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I’VE TAUGHT BEHAVIORAL economics, which holds that even our most important decisions are influenced by unrecognized biases. For my students, there’s no better example than the choice of where they went to college.
Although the cost is enormous, the decision of where to go hinges on the smallest things. A teenager who says, “I want to be close to my boyfriend,” will zero in on a nearby college, even if her high school romance is fading. The opposite impulse—to go far away—led my brother from New Jersey to attend college in Los Angeles.
After my children toured colleges, we didn’t hear anything about the number of students who go on to get graduate degrees or the percentage of students who graduate in four years. Instead, we heard about the elegant ballet flats the tour guide had worn, or how cool it would be to attend a city school.
When faced with a difficult decision, people tend to ask themselves an easier question and answer that one instead. We usually don’t notice this substitution and later tell ourselves that we considered our options carefully.
Because America is full of great colleges, little harm is done by such decision-making shortcuts—until the bill comes due. Those who borrowed to attend their dream school can find themselves drowning in debt, unable to pay both their student loans and their rent.
When I enrolled at the University of Rochester in 1974, it cost $4,000 a year. Tuition, room and board now exceed $80,000. Wages have risen at a far slower pace than the 20-fold increase in college costs. Many students realize too late that the central question at the heart of their college decision is, “Can I afford this given the salary I’ll earn afterward?”
That’s a hard question to answer, especially for 18-year-olds. That’s why parents of college-bound seniors may want to consult The Wall Street Journal’s 2025 college rankings published this month. It gives extra weight to financial outcomes, particularly how much a school “boosts a student’s salary beyond what they would be expected to earn regardless of which college they attended.”
Viewed through this return-on-investment lens, some unfamiliar names rose to the top. Business- and technology-focused schools like Babson, Claremont McKenna, Georgia Institute of Technology and Davidson all broke into the top 10 colleges in the nation. Bentley University, Lehigh University, San Jose State and Virginia Tech landed in the top 20.
That’s quite different from the U.S. News & World Report rankings, issued this September for the 40th year. By now, many schools have gamed the U.S. News rating systems to raise their standing. No less of an authority than U.S. Education Secretary Miguel A. Cardona said, “It’s time to stop worshiping at the false altar of U.S. News & World Report. It’s time to focus on what truly matters: delivering value and upward mobility.”
The Journal seems to be trying to do that. Still, it’s wise to view any ranking system with skepticism. The Journal’s algorithm does produce some head-scratching results. The college where I taught, St. Joseph’s University in Philadelphia, is ranked No. 42 nationally, ahead of Duke (No. 45) and Dartmouth (No. 57). St. Joe’s may be benefitting from the extra credit given to schools that create upward social mobility, helping students to rise above where they started in life.
The Journal estimated that St. Joe’s added $51,405 per year to a typical graduate’s salary and cost $31,894 a year after scholarships and discounts. At this rate, St. Joe grads would need an average of just two years and five months to repay their student loans, according to the Journal, provided they used only the extra pay that their degree added to their wages.
Compare this to Savannah College of Art and Design, No. 431 in the Journal’s rankings. Savannah added $17,274 a year to the average graduate’s salary but cost $44,790 a year to attend. It would take Savannah grads 10 years and four months, on average, to pay off their student loans using only the extra pay conferred by their arts degree, according to the Journal’s calculation.
What should we make of the Journal’s ranking? Is St. Joe’s really a better school than Duke? Certainly not in basketball. The Journal’s system is still on its shakeout tour, I suspect. That said, a contrary view—even when flawed—can open the eyes of high school seniors to a wider array of colleges.
When making a difficult decision, behavioral economists advise us to place one hand on the data. Seeing how others have fared when making a similar choice can disrupt our tendency to make snap decisions.
Psychologist Daniel Kahneman said data can provide us with “the outside view.” In this case, the outside view might disrupt the tendency to fall in love with a college based only on the campus tour. Kahneman called that kind of decision-making “the inside view,” and wrote that it’s based on WYSIATI—what you see is all there is.
Greg Spears is HumbleDollar’s deputy editor. Earlier in his career, he worked as a reporter for the Knight Ridder Washington Bureau and Kiplinger’s Personal Finance magazine. After leaving journalism, Greg spent 23 years as a senior editor at Vanguard Group on the 401(k) side, where he implored people to save more for retirement. He currently teaches behavioral economics at St. Joseph’s University in Philadelphia as an adjunct professor. The subject helps shed light on why so many Americans save less than they might. Greg is also a Certified Financial Planner certificate holder. Check out his earlier articles.
