Private Colleges May Not Be Worth the Price of Admission

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Whether you're a parent wanting the best for their children or a student hoping to launch a dream career after college, you've likely spent a lot of time thinking about choosing the right college. Even though tuition is getting more and more expensive (consistently exceeding the rate of inflation), a college education still provides the best chance for employment in "the real world." College grads are much more likely to have jobs and earn more money than those without degrees.

Given that, you might expect that the more exclusive and prestigious the college you attend, the better your chances for increased success. But given the enormous and growing burden of student loan debt on recent grads, it's reasonable to ask: Are private colleges really worth their expensive tuition?

What You Pay for at Private Colleges

There are no blanket rules for colleges, but in general, higher-priced private colleges offer benefits that public schools don't provide.

Class sizes are usually smaller, which means students receive more personal attention. This can make a big difference for students who are highly engaged -- and even more so for students who might struggle without enough one-on-one time with professors and advisers.

Instructors at private colleges spend less time on research, which gives them more time for students. Fewer courses are taught by grad students. And the campus community as a whole is often more close-knit, with lots of support for current students, new graduates and alumni.

But all this is not to say these value-added aspects can't be found at public (or less expensive) schools. Parents and students should examine potential universities individually.

What to Consider When Choosing a School

Your degree is a tool you will use after graduation to launch you into a career (hopefully in a field you want), so it's tempting to think that the better the reputation of the university that degree came from, the better your chances are of securing your dream job.

This is not the most important rule. It's much more important that you consider the degree you want and then choose a school that specializes in that field or offers a degree program that's recognized as excellent in that particular industry.

For example, New York University is a private college known for film studies and the performing arts. If you're interested in pursuing a career in one of those areas, NYU might be a wise investment. However, consider the amount of debt you'll have to take on to get a degree from that school. (In 2011, it averaged more than $33,000.) If you want a career in the arts, starting off free of college debt might make it far easier. You'll be able to take a lower paying position in the field you love because you won't have high student loan payments hanging over your head each month. (I learned a lot of valuable skills as a theater major, but I did so at a public university.)

If you want a more general degree -- such as teaching, marketing or English -- it might make more sense for your career -- and your personal finances -- to choose a public university known for having excellent professors in that department.

Digging Down to the Good Stuff: Potential Earnings and ROI

Finding a school that provides a good fit for you and your future career is important -- but we can't ignore the money. Is there any truth in the belief that a private school's prestige and education leads to a better return on investment? In other words, do private schools set up graduates for higher future earnings? Again, much depends on the degree you want. You need to align your college choice with your career goals.

If you want to pursue engineering, for example, the three schools ranked for highest return on investment are all public universities. Payscale.com takes almost 3,000 words to explain its methodology, but the key is this: "The investment is the cost of college as determined by the actual cost of attending college. The return (gain) is the additional expected future income stream received for being a college graduate." While private engineering schools do offer positive ROI, many lag a few percentage behind their public counterparts. The same goes for research schools. Of the top 10 schools that provide the highest ROI, number one and number two were public universities. (The state school ranked with the absolute highest ROI? Georgia Tech.)

On the other hand, private business school and private liberal arts colleges are most likely to provide the highest ROI in their respective specialties. And none of the private schools listed in Payscale's data showed negative returns. The lowest reported was around 3 percent and showed up in the category that collectively had the lowest ROIs: art schools.

If a private university is something you can afford, your future career is unlikely to be hurt by your prestigious education. But it's not the sole determining factor in your earnings potential after graduation.

You Determine the Value of Your Experiences and Education

Students have a lot of say in the value they receive from their education, no matter what school they graduated from. This is good news, because it means you don't have to pony up hundreds of thousands of dollars to succeed after college. But it also means that it's your responsibility as a student to make the most of any college education. You have the power to make decisions to increase the return on your financial investment.

Show up to class ready to learn something that increases your marketable skills and abilities. Volunteer in groups or clubs on campus to broaden your experience. Manage free time wisely, and use some of it to intern or work a paying part-time job in your career.

As a financial planner, I've worked with millennials across the country who are stressed out about their high student loan debts, and who wish they'd gone to less expensive colleges. I have yet to speak to one who said they wished they'd gone to a more expensive college -- regardless of prestige-- and graduated with more student loan debt.

The bottom line: A private, expensive education isn't required for success. What you do with the education you earned -- wherever you earned it from -- is a crucial factor in determining how well you do in life after college.

Sophia Bera is a virtual financial planner for millennials and the founder of Gen Y Planning. She is location independent but calls Minneapolis her home. Do you want to be better with your money than 90% of your friends? Then sign up for the Gen Y Planning newsletter for this awesome guide - FREE!


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Dennis

Gee, I remember a time when having a degree or graduate degree meant something. Now it is close to meaningless with most graduates tdoay qualified to do relatively little. A degree is something like social sciences or English Lit will qualify a person to be a greeter at the local supermarket.

August 28 2014 at 3:59 PM Report abuse rate up rate down Reply
mikcl1

Public schools are no better, just more greed stricken fat ass slackers stealing money from our youth and thier parents.

August 28 2014 at 8:23 AM Report abuse rate up rate down Reply
mikcl1

Not only are they not worth it, there are no jobs once they get done stealing your money and burying you in debt.
All the directors and administraitors are nothing more than con artist, they check your credit before they give prices for classes then they max you out on everything they can, nothing but scammers.
Learn a trade.

