The Price of Prestige
Is an Ivy League Education Worth the Investment? We Do the Math

By SOLJANE MARTINEZ
Staff Reporter of THE WALL STREET JOURNAL

It has long been assumed that an Ivy League education was better than a public university. These days, however, not everyone agrees.

For many people, if course, the final decision often is dictated by what's affordable. But the question you should ask yourself is: Are the most expensive schools really worth the extra money, or might the same opportunities be available--at lower cost--from public universities?

To Eric Eide, an economist at Brigham Young University, the balance tips without question in favor of the Ivy League. A degree from Harvard or Yale can make a big difference in how quickly you get a job after graduation and how high a salary you'll command, he says. "Even with the tuition disparity, graduates from top private schools make more money," says Mr. Eide.

Mr. Eide cites a 1999 study that found that the higher tuition at Ivy League schools proved a better investment based on the wages earned by graduates. The study looked at 1972, 1980 and 1982 high-school graduates who attended public and Ivy League universities. It found that members of the class of 1972 who graduated from elite universities earned 15% higher hourly wages in 1986 than their counterparts who went to less-competitive schools. Class of 1980 graduates earned 20% more, and 1982 graduates made 39% more.

'New Work Model'

Some career consultants, however, argue that Ivy League degrees are no longer as valuable as they once were in the workplace. "There's a new work model these days," says Barbara Moses, president of a human-resource consulting firm in Toronto. "Although the prestige of an Ivy or highly recognizable school enables you to get out of the gate faster ... employers are looking for what you can do. They're looking for a rich portfolio of skills instead of prestige."

She adds: "If you have two equally bright, well-spoken grads capable of solving problems, 10 years later the two will not be substantially different. In the long term, the differences between an Ivy grad and a state grad will start to average themselves out."

Cambrietta Frierson, a 1993 graduate of the University of Pennsylvania, says she isn't sure her Ivy degree was really worth the extra expense. She has five more years to go before she has paid off her $104,000 debt. "I love where I went to school," she says, but "could I have made the same types of connections elsewhere? Without a doubt." Ms. Frierson is a freelance TV producer in California. "For the field I'm working in, my degree's not necessary," she says. "At least the price tag on my degree wasn't."

Others say that, all things being equal, an Ivy League degree offers an advantage in any number of situations, from applying to competitive graduate schools to seeking a promotion. "An Ivy education does open doors," says Zazy Lopez, a recent Yale graduate who is now at the Penn law school in Philadelphia. "If a senior in high school were to ask me, 'Where should I go--Yale or a state school?' my answer would be Yale, because it is an Ivy."

No one can put an exact measure on the value of a good education. But to give you something concrete to go on, we attempted to come up with a quick analysis of the costs and benefits of attending an Ivy League vs. a public university. First we looked at the tuition and likely loans necessary to attend each university. Then we checked the estimated starting salaries of their graduates.

Start with Yale. Attending Yale would cost you about $35,170 this academic year, including tuition, room and board, personal expenses and books. For four years, that all adds up to roughly $141,000.

Yale expects you and your parents to pay for a little less than half that, or $13,650 a year, out of pocket, and assumes you'll get about $6,000 a year in federal student loans. Assuming you cover the remaining $15,600 with more loans from other, nongovernment sources, you will have borrowed a total of about $86,000 after four years. Factor in roughly $37,000 in interest on all that debt, and your repayments will total $123,000 over 10 years.

By comparison, tuition and fees at the University of North Carolina at Chapel Hill last year would have cost a nonresident about $84,000 over four years. The university would expect your family to pay about $10,000 a year upfront. If you didn't receive any financial aid, you'd have to cover the remainder--about $44,000-through federal and other loans. Add interest payments of roughly $17,000 to the total debt, and your total loan payments would come to about $61,000.

Compared with Yale, that's a huge difference. Yet the first-year starting salaries earned by graduates of the two universities are very similar, at least on average. The alumni office at Chapel Hill says the average starting salary for its graduates is the same as the national average--about $27,000. Yale's alumni office says its average is about $28,500.

Long-Term Impact

Over the long run, BYU's Mr. Eide and others argue, that spread is likely to expand. But Ms. Moses and other critics of the Ivy League mystique argue that top UNC graduates stand a good chance of keeping pace or surpassing the salaries of those from Yale, and will face a much lighter burden in paying off their loans.

In the Yale example, a standard 10-year student-loan repayment plan would require monthly payments of $1,024--about 43% of the average gross monthly starting salary. At UNC, the monthly payment would be about $513--or about 23% of average monthly pay for new grads.

The difference is even more startling when you look at how much the two graduates would have to earn for their monthly payments to stay within what the government considers a safe level--10% to 15% of your monthly income.

To stay within that range, the Yale graduate with $86,000 in student loans must immediately start earning a salary of $82,000 a year. The graduate of UNC with $44,000 in debt would have to earn only $41,000.

Although it seems like it all comes down to money in the end, the most important factor to take into consideration when deciding on a university is maximizing your future options, says Ms. Moses.

"If you choose a school and you're not certain of its reputation among employers, check it out beforehand," she says. "Any decisions you make now will have a long-term impact on your choices."