Does College Selectivity Predict Earnings? Sort Of.
Credit: John Greim / LightRocket / Getty Images- A new study reveals connections between college selectivity and future earnings.
- Among less-selective institutions, greater selectivity doesn’t equate to higher earnings.
- Attending a very selective institution correlates strongly with higher wages, especially within the highest earnings percentiles.
- Variables such as gender and academic major can also determine future earning potential.
Hundreds of thousands of students compete each year for coveted spots at our nation’s most elite universities, and the number of applicants continues to trend upward.
Why?
The underlying assumption is that degrees from prestigious institutions pay off. This assumption has been confirmed by multiple studies.
For example, a 2023 report by Opportunity Insights, a Harvard University-based research group, found that attending an Ivy-Plus college gives graduates a 60% better chance of reaching the top 1% of earners than attending a public flagship.
And public flagships aren’t scraping the bottom of the academic barrel.
But wait. It turns out the story isn’t so simple. Yes, attending a top university pays extra dividends, but not uniformly.
That’s the conclusion of a November 2024 study titled “Understanding Variation in Post-College Earnings: Evidence from the U.S. Department of Education’s College Scorecard,” published by the Annenberg Institute at Brown University.
As the title suggests, the three authors — all from the College Board — use data from the College Scorecard to determine if attending an elite college pays financial dividends and, if so, how much.
Here’s what they found. Among less-selective colleges, institutions accepting more than 40% of applicants, there’s no link between selectivity and earnings. Attending a school that accepts half of its applicants doesn’t pay off any more than attending one that accepts 80%.
But the relationship between attending a more selective institution and earning higher wages is much stronger, especially above the 75th earnings percentile. Above the 90th percentile, the link between elite colleges and earnings is vastly more significant.
What’s more, gender inequity becomes readily apparent. Men earn $5,000 more than women six years after college entry, a gap that grows to about $9,000 at the 10-year mark.
The more selective the college, the greater the disparity. Among graduates of colleges that admit fewer than 20% of applicants, median earnings for women at 10 years trail those of men by $16,000.
Another significant factor determining income is the field of study a student chooses — again, depending on the selectivity of the institution that student attends.
In some fields, such as criminal justice, social work, nursing, and education, there’s no relationship between selectivity and earnings.
Yet in other fields, including computer science, finance, economics, political science, and marketing, selectivity correlates strongly with income, particularly among the most selective colleges.
The study also found that selective schools tend to have higher concentrations of majors in the fields that pay better. From this, they conclude that the strong relationship between college selectivity and earnings exists partly because selective colleges offer more programs in high-paying fields and fewer in low-paying ones.
You can’t major in education at Stanford University.
What’s the big takeaway here?
Yes, where you attend college might dictate your future earnings, depending on the selectivity of the institution and what you study. Your gender could also play a role.
The link between selectivity and earnings is a “nuanced relationship,” the study concludes.
Another takeaway is that students concerned with future earnings (read: most of them) should look beyond the simple “median” salaries reported on the College Scorecard. That’s because there’s “remarkable overlap” in the earnings distribution across colleges, even between institutions with large differences in median earnings.
As a result, the study says, “median earnings may distort perceptions of students’ expected earnings after graduation.”
Instead, students should access the more complete set of data on the College Scorecard site, examining earnings at the 25th, 50th, and 75th percentiles for each college and how earnings differ depending on major and gender.
Today’s students attend college primarily to improve their employment opportunities and build better lives for themselves and their families. As such, they’re paying close attention to return on investment (ROI), the payoff from four (or more) years of work and potentially tens of thousands of dollars in student loans.
Predicting an answer to the ROI question can be difficult, though this new study makes doing so a little bit easier.