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January 26, 2000

Elite Colleges Not Necessarily Best Ticket to High Earnings

Study Shows Students Attending Next Tier Gain About the Same

PRINCETON, N.J. -- Going to an academically elite college does not necessarily boost your earnings potential compared to a less elite college, according to a study by Princeton University economist Alan Krueger. In his paper "Estimating the Payoff to Attending a More Selective College," published by the National Bureau of Economic Research, a school's selectivity, as measured by matriculants' average SAT scores, does not correlate with students' later income, once the abilities of the students upon entering college are taken into account. This finding challenges previous studies positively linking earnings to a college's prestige. The researchers did find, however, that for a subset of students -- those from a financially disadvantaged background -- an elite education did bring greater financial rewards.

The paper, co-authored with researcher Stacy Berg Dale of the Andrew W. Mellon Foundation, examines College and Beyond data which tracks 14,239 adults who entered 30 colleges in 1976. Krueger and Dale correlated 1995 income of those adults with the SAT scores of the colleges they attended. They also examined data on 2,127 workers who attended a broader set of colleges using the National Longitudinal Study of the High School Class of 1972. In both data sets, Krueger and Dale, like other researchers, find that students who attended more selective colleges tend to earn higher salaries later on than those who attend less selective colleges. However, the researchers not only looked at the schools that students attended but also where they were accepted and rejected. They found that where a student applies is a more powerful predictor of future earnings success than where he or she attends.

Says Krueger, Bendheim Professor of Economics and Public Affairs at the Woodrow Wilson School of Princeton University: "It appears that student ambition, as reflected in the quality of the school to which he or she applies, is a better predictor of earning success than what college they ultimately choose or which college chooses them." The researchers refer to this phenomena as the "Steven Spielberg Effect"; the filmmaker, who was rejected by both USC and UCLA film schools, ended up attending a less prestigious program but went on to achieve tremendous success.

The researchers found a different pattern, however, for students from financially disadvantaged backgrounds, whose earning power as a group was improved by going to a more academically elite college. "These findings suggest that colleges that provide more tuition assistance to children from lower income families are pursuing the right path, since we find that these are students who benefit the most from attending highly selective schools," says Krueger.


NOTE: The working paper (PDF format) "Estimating the Payoff to Attending a More Selective College" by Stacy Berg Dale and Alan Krueger is available online.