One of my favorite topics: Is it worth it to go to an expensive college?

This is one of my favorite financial topics to investigate and talk about for several reasons – 1) due to the insanely high costs of private education these days and 2) because at the company I work for, there are many people from expensive schools that enjoy sharing their stories of debt. So, let’s get started.
The question on the table is “Is it worth it to go to an expensive college?”
As usual, the answer to this, I believe, is that it just depends. Some jobs, such as financial banking and other jobs of that nature, almost require it as a prerequisite to work at the company that you went to one of the Ivy League schools. However, for most other types of jobs, this is not the case.
So, let’s start by comparing the cost to attend a top private school versus a not-so-prestigious state funded school. We’ll expose the costs by talking about two imaginary folks – Jane and Jon. Jon went to the state school. Jane went to the private school.
Jon and Jane were both top notch students in high school. They made straight A’s, took all sorts of AP classes, and did volunteer work. Both students basically aced their ACT and SAT tests, so they really had their pick of wherever they wanted to go for college. 
In the end, Jane decides to go to Harvard. Jon decides to go to the University of Arkansas. Jane has to take out a loan to cover the $50,000 per year tuition to go to Harvard. Jon gets a full ride to the University of Arkansas, and on top of that, the University will pay him a $10,000 per year stipend as well. Jon and Jane both graduate in four years time, and at the end of that, their balances are shown below.
Jane = -$200,000 in debt to the bank, assuming that interest starts to accrue after college is over
Jon = +$40,000 from the stipend he received
After school, Jon gets a job as an engineer/project manager at a company making $45,000 per year. Jon wanted to work at a pharmaceutical company or investment banking company, but couldn’t find any companies to work for interested in hiring Arkansas grads because there are no companies like that in that area. Jane gets a job as an entry level research scientist at a pharmaceutical company, making $70,000 per year. This is her 1st pick, top choice for the job she has always dreamed of!
Both Jon and Jane have $1,500 per month in living expenses ($18,000 per year). To keep things simple, let’s pretend there are no taxes. Jon takes the remaining $27,000 and invests the money in equity funds for retirement. Following my rules for which accounts to contribute money to that I previously posted, we can deduce that Jane will invest 6% of her income in her 401k to take advantage of the company match ($4200), leaving her with $47,800 per year left. Let’s assume that she will take this entire amount and pay off her student loans. Once Jane pays off her loan in 4 years, she will have a net worth of $0 and then will begin to invest the entire amount of her salary after living expenses ($52,000) in equity funds for retirement.
All else being equal, this pattern continues to occur and we assume they receive an equal 12.4% annual return. How long will it take for the net worth of Jane and Jon to become even?
After running the calculations, the answer to this is very interesting. They will both have an equal net worth at the age of retirement – Age 65. Fantastic!!!!

So, this bring us back to the original question of is it worth it to go to a top private expensive college. The answer seems to be NO from a purely financial perspective.
The case is made further for going to a cheap public school when you examine the fact that you can go to many state schools on the East Coast such as Penn State, Rutgers, and University of Virginia where companies recruit that also frequent top private institutions. At these companies, if you have the same degree, you will get paid the same. So, a scientist from Harvard would get paid the same $70,000 as a scientist from Rutgers. 
Awesome!!!! You learn something new every day.
Keep on investing!
Jacob

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