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Home » Blog » Return on Investment at Top Tier Schools
  • Contents
  • Understanding Selectivity and the Tier System
  • Comparing the Tiers
  • Evaluating the Costs and Returns
  • Maximizing Return on Investment (ROI) Regardless the Tier
  • The Final Verdict

Return on Investment at Top Tier Schools

Penny Redlin
By Penny Redlin
January 25, 2024
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Stack of Brochures for Top Tier Colleges

Aside from the bragging rights, do college graduates from top tier schools make more money than those from other colleges not in the top tier?   The assumption is that by gaining acceptance into an elite school you must be one highly intelligent people and that paired with a degree from a top tier college, you are all but assured to be financially successful right? Well let’s see.

A number of factors come into play that effect the trajectory of someone’s career and financial success.  Some of these factors are not teachable and may be innate. Risk tolerance, interpersonal skills, and good old-fashioned grit for example can certainly play a role in determining success.  But let’s set those aside for now and just look at the data to determine, if in fact, graduates from top tier universities realize a higher return on their higher education investments.

Understanding Selectivity and the Tier System

The numbers are constantly changing but there are about 4,400 colleges and universities across the United States educating over 18 million students.   During the 2022-2023 application season nearly 3 million college applications were submitted representing a whopping 41% increase from the pre-covid 2019-2020 season.

With so many applications going out, colleges can be selective regarding who they invite to attend their schools.  Selectivity levels (i.e., acceptance rates – the percent of applicants admitted to a school) define the tier the school belongs to, with the most selective referred to as “top tier”.

The tiers are generally defined as follows:

Tier Acceptance Rate Approximate % of Schools within this Tier
Tier 1 - Top Tier 10% or Less 1%
Tier 2 - Top Tier 10-25% 3%
Tier 3 25-50% 19%
Tier 4 50-75% 52%
Tier 5 More than 75% 25%

Based on these figures, top tier schools (Tiers 1 and 2) would represent about 176 schools in total, with Tier 1 accounting for a mere 44 schools in total.   Does being among this elite class signify an ability to rise to the top that others don’t possess? Does it all but guarantee a future much brighter than those attending lesser tier schools?  Let’s compare a sample school from each tier to better understand the realities of attending a top tier vs a lower tier school.

Comparing the Tiers

A sample school was selected at random from each of the tiers for the purposes of our evaluation.  Average attendance costs were collected for each school. Salaries are again based on total school averages and can vary widely based upon career field, size of company worked for as well as size of city (i.e., market) and the current job market.  We will use these figures to give us an idea of what to expect from each, these numbers certainly are not entirely representative of the tier itself.

Sample School Tier Comparison Table

Tier 1 Tier 2 Tier 3 Tier 4 Tier 5
School Harvard UCLA Boston College Penn State University of Arizona
Cost of Attendance/Year $79,450 $28,205 In-State/$60,779 Out-of-State $62,950 $32,270 In-State/$51,635 Out-of-State $30,354 In-State/$53,103 Out-of-State
Total for 4-years $318,000 $113,000 In-State/$243,000 Out-of-State $252,000 $129,000 In-State/$207,000 Out-of-State $121,000 In-State/$212,000 Out-of-State
Average Undergrad Starting Salary $80,000 $63,000 $62,000 $68,000 $62,000
Estimated Salary Mid-Career $186,000 $154,000 $142,000 $124,000 $126,000
All figures are approximate and can vary over time.

Notice how the cost of tuition in Tiers 2-5 are similar to each other as well as starting salaries, which are roughly the same.   Average starting salaries for newly minted undergrads from the Tier 1 school are about 20-25% higher initially and range between 20-50% higher by mid-career.  So with respect to lifetime earnings, only some of the top schools, those in Tier 1 look to provide a higher return overall on average but it will take some time to get there.

Evaluating the Costs and Returns

For many getting into a Tier 1 school is a quite a feat in and of itself and truthfully, only a few will succeed in this goal.   For the rest of us, it appears that a degree from any other college can perform well and yield respectable returns on investment. Obviously, the greatest investment returns come with in-state tuition at a public university versus out-of-state tuition (even at a public school) which is comparable to the cost at a private college.

Keep in mind those other factors that can also greatly impact overall financial success  regardless of the tier your school is in.  Risk tolerance, interpersonal skills and grit could potentially make a scrappy, risk taking  innovator from a Tier 5 school run circles around a very conservative, inarticulate graduate from a Tier 1 school.

Maximizing Return on Investment (ROI) Regardless the Tier

While the odds may appear greatest with a tier 1 school, you can maximize your return on investment at any school by taking advantage of some money saving strategies.

Obtain Residency Status

As noted above, in-state tuition can’t be beat and to receive this discounted rate you must have residency status.  If you already live in the state of the school you want to attend then this is a non-issue, your status is already established.  If you live out of state, you might want to consider deferring enrollment, taking a gap “year” between high school and college and moving to the state for whatever period is required to establish residency (typically around 12 months) before enrolling in school.

Consider Attending a Community College

Often thought of a stepchild of sorts to higher education, community colleges can offer significant savings while you knock out your general education requirements.  As long as you ensure your credits will transfer, and most of the time they will, you can start at a community college and finish at your 4-year school, having paid much less overall and still receiving a college degree from your university of choice.

Apply for Scholarships 

Many people overlook the value of scholarships.  They should be  top of mind when applying to college and as you enter your freshman year, but once at the school don’t forget about continuing to try and win them.   You can apply for scholarships throughout your college career, and you should.  Competition decreases after freshman year, and as your college years progress you could be awarded   thousands of dollars you can use to reduce your educational costs.  Make it a habit to spend some time each week and increase your odds of chipping away at tuition.

The Final Verdict

It appears that 1% of colleges can offer a higher average starting and mid-career salary than those of other colleges. The costs of the elite schools can be more but unless you have in-state tuition, which represent significant savings, out-of-state tuition for public schools and private colleges are not far off from each other.

As seen in the sample, there are state schools in Tier 2, so in-state tuition at a top tier school can be achievable.  Don’t forget to factor in career choice, market demand, size of market to work in as well as personality traits that can impact overall success when calculating ROI at any college.

So ultimately it comes down to you.  You can determine your return on investment within any tier as long as you do your best to minimize costs and take advantage of opportunities that maximize your salary potential.

Share

Penny Redlin

Penny is the Content Marketing Manager for Edvisors.  She is tasked with optimizing website content and managing SEO performance.  A seasoned marketer with a diverse background in brand management, e-commerce and digital marketing, Penny brings an array of experience with her. An MBA from the University of Chicago, entrepreneur and author, Penny's experience offers a unique view to content creation and curating.

Find Penny Redlin on LinkedIn.

If you would like to schedule an interview with Penny, please reach out to us at [email protected]

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