Calculating the College Payoff

If your child is approaching college age, you may be wondering if an Ivy League education is really worth the steep price of admission. Will a diploma from an elite college guarantee your offspring a bright and prosperous future…or just a pile of debt?

Higher Dollars and Cents
The cost of tuition, fees, and room and board at Harvard University for the 2007/08 year is $45,620. (Source: Harvard Crimson, March 22, 2007) If your child entered the freshman class this September, that would translate into a total cost of $196,628 for four years (assuming a rather tame 5% annual rate of college inflation). And this doesn’t include money for books, transportation, and personal expenses!

By comparison, the cost for the 2007/08 year at the University of North Carolina at Chapel Hill, a school widely regarded as a top-notch public college, is $28,684 for out-of-state students and $13,036 for in-state students. (Source: UNC Financial Aid Office) This equals a four-year cost of $123,632 for the out-of-state student and $56,187 for the in-state student (again, assuming a 5% rate of inflation). That’s an out-of-pocket savings of $72,996 and $140,441, respectively, compared to the cost of Harvard.

The Debt Factor
The Ivies often note that, while their schools might be expensive, most students rarely pay the full sticker price. But even as Ivy League colleges dole out millions of dollars in need-based aid each year from their huge endowments, non-Ivy private schools and public colleges distribute more merit aid, which is aid awarded on the basis of good grades or some special talent. Up-to-date college guidebooks can tell you how generous each college is in helping its students meet annual costs, and the breakdown of student loans vs. grants.

Still, you won’t actually know what your child will receive in the way of “free” grant and scholarship money until he or she actually applies to a particular college. So you won’t know for sure how much you or your child might need to borrow. But if your child does require student loans, here’s an idea of what he or she will owe each month:

Note: Results are based on a standard 10-year repayment term and a fixed interest rate of 6.8%–the current rate on all new federal Stafford loans.

As you weigh the cost factor, keep in mind that a high amount of debt might impact your child’s future major life decisions on job opportunities, living arrangements, graduate school, getting married, and/or starting a family.

What About the Intangibles?
Putting aside cost, there are benefits to an Ivy education that can’t be measured in nickels and dimes–the prestige of the name on your child’s resume, strong mentoring that can lead to coveted jobs and graduate school spots after graduation, the opportunity to build friendships with future leaders, and an alumni network that can open doors throughout life.

But critics of the “Ivy-at-any-cost” group point to excessive competition at the Ivies. They claim that students are more likely to get individualized attention at other colleges, and note that as time goes on, achievement in the workplace will matter more than the name on your child’s resume. Indeed, Warren Buffett, CEO of Berkshire Hathaway and graduate of the University of Nebraska-Lincoln, once stated: “I don’t care where someone went to school, and that never caused me to hire anyone or buy a business.” What counts most, some CEOs say, is a person’s ability to seize opportunities. (Source: Wall Street Journal, Any College Will Do, September 18, 2006)

The Bottom Line
To decide if an Ivy League education is worth it, weigh the cost with the potential long-term economic and life experience benefits. But keep in mind that highly motivated students who are independent thinkers and hard workers will likely do well in life no matter where they attend college. The important thing is to make sure that the match between your child and the college is a good one.