Understanding the “Yale or Jail; Harvard or Homeless” misconception
Published March 7, 2022
When it comes to planning for and financing higher education – especially in this mid-pandemic, geopolitically fragile environment – there are a lot of complex factors to consider. And for families considering major and state universities can be challenging to determine if the value of the “brand name” institution justifies the cost.
To help you weigh your options, I asked one of Buckingham’s Wealth Advisors and resident Education Planning subject matter resource, Dave Ressner, to share his perspective on a couple of the most important factors to consider when choosing the right institution for your child’s higher education.
“Harvard or homeless” is a myth
According to Dave, “Many families fear that if they don’t send their child to the best possible school, their child’s lifetime employment prospects, opportunities and even their happiness will be limited. That cannot be further from the truth, especially for children who come from educated, professional families.”
The “Harvard or homeless/Yale or jail” misconception has been thoroughly dispelled and debunked in the academic literature. Peer-reviewed studies have found that elite schools do not create successful graduates but instead attract a particular type of student – students that already possess the habits, behaviors and mindsets that drive them to be successful. The findings suggest that these ambitious, highly motivated students might benefit more from the atmosphere at a less competitive, high-caliber school.
Another benefit
Another benefit of expanding your options is the “Big-fish-little-pond” effect. This theory is used to describe the phenomenon where students in selective schools experience undue stress from intense competition and overly rigorous coursework. They feel worse about themselves and have even been known to abandon their passion due to feelings of inadequacy, which was described in Malcom Gladwell’s book “David and Goliath”. A 2018 study led by Prashant Loyalka, Associate Professor at the Graduate School of Education at Stanford University, found that academic self-concept is key to positive student outcomes and can affect students’ attitudes around learning as well as their educational trajectory – including post-graduate and advanced studies. Loyalka notes, “There can be negative psychological consequences when you’re surrounded by high performers … This study tells us, in a meaningful way, what education psychologists have long suspected. As humans, we have a tendency to compare ourselves to others in terms of our abilities and, because of that, we tend to feel better or worse about ourselves. It is fundamental to who we are.”
You don’t always get what you pay for at name-brand institutions
Dave’s second point is one of return on investment.
“One significant problem with well-off families pursuing brand-name colleges is this: Those schools tend to give little or no merit-based aid, and these families don’t qualify for need-based aid. So, they are left to pay the brand-name price, which can equate to serious dollars… we’re talking astronomical numbers – I’ve seen up to $350,000 per child, for an undergraduate degree!”
Dave goes on to say, “One more caveat to brand-name schools: Many, though not all, focus on research and graduate students, rather than teaching and undergraduate students. So many classes — especially intro-level — are large, impersonal and often taught by graduate assistants and/or underpaid, part-time adjunct professors. $350,000 for that? No thanks!”
Presuming it is important to you that your child get a meaningful return on investment in every sense of the term (dollar value, intellectual discovery/development, strong social networks, positive sense of self and emotional well-being, etc.), it’s prudent to consider investing fewer dollars into an institution that can provide more direct support through smaller class sizes and access to fully tenured academics teaching the bulk of their courses.
Keep in mind
Bear in mind that going to an Ivy League university for students pursuing majors in very particular fields of study can be valuable. According to researchers Eric Eide and Mark Showalter of Brigham Young University and Michael Hilmer of San Diego State University, business majors stand to benefit most from attending elite schools. Eide, Showalter, and Hilmer conducted a study comparing the earnings of individuals from schools with different selectivity rankings ten years after they completed their undergraduate degrees.
They reported, “Our results show that business graduates from top colleges earn on average more than graduates from middle selectivity colleges, and graduates from middle selectivity earn more than those from bottom selectivity … While we cannot say definitely what the underlying reasons are for significant differences across college selectivity types for business majors, it could be related to differences in alumni networks and other connections with potential employers for jobs and internships due to institutional prestige.
The statistically weakest earning difference for a given major across college selectivity types is found for science majors where there are no statistically significant differences between any of the college selectivity groups. A somewhat similar pattern holds for engineering majors… Considering that the broad categories of science and engineering encompass all of the STEM fields, these results suggest that in these more technical fields it may be that the skills a student acquires in these fields are more important than the institution attended.”
It’s safe to say, if your child hopes to develop a cure for cancer or to be the next Elon Musk, they may be better off investing their dollars in a more affordable program where they will still learn the core STEM skills needed to advance in their career. Their education-related debt will be far more manageable than their Ivy League counterparts, with the same earning potential post college!
Some final thoughts
When considering being a big fish in a smaller academic pond, Dave suggests two more points to consider:
– Scholarships are often more plentiful for the “big fish”— the students among the top 25% of applicants. Would your child qualify? Check out CollegeData.com to make an informed decision.
– There are also more opportunities for extracurricular enrichment (research, small group/one-on-one projects, internships and the like). Obtaining practical experience and mentorship is critical to launching a career and should be among the highest priorities in college selection.
Dave sums up the process perfectly: “Instead of clamoring for the most prestigious school possible (and over-paying), focus your search on slightly less selective/less coveted — but still high-quality — schools where your child will be among the top 25% of applicants and where the school devotes significant dollars to merit-based aid. This way, your child gets a great education at a lower cost, setting them up for a strong financial future.”
We hope you find these points valuable as you consider which university is the best fit for your child. If you are looking for personalized support in your education and financial planning, our Wealth Advisors at Buckingham Strategic Wealth would love to learn more about your unique circumstances and help you to develop a plan to support your financial health and wellness.
This content is for informational and educational purposes only.
