How Much Should You Pay for College?

The middle of summer is when parents and students start to stress about their college choices—and finances as well.

Parents living in the U.S. whose children also have expensive college choices can struggle with a very old question: Should they spend obscene amounts of money so their children can attend their dream school, or should they insist that their children stick with more reasonably priced alternatives?

When money is an issue (and it is for almost everyone), our standard advice is not to blow the budget (and potentially the parents’ retirement accounts) on a wildly popular private university if the school comes with a wildly obscene price.

Parents and teenagers assume that these popular schools—mostly research universities congregated on the East and West Coasts—must be worth the cost. They’re usually located in major (fun!) cities that families assume will lead to awesome internships and incredible jobs that should compensate for the potentially crushing costs and debt.

True Story: “In Love with Northeastern University”

I recently heard the story of a high-income mom in New York City whose son is in love with Northeastern University, which is charging the family full price. The current cost of attendance is $66,000 for one year, and it will surely be even more in the fall.

It’s not surprising that the teenager didn’t get a merit scholarship. Popular private research universities are less likely to award merit scholarships to affluent teenagers, and the higher their U.S. News & World Report ranking, the less likely these institutions are to dispense them.

Many elite private research universities in the Northeast award zero merit scholarships or just a small percentage because they don’t have to—parents will wreck their finances for these schools. The most prestigious research universities do award need-based financial aid, and with some exceptions, the packages are often among the most generous you will find.

However, at most of the prestigious research universities, the percentage of students who are low or middle income is depressingly low. (It’s a scandal!) At many of these research universities, 40% to 50% or more of the student body is paying full price. And that means that the students are so wealthy that they don’t qualify for need-based aid even as the prices for these schools is now crossing the $70,000 mark!

Universities That Provide Little or No Merit Scholarships

Affluent parents will kill themselves financially if their kids get into institutions such as those below. Next to each university is the percentage of students who receive merit scholarships, as compiled on

  • Ivy League schools, 0%
  • Georgetown University, 0%
  • Massachusetts Institute of Technology, 0%
  • Stanford University and CalTech, 0% (as far as I know, these are the only research universities on the West Coast that don’t provide merit scholarships)
  • Johns Hopkins University, 1.3%
  • Boston College, 1.7%
  • Tufts University, 2.1%
  • Carnegie Mellon University, 4.9%
  • New York University, 4.9%
  • Boston University, 5.6%

Northeastern isn’t ready to scale back the merit scholarships as dramatically yet. According to the latest figures, 24% of the students received them, but I would bet that this percentage will decline if the university continues to be an “it” school.

While Northeastern is a hot property now, it didn’t used to be that way. Twenty years ago, the institution was in trouble. An excellent article in Boston magazine about Northeastern’s calculated rise described the institution back then as a “third-tier, blue-collar, commuter-based university.”

The university decided to save itself by focusing on scratching its way up U.S. News & World Report’s flawed college rankings*, and it succeeded. It’s currently the 39th “best” research university, according to U.S. News.

A Salary Comparison

The teenage boy who hopes to attend Northeastern in the fall intends to major in business administration, which happens to be the nation’s most popular major. He assumes that Northeastern, which offers a popular co-op program, would be the best school to launch him into a lucrative business career.

The New York teenager’s other choice is SUNY at Binghamton, which is a top research university in the lineup of New York state schools. The price tag for New York residents at this SUNY is just $25,000! What a deal!

Concerned about the teenager’s earnings potential, however, the family is leaning toward Northeastern.

Not so fast, we may have suggested.

While I do not think families should pick schools based heavily on future salary, in this case I think it makes sense to point out that the family could save themselves well over $150,000 in the pursuit of one bachelor’s degree. We would likely tell the mom about an excellent resource to compare actual average salaries of new graduates.

Educate to Career

Educate to Career is the only resource that provides real average salaries of students majoring in specific disciplines at individual schools. The nonprofit is pulling the same federal employment figures that the federal government could release if Congress hadn’t forbidden the U.S. Department of Education from doing so. Educate to Career made an end run against this ridiculous prohibition that resulted after intense lobbying from private higher-ed interests.

Take a look at the following jobs and salaries data for SUNY at Binghamton and Northeastern University, as detailed by Educate to Career:

Note that the salary from SUNY Binghamton beats Northeastern’s salary in every occupation!  It doesn’t take a Ph.D. in math to see that a Northeastern U. degree has an extremely low return on investment.

Of course, there are always exceptions; however, from what we’ve witnessed and researched, the high-cost colleges simply don’t measure up in many, if not most, cases.   

So, especially when it comes to college choices, it actually does pay to look before you and your college-bound teen leap.

* U.S. News rankings don’t measure academic quality. They do, however, care about what percentage of students that a school rejects. As well, schools have been caught falsifying numbers in order to bump themselves up in the rankings.