduate level.

Furthermore, the 2017 NSSE revealed that “no assurance” selectivity or school size corresponds to a superior learning environment for students. The level of education at many less selective schools is widely regarded as high. “Conventional thinking is that the more selective an institution is, the better it is likely to be,” said NSSE director Alexander McCormick. Systematically, that is not correct.

  1. Individual Fit

Because of their reputation for excellence, some students mistakenly believe that attending a highly ranked school is in their best interest. It’s important to weigh a college’s suitability to your desired major, your financial situation, and your overall sense of satisfaction before committing to one.

Some parents and students may underestimate how much of an impact a student’s level of happiness has on not just their success in college but also their chances of graduating. 

During my time as a professor at a private four-year institution, I saw a lot of students drop out due to issues like being overwhelmed by the course load or feeling out of place socially.

The competition to enter a top school is intense, but the pressure to succeed after you’re enrolled might be much greater. You’ll have to put in extra time and effort to prove that you’re worthy of the title of “best of the best.”

It is important for prospective students to think about everything about a college, not only the classes and tuition, but also the atmosphere on campus and the people they could meet.

Do Employers Care Where You Go to School?

What companies value most in new hires is a good indicator of a graduate’s future earnings potential. There too, studies demonstrate that the importance of one’s educational background is much smaller than often believed.

A lot of organizations, including computer titans like Apple, Google, and IBM, reportedly don’t require a college degree, and therefore it’s safe to assume that they don’t care where you went to school. Businesses care more about finding workers with the right mix of skills and experience.

In particular, Google has spent many years studying what makes some people successful at the firm, and it has found that the individuals’ educational backgrounds have nothing to do with their eventual success. When Google was younger, it made sense for the firm to focus on bringing in talent from prestigious institutions like Harvard, Stanford, and MIT.

According to Laszlo Bock, a former Google executive who oversaw people operations, many universities “don’t deliver on what they offer. You rack up a lot of debt and fail to acquire the knowledge that would prove to be most beneficial to you in the long run. A prolonged period of adolescence.

Further, Bock’s group discovered no correlation between an employee’s educational background and their performance on the job. A student’s academic achievement, a highly sought-after trait among those attending prestigious universities, may have little to no bearing on their eventual success in the workplace. The ability to accomplish a job is not necessarily indicative of academic success. According to Bock, “academic contexts are artificial ecosystems” that train students to thrive in that specific setting.

The value of an applicant’s alma mater has been deemphasized by many companies, not just Google. More than 600 corporate executives were polled by Gallup in 2013 and they said that a candidate’s understanding of the industry was the most essential criterion when making a hiring decision, followed closely by their ability to apply that knowledge. Some 84% and 79% of leaders said they were “extremely essential” to them. The educational background of a candidate rated last, with only 9% placing a high importance on that factor. 

A candidate’s college major is more important than their academic pedigree (at 28%).
Instead of setting your sights just on a prestigious university, you should first choose your major and then look for the institution that best supports your professional aspirations.

When It Matters Where You Attend School

In one particular case, going to a prestigious university can make a huge impact. In their research, Dale and Krueger found that students from poorer socioeconomic origins, as well as pupils of African-American and Hispanic backgrounds, who attended prestigious institutions had much higher future earnings.

This may be because students who attend prestigious institutions are welcomed into professional and social circles from which they would be otherwise excluded. According to Dale and Krueger, students from lower socioeconomic backgrounds are less likely to have the same access to resources as their higher-income counterparts when applying to premier universities.

Undermatching is the problem of many high-achieving kids from low-income backgrounds not applying to top universities. According to research conducted by Caroline Hoxby and Christopher Avery, whereas the vast majority of middle- and upper-class high achievers applied to elite schools, just 8% of low-income high achievers did so, and 53% of them only applied to one school, a non-selective one.

Perhaps misunderstandings are to blame for the low number of applications received. The vast endowments of highly selective colleges, and the Ivy League in particular, allow them to provide excellent financial aid packages to students from low-income households, despite the fact that they are often viewed as emblems of elitism. Princeton, Brown, Cornell, Columbia, Duke, Harvard, Yale, Stanford, MIT, and Dartmouth are just a few of the prestigious universities that provide financial aid in the form of either free tuition or a full ride (tuition and living expenses).

The Georgetown Center for Education and the Workforce notes that many top colleges continue to recruit mostly students from high-income households, and that the universities may be doing more to attract these students. But knowing the option is important for the small percentage of kids for whom going to a top university will make a meaningful impact.

Bottom Line

The answer to the question “Does it matter where you go to college?” may ultimately depend on your perspective.

According to studies, this is probably irrelevant for most students at least in terms of their future income. However, there are advantages to attending a prestigious university for certain students and families.

What sort of career you desire and how much money you stand to make at that employment may be the most important factors in determining if a school is worth the costly tuition. Even a predicted six-figure salary won’t come close to covering the cost of a four-year degree at many prestigious colleges, so most financial experts advise avoiding taking out more in student loans than you can afford to pay back in your first year after graduation.

Once the ticket to a successful life, prestigious universities are losing their allure as skill sets and work experience become more important to prospective employers. In the eyes of a potential employer, it is not always a fancy degree but rather the genuine value you offer that makes you stand out. More important for future career prospects than college choice is whether or not you go to college, since most studies continue to demonstrate large variations in earning potential between college graduates and those with only a high school diploma.

One’s own degree of motivation, dedication, and openness to learning are far more important than one’s access to a particular institution in determining one’s eventual academic performance.

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