September 5, 2018 / 9:11 PM / a year ago

Graduates of selective U.S. colleges earn 20 percent more after a decade - study

NEW YORK, Sept 5 (Reuters) - Students who graduate from selective U.S. colleges earn more than their peers in the long term, and majoring in a technical field adds to the premium, a study from the New York Federal Reserve released on Wednesday showed.

Students of selective colleges on average earned 20 percent more 10 years after enrollment than those who attended non-selective schools, New York Fed economists Rajashri Chakrabarti and Michelle Jiang wrote in a blog post.

Their earnings power was compounded if they entered a science, technology, engineering and math (STEM) field, they said.

The authors defined a selective college as those in the top three of six tiers in 2001 for “Barron’s Profiles of American Colleges,” which ranks schools based on their acceptance rates, students’ median entrance exam scores and other factors.

In more recent versions of the rankings, the top three tiers included Ivy League colleges as well as schools such as University of Michigan at Ann Arbor and Southern Methodist University.

The analysts found that students who attended for-profit colleges on average earned 18 percent less than peers at private not-for-profit colleges.

“Overall, we find large positive premiums to selective college attendance and choice of a STEM major, and find large penalties for for-profit college attendance,” Chakrabarti and Jiang wrote in “Education’s Role in Earnings, Employment and Economic Mobility.”

Even in the medium term, or six years after enrollment, graduating from a selective college makes a noticeable difference in a student’s average salary. These students made 11 percent more than their counterparts who enrolled in non-selective schools, Chakrabarti and Jiang said.

Going to a top college did not make much of difference in obtaining a job, they said. But students who attended for-profit schools had a 4 percent less chance of employment when compared to those who enrolled in private not-for-profit colleges,

“The employment and earnings results collectively imply a markedly higher job quality for selective college and not-for-profit enrollees,” Chakrabarti and Jiang wrote.

Enrolling in selective colleges offered long-term economic mobility for students, they added. The income gap between students who attended for-profit colleges and those who attended non-profit colleges grew by 117 percent over 10 years.

This has policy implications for for-profit colleges if they intend to comply with “gainful employment” regulations which stipulate their educational programs prepare students for a recognized occupation so they can be eligible for federal student-assistance funding, the economists said. (Reporting by Richard Leong; Editing by Cynthia Osterman)

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