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For those in the process or soon to be in the process of searching for the right college for a family member, The Washington Monthly has published an annual guide for a number of years. Here is how they approach it “We rank liberal arts colleges—four-year institutions that award almost exclusively bachelor’s degrees and that focus on arts and sciences rather than professional programs—based on their contribution to the public good in three broad categories: social mobility, research, and promoting public service.” Here is the link to the 2024 report https://washingtonmonthly.com/2024-college-guide/national/
Thanks so much, Greg, and everyone who commented. I’m trying to gently guide my grandson, a very mature and independent kid, but still only 18, through the process. We had a blitz of college visits one weekend in August and he seemed to like them all. Today was SAT day. 🤞🏻
I went to Rochester Institute of Technology a few years before you went to the University of Rochester. My main concern at the time was the cost, our family didn’t have much money to begin with and my father had been unemployed for most of the year before I started in the 1967-68 school year. I wanted to go into engineering, and I could commute from the nearby town where I lived. RIT was scheduled to move to a new campus that year, but it didn’t happen until the following year. My first-year tuition was $2050.
RIT had about 4000 full-time students at the time. It had a good regional reputation but wasn’t well-known nationally. Do I think that I made a good choice? Yes, I got a good education, and the culture was right for me. I didn’t know that at the time, however.
RIT is a much different institution now. With about 17,000 students, it’s one of the 20 largest private colleges in the country. Would I fit in now? I’m not sure, but I’m pleased with the way that it has evolved. They’ve forged their own path and appears to still offer a great education.
The university where I teach, which is also my undergraduate alma mater, ranked #12 on the WSJ list, so that’s good, I guess. I already knew this because our chancellor is really good about amplifying stuff like that on social media. 😂
I notice that discussions of college, including in some of the comments here, seem to assume a four-year residential degree as the default option. But many, many students go to community college before transferring to a degree program and/or choose a commuter school where they can live at home to save money. And with a few exceptions, it doesn’t matter all that much if you get that degree from a pricier school as long as you get one.
My point is that there are a lot of different ways to look at this (including not going to college at all, of course).
SCAD was a school my now art-school-dropout considered. We completed the difficult task of selecting colleges during the pandemic, when no in-person school tours were occurring and many schools had no in-person classes. Many dorms were closed as well, complicating the “off to college” experience. I felt the process was a crapshoot for my twins, despite my own work in higher education and years of preparation.
We endured further complications, like the government revising FASFA (no more “discount” on family contribution for having multiple students in college at the same time), and the University of California ending consideration of standardized test scores in admissions decisions (diminishing my teens’ chances, with good SATs but a negative impact on their GPAs after my spouse’s unexpected death in their second year of high school.)
Further research may indicate many irrational decisions were made in those selection years. Over the coming generation we’ll see what impact, if any, that lack of rationality created, though the passage of time and the piling on of additional variables could mask effects on this cohort of young adults of the pandemic and institutional decisions on school closures.
I repeatedly told the kids not to worry, just try for a good choice, and do their best. That their choice could be changed later (at a cost of course, to them and to me.) That nearly all accredited institutions of higher education will provide a good higher education…
An earlier comment recommended the government’s College Scorecard website, an excellent resource for parents and interested students. https://collegescorecard.ed.gov/
I’ve had lots of time to consider the art school paradox. It really comes down to what “truly matters”.
While the secretary of education might believe the point of college is “…delivering value and upward mobility”, that is a modern notion. Especially if “value” includes intangibles. And the idea of a college degree delivering upward mobility hinges on the goal of college education for a particular segment of America’s youth (and families who will also benefit from their upward mobility). I can think of plenty of people who would be happy simply to avoid any further downward mobility.
Art schools allow creative people to learn more about the act and outcomes of their efforts, spending most waking hours with other creatives. Even if my youngster did not graduate, they were able to meet people and live in a big city on their own at an early age. Indelible memories and amazing pieces of work. Leaving art school early meant a big reduction in the overall cost of attending college with virtually no hit to future earnings.
They have now moved on to a full-time job and night classes at community college (which they are paying for themselves) toward finishing their undergraduate education. Whenever they head to an art supplies store for raw materials I get excited, because each work they create makes my world a more beautiful and inspiring place. This is one value of art education. If I’m not inspired, what’s the point of life? If I can be surrounded by beauty, how lucky I am.
Ron Lieber’s The Price You Pay for College was the most helpful book I read. Three possibly distinct goals for college education in the minds of students: fun, a career, learning. Unsurprising that the most popular major where my other twin will complete her undergraduate education next May is also the one with the highest immediate salary. But that is not her major, and I hope that she will make the best possible use of career services to find a good first job after graduation. Regardless, I know her four years (and her sibling’s too) have contributed to her “formation” as an educated person, ready to engage in a world that’s vastly different than the one I graduated into.
Both are college-debt free.
Luckily, I had grants and workstudy for my college degree. I worked 22 hours a week. I didn’t really get a degree for a job, but it has had lasting effects on my choices in life. The time I had to study, contemplate, discuss subjects was of immeasurable value. I went to a land grant college, which was intended to be as cheap as possible. Nowadays, there are fees for the gym, other amenities and one bedroom costs $1K a month. And, there is a food bank and clothing bank for students who cannot afford such things. I went back for a Masters in the 90s and it was not particularly expensive. For me, though, I had no particular direction or expectation of a destination, rather it was all about the journey. The expense, I think, is leaving too many kids behind.
