Holding a four-year degree gives earners a distinct edge over their high school educated coworkers, both by providing them with advantages in job performance and granting them an annual earnings premium of between 37-39%. But to what extent does the source of the degree – the college attended – impact the return on investment of earning one?

Public_vs_Private.jpgPublic vs Private Institutions

When choosing what university to attend, many options are available. The most exclusive universities are the top private schools, and the most economical are the middle or low level public schools. When earnings were analyzed comparing cohorts who attended the various college types, students who had graduated from elite and middle-rated private universities earned significantly more income than the bottom public schools. Although typically the most expensive and prestigious, elite private universities tend to grant high returns.

Other Factors

It is important to note that, over time, the cost differential between public and private schools is rising. Although the rate of return for elite private universities is high, as the trends continue the investment may become less valuable. Many states and colleges also offer grants and scholarships for students who maintain high GPAs or score well on standardized tests. In Georgia, for example, the HOPE lottery scholarship offers full tuition and fee coverage plus a book allowance for students attending a public college who maintain a B average or better in high school or score in the 80th percentile on the SAT or ACT. The scholarship offers a flat $3,000 scholarship for private university attendees. In some states, student academic performance may provide a virtually free ride to four-year public university, making it a strong investment.

Choosing what type of college to attend depends on several factors. If a student is accepted into an elite private college, the high earning potential generally makes up for the higher cost of attendance, but the availability of scholarships and grants can make a public college a worthwhile choice. For more information on how to maximize test scores and open more doors when making a college comparison, please contact us.