In 1997, Southeast Asia suffered a massive decline in tourism. The country’s economy wasn’t stable, forest fires swallowed the land and induced a suffocating smog throughout the land. Luxury hotels in the area were struggling to fill their rooms and, as a result, slashed prices to attract a higher frequency of lower-paying individuals. Almost every hotel did this– all but one, The Ritz-Carlton. Conversely, the hotel offered even more lavish amenities and luxury promotions; tourists flocked to the hotel in droves (according to Harvard Business Review).
Why would a tourist choose to pay more money when similar hotels have better rates?
Paying a premium for luxury is a universal concept. We have constructed this idea that the most expensive item in any store or on any menu is likely the best quality. We believe quality and price are synonymous; the higher the number, the better the item. For this reason, people pay thousands of dollars for designer clothes, handbags and shoes. This concept does not stop at consumer goods. Highly selective universities are guilty of this very same phenomenon.
It’s called prestige pricing, or the pricing of goods at exorbitant amounts to indicate quality. Many of the universities that pop into your mind when you think elite universities are often guilty of such pricing. These schools often boast world-renowned faculty and immaculate facilities for a mere $70,000 or more a year. And despite such a large sticker tag, they receive thousands of applications each year from domestic and international students alike. Some students spend their entire lives dreaming of attending such an institution.
Writer Max Kutner of The Boston Globe recently wrote an article, “Higher Education spent a fortune on prestige. Now it’s for sale to the highest bidders. How did we get here?” where he examined the root cause of this expensive phenomenon. He posits that there are two causes: federal funding cuts to public universities and the “1983 launch of the US News & World Report college rankings.”
Kutner states that ranking systems like US News & World Report delineated a ‘good’ school from a ‘bad’ one. It placed a spotlight on ‘the best’ schools and established an elite, making the option of attending any other institution unimaginable. “In short, a degree from a low-ranking school became equivalent to a career dead end.” Around the same time, President Ronald Reagen gutted financial aid programs within the Department of Education by millions of dollars. As a result, potential college students became “brand shoppers.” They wanted to know they were getting a degree that was worth something post-graduation. College brand awareness when shopping for college has persisted and permeates to this day. In fact, in The Atlantic’s article “At Private Colleges, Students Pay for Prestige” cites that in 2016, “65% of U.S. freshman said reputation was ‘very important’ when selecting a college.”
While name recognition for elite universities are great, they shouldn’t be students’ final decision when selecting a college. In fact, The New York Times’ “Measuring College Prestige vs. Cost of Enrollment” discusses two studies that debunk the notion that the most expensive option is always best. In particular, “Alan B. Krueger, then an economist at Princeton University, and Stacy Berg Dale, a senior researcher at Mathematica Policy Research, found that equally smart students had about the same earnings whether or not they went to top-tier colleges.” However, they did find that low-income and/or minority students ended up better off going to an elite institution.
Forbes performed a similar examination of college tuition at larger, public institutions and smaller, top private institutions. “Prestige and Price: Why Top Colleges Aren’t for Everyone” states “at only 30% of the top 50 schools will the average graduate’s starting salary be more than one year’s total cost of attendance. Comparatively, at 64% schools ranked 300-349, graduates will make more money in their first year of work than they paid during one year of school.” On average, students at less selective institutions will make $6,569.11 more than what they paid for school.
None of this is to say that highly selective universities are a bad option, however. Top universities are extremely competitive and difficult to get into. If a student gets in, they should feel proud of their accomplishment. They should also fully consider the sticker price attached to such a university. While students hardly pay the full sticker price of any institution they attend–just 11% of students do–, it is important that students and their families have a realistic understanding of their options. “Measuring College Prestige vs. Cost of Enrollment” author, Paul Sullivan suggests that parents and students look at the graduation rates and average starting salaries of the schools they’re considering. They should take a critical look at the merit and need-based scholarships in their financial package and make realistic decisions about what is best for their families.
Unfortunately, there is no catchall solution to figuring out what college is best for a student. There are many factors both about the college and your family’s financials that should be considered. However, having a good grip on all of the information out there and understanding what to look for will help you make an educated decision. Determining if it’s worth it is entirely up to you.