I have a good friend who never wanted to go to college while she was in high school. No one in her family had attended college, and she didn’t like studying or classes. Nevertheless, she signed up for a bus trip to visit a nearby college simply because it was free and meant a day away from school.
During the tour, she was unimpressed by everything the group learned about classes, professors, dorms, cultural events, etc. It all seemed irrelevant to someone who assumed she would immediately begin working 9-5 in a shop or factory after graduation, just like everyone else she knew.
Then the group walked through the student center/cafeteria. My friend was astounded to see people about her own age laughing, eating, smoking, and having fun in the middle of the afternoon. She instantly decided that she would go to college after all.
Though she freely admits that she went to college mainly to have fun (and she pursued that path diligently), she ended up with a career in social work and helped hundreds of people before she retired. But she always maintained that she went to college in order to be able to sit around with friends and smoke cigarettes every afternoon without being forced to hurry back to a job.
My wife commented to me last night, “Remember what we were doing last year at this time?” I do–picking a college for our daughter.
Her route is different from ours. My wife had a four-year, all-inclusive scholarship to UCLA for undergrad, then piled-on debt to attend Emory in Atlanta. I chose a small state school in Jacksonville so that I could commute from my hometown. Emory was probably the right choice if an academic career was the goal. But for a clinical physical therapist, my much less expensive education was the smarter choice. I bought the same income as hers for a fraction of the cost.
My daughter wanted assurance from us that she was choosing a degree that would pay off, but also wanted a school that fit her personality, habits and thinking. We indulged her–and ourselves–by helping her choose a small, faith-based school that emphasizes academics. We’re paying a price that’s high to me, but we prepared for it, and she’s our only child.
I don’t miss the hunt for the right school.
Thoughtful post, Greg. Reminded me of a very interesting article in this past weekend edition of the Wall Street Journal, wherein a very good case was presented for the reason there is an influx of students who are currently opting to go to Southern colleges.
Not only are there considerable financial differences, but too many colleges have a politically charged atmosphere. Many students are more interested in receiving a good education, as opposed to participating in political protests, as evidenced by the recent problems at Columbia University in NYC.
Perhaps. However, Columbia admitted 3.85% of applicants this year which was essentially unchanged from 3.9% the previous year. NYU’s 2024 acceptance rate was 8% versus 16% in 2023 and 21% in 2022. Despite high “retail” tuition, room and board, Columbia had an average net price of $23,497 after taking into account grants and scholarships according to the WSJ. For Princeton, the net price was only $8,143 which no doubt contributed to its being ranked #1.
While I can see some value in looking at the various college ranking services, I suspect the most important determinant for success depends on the student. Much has been written about boosting the student’s chances for admission to the “best” schools; good high schools, tutoring, SAT/ACT preparation courses, enhanced resumes with various extracurricular activities, etc. Yet, I wonder about the student’s personality traits and whether he or she finds a place where they feel like they “fit in” and will more likely apply themselves. I think any well motivated student attending a good college, even if it isn’t in the same league as Harvard, who works hard will do just fine. And more importantly, those traits will make a bigger difference in their post-college work career than the name of the college on their diploma.
The freshman year is marked by that fish out of water feeling, for most everyone. And, that year represents huge personal growth in dealing with that.
I agree.
Very good article. I do think there’s merit to discriminately deciding “which college”, especially to prevent overpaying for value received. But just as asset allocation is more important than stock picking, I think the more important question is “which major”. I’d suggest a degree in a field that’s in demand (from any accredited school) is worth more than a degree in a field that isn’t in demand. Of course, there’s always exceptions, but I suspect this is generally true.
Taking the children to visit colleges is kind of a ‘right of passage’ for us old boomers.
Did any of your kids refuse to even get out of the car a college?
Did any of your kids attend your Alma Mater?
It’s where their mother and I met.
Not a one of our kids went there even though they all dutifully visited and applied there.
(Interestingly, to us at least, a couple of our
kids spouses DID go there.)
Making an evidence-based decision is always solid advice, Greg. I’d urge anyone interested in comparing college outcomes to visit the Department of Ed’s College Scorecard. The site offers an easy on-ramp to graduation rates, student debt, graduates’ salaries, and many other institutional data. It provides both institution-wide data and data for specific majors, and has tools for comparing institutions. A comprehensive site, without the taint of commercialism.
Great article Greg. Choosing a college and a career path is such a challenge for an 18 year old.
I always enjoy your “behavioral economics” based articles. I think this point is one we all struggle with.
“When faced with a difficult decision, people tend to ask themselves an easier question and answer that one instead. “
Financial planning involves lots of complicated topics and concepts, and necessarily involves at least some level of math facility. It’s fascinating to observe how differently approach this challenge. It’s one of HD’s main benefits – the chance to watch and understand how others have approached similar financial problems.
I think that habits are the most important behavioral thing you can develop to follow a plan. But this site offers space for ideas as to what goes into your plan.