College Tuition & Crummy Math

So George Washington University, already the country's most expensive college, has raised its tuition again and broken the $50,000 barrier (including tuition, housing, and mandatory fees).

An article in the Washington Post quotes a GW student already $60,000 in debt: "I think people are going to come regardless of how much it costs," and apparently the president of the GW Student Association thinks that "tuition is not a big issue at GWU, in part because parents often pay for it and in part because students think they're getting a great education" (as paraphrased by WaPo).

Is a GW education really so magical that it merits the highest price tag in the country? Either (1) GW is full of people so well off financially that price really is no object (although the über-rich are some of the most cost-conscious people I know), (2) it's full of people who aren't so good at math (see my previous post about people who can't do math when they're choosing a college and the financial aid racket that facilitates dumb decision making), or (3) GW's financial aid is so generous as to render the ticket price completely fictional (unlikely, given the size of its endowment -- it doesn't enjoy the financial aid luxuries of, say, Princeton).

Published tuition costs are of course really just list or sticker prices, like the ones car dealerships use. A lot of people don't actually pay list price. Either they negotiate the price down (if they can play peer schools against each other), they are poor enough to qualify for need-based aid, or they can dangle some carrot the school wants, whether that's geographic origin, race, grades and test scores, or a particular extracurricular talent. Schools discount tuition all the time so that they can engineer the kind of incoming class profile they want. Still, baselines matter. A high list price means a high negotiating baseline for you and a high discounting baseline for them.

Which brings me to the term "discount." I remember attending a conference for admissions officers and hearing people use that lingo --  the speakers referred to financial aid as "tuition discounting." That's all financial aid is when you boil it down, so don't get too wrapped up in the sticker price on the window if you have something you know a school wants.

That's the strategy I generally advise for college selection: go to the place where you're a big catch for the admissions office and save your money. Career coach Marty Nemko had a great post on this subject, and I agree with 99% of it. In particular, he writes:

Although it's easier to make connections at a prestigious college, it's far from certain that you'll make connections that will actually help your career. As you'll see below, many, many students, having mortgaged their family's financial security by attending an expensive private college, graduate feeling disillusioned, even ripped off.

You might protest, "But look at the most successful people! So many came from places like Harvard and Yale."

Yes, Ivy graduates are disproportionately represented in top positions, but that doesn't mean the college was causal. On average, Ivy-caliber kids are smarter, come from better schools, and have brighter, better-connected parents. You probably could lock Ivy-caliber high school in a closet for the four years of college and, on average, they'd end up with much better careers than other students.

A study reported in the American Economic Review concluded that even in terms of earnings, "What matters most is not which college you attend, but what you did while you were there. (That means choosing a strong major, choosing professors carefully, getting involved in leadership activities, getting to know professors)...Measured college effects are small, explaining just one to two percent of the variance in earnings." (James, et al, 1989).

In that post he also has a list of schools that offer great educations for more modest price tags.

The one piece of advice in his post I don't agree with is to factor the weather into college selection. Four years fly by before you know it, and it doesn't make sense to me to rule out an otherwise great option right off the bat just because you don't like the climate. (Weather can be a nice tie-breaker, though.) The same goes for how chi-chi the surrounding neighborhood is. That's all trivial compared to what goes on inside the classroom.

I'll close with an important caveat: I'm a firm believer in the maxim that it's the terminal degree that counts. That means that you should go all-out to attend a prestigious graduate school, assuming you've already done the analysis to figure out that the particular graduate degree you're interested in is a worthwhile financial investment to begin with. If you're going to spend big bucks on a degree, don't spend it on your first one. Go to the college that represents the best value proposition, knock people's socks off, and then invest in a fancy-pants, big-ticket, big-name graduate school.