Dear Liz: You recently mentioned a study by Alan Krueger of Princeton University and Stacy Dale of the Mellon Foundation. You correctly state the main result of this study without reporting an important secondary finding that contradicts your advice. Yes, Krueger and Dale found that students who were accepted at a highly selective college but chose to go elsewhere did just as well in life as those who went to a highly selective college.
But they also reported an important exception: students from lower-income families, whose earnings were substantially greater if they went to the highly selective college. Since students from lower-income families are precisely the students most likely to need loans to attend college, it follows that for them taking out loans to attend a highly selective college would be a good investment.
Do you think Supreme Court Justice Clarence Thomas or nominee Sonia Sotomayor would be where they are now if they hadn’t accepted the financial and academic challenge of attending highly selective colleges?
Answer: You make a good point about the study, but it doesn’t fit today’s financial aid realities. The person who wrote asking for advice had been accepted to her “dream school” but faced the prospect of borrowing to pay for most of her school expenses. That indicates either that she was not from an economically disadvantaged background or that it wasn’t an Ivy League school that accepted her.
Many Ivy League schools now waive tuition entirely for low-income students, and others provide enough in grants to minimize the need for loans, particularly the pricey private loans that she would have to tap once she exhausted low-rate federal loans.
So my advice remains the same. Rather than borrow $200,000 to pay for an undergraduate business degree, with the likely prospect of borrowing more to get her MBA, she would be better off pursuing an affordable undergraduate education and then borrowing to attend a “dream” graduate school. Sacrificing to attend college is one thing. Lashing yourself to a lifetime of expensive debt is quite another.
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