August 28 2014 at 8:22 AM Report abuse rate up rate down Reply
crwnyc

The fact that you don't understand the difference between a money-making career and an ability-to-think education is your problem AND the same problem that limits the narrow-minded author who wrote the article that triggers all of these reader comments. So if you can't understand, there's no use in trying to explain. The issue -- at least the only one that matters -- is not "big name schools" versus professional degree programs taught at not so big-named schools and the cost which separates the two. What matters is the ability to understand what's written in books, what's portrayed in theatre, and the ethical significance of life challenges.. So just keep doing whatever is helping you put bread on the table especially since you seem to say that is good enough for you. In the meantime don't bother to try to defend the horse-blindered author of the article or her one-dimensional presentation of educational choices because thinking and abstract issues are clearly beyond your reach.

August 27 2014 at 9:13 PM Report abuse -3 rate up rate down Reply
fakeconomics01

Certainly there is some hype about attending private colleges. Identical text books, curriculum but less competition in private schools. It is much difficult to get better grades in public colleges like Big 10, Pac 12, Big 12 and ACC than Harvard, Penn, Yale and other Ivy League Schools

August 27 2014 at 7:18 PM Report abuse rate up rate down Reply
ruthjoec

http://rannthisthat.blogspot.com/2013/03/how-to-pay-for-college-without-massive.html

August 27 2014 at 3:55 PM Report abuse +1 rate up rate down Reply
rssmray

What is she talking about??? Obviously never attended a Private College. Nor been around one. Rich kids come along and buy diplomas. They even sign a pledge to donate to the college yearly after graduation. When they can make it, show up for classes and have fun. They have sports but no one expects them to win...it is all play. I lived across the street by a private college and saw and knew what they do.

Write a Real article. Make an example from the Sports Group and say how effective they have been by protesting. If ALL Students would NOT Register for ANY College, I assure you the price of Admission would be greatly reduced.....and very soon. Like a Union, students need to Unite. There is no reason to pay for high priced books, registration fees, dorm rates, special parking, and the list goes on and on. It is called a Boycott. Everyone thinks we are at the Mercy of the Colleges.....that is simply not true.

For example, tell me that Brooke Shields was not Paid by Princeton to attend Princeton. It was on TV of her attending Drama class. She did not go out for Sports or anything else I could tell. She took a private jet to attend classes, from Calif. and I doubt if she attended anything but half of the 4 years. I think she had a lot of fun, did exactly what she wanted....but do not tell me she earned all 120 required credits.

Money talks, nobody walks. I do not know how to get all the students to Unite....but the time has come to get the word out and stop this college greed. Greed it is and Money and the lack of Money does talk.

August 27 2014 at 3:02 PM Report abuse +1 rate up rate down Reply
1 reply to rssmray's comment
jpfmtka

Wrong, oh so wrong. Some bitter grapes? Envy? Feelings of inadequacy there rssmray?
My brother in law (and my husband) lost their father when they were 11 and 13 respectively. Both started working multiple part time jobs to support themselves and their mother. Both graduated with multiple degrees. One undergraduate degree from Harvard, one post graduate degree from Wharton School of Business (University of Pennsylvania ...another Ivy League school in the event you were unaware). They were not legacy, they were not admitted by flashing cash, they were far from celebrities, yet they received their educations on their own merits. And, another thing, my father was also an Ivy League graduate. He received a full academic scholarship to the school of engineering. His father, an orphan, did not attend college.

Stupid talks, intelligence walks (as in the graduation ceremony).

August 27 2014 at 4:53 PM Report abuse rate up rate down Reply
randallalbin

it is really the old adage that you get what you pay for. look closely at the college you want to go to. how successful are the Alumni? is there a cohesive Alumni Association? you may find some prestige in the college you attended. future worldly success is dependent upon the Alum. sorry to say that the tuition and cost can be really expensive

August 27 2014 at 2:51 PM Report abuse +1 rate up rate down Reply
crwnyc

... one of the most narrow-minded articles ever written and the type of article that one might expect of a teenager who makes a first-ever effort to put together the views of a few random friends. I trust that no one anywhere paid this novice for this myopic view of education which amounts to little more than the notion of "pick your career and go somewhere cheap to learn how to do it!" Btw, clearly the writer never learned the value of thinking independently and about subjects that convey wisdom for the sake of enriching lives rather than simply going to a profession-oriented school in order to have a job to earn a living.

August 27 2014 at 1:33 PM Report abuse rate up rate down Reply
1 reply to crwnyc's comment
apk892

I don't understand your point. The writer wrote an informative article on how the big name school doesn't necessarily give you the most bang for your buck (which I know from experience to be 100% true) and you ridicule her for it. Going to college is not about enriching lives and conveying wisdom, it is about opening up opportunities to better yourself and your family FINANCIALLY. You don't need a college degree to do what you want to do, but you do need one to become an accountant, doctor, forensic scientist, lawyer, engineer, stock broker, financial analyst, and, yes, even a teacher, who's job is to convey wisdom and enrich lives.

August 27 2014 at 1:49 PM Report abuse +1 rate up rate down Reply
1 reply to apk892's comment
apk892

So actually I guess I proved myself wrong, you DO need a college degree to do what you want to do

August 27 2014 at 1:50 PM Report abuse -1 rate up rate down
nancy.farmerfarmer

I am President of a Consortium of 275 private colleges and universities that voluntarily sponsor a prepaid tuition plan, Private College 529 Plan. You make important points about the need for each family to determine the relative value of schools. Sometimes private schools are less expensive, because they give more financial aid, students are more likely to graduate in four years, etc. What’s missing from your discussion is a reminder that the best solution is to avoid debt by planning and saving for college. 529 savings and prepaid plans offer tax breaks for families and even small, regular contributions to a 529 Plan will add up over time. Bottom line: earn interest rather than pay it. It is interesting that in our survey of more than 1,000 teens this spring, more than 90 percent said college saving is important to them and plan to minimize the amount they borrow for college.

August 27 2014 at 12:50 PM Report abuse +3 rate up rate down Reply