Should you pay for an Ivy league school?




Your student got accepted to an Ivy league, now what?

Well, very likely the price tag of the school per year ranges from $90k to $110k when you account for the Books/computer, living allowances and housing. 

Here is a detailed table containing the tuition fee, books and computer expenses, apartment costs, and living allowances for all Ivy League colleges for the academic year 2023-2024:

UniversityTuition Fee (USD/year)Books/Computers (USD/year)Housing (USD/month)Living Allowances (USD/month)
Brown University68,230Data not available1,6181,618
Columbia University69,0451,3921,5951,630
Cornell University66,0141,3541,7311,731
Dartmouth College65,7391,0051,7541,754
Harvard University59,0761,0002,2192,219
University of Pennsylvania66,1041,3581,7971,797
Princeton University59,7101,0501,9401,940
Yale University64,7001,0001,8831,883

Here I will compare these price tags to other best alternative such as in-state school for example. For argument's sake, I will consider someone who lives in Texas 🤠 and who got an acceptance letter to ALL in-state colleges:
CollegeTuition (Resident)Books & SuppliesHousing & FoodTransportationPersonal ExpensesTotal Costs (Resident)
University of Texas at Austin$10,858 - $13,576$724$14,136 - $14,840$1,682$3,352$30,752 - $34,174
University of Texas at San Antonio$11,442$1,000$14,248$740$2,124$29,622
Texas A&M University$12,050 - $13,770$900$13,770$2,034$3,360$32,174 - $34,966
Texas Tech University$11,060$1,200$11,303$2,731$2,000$28,294
The total cost per year would be at most $30k to $40k per year.

Obviously, the network you would be able to access to for job opportunities and growth would be different whether you attend an Ivy League or not, as well as the salary you will get Early Carrer and Mid Career, but is it worth the price tag?



I will try to address this question by doing a Net Present Value comparison and considering the following assumptions:
  • Free risk interest rate 5%
  • Tuition loan 12%
  • Start accruing interest immediately
  • Start repayment at graduation
  • 10 year student loan
  • Ivy league first job salary :$86k
  • Ivy league annual salary growth: 6.5%
  • Other universities, first job salary: $60k
  • Other universities annual salary growth: 5.5%
  • Parents contribution: $0k
  • 15 years analysis
Ivy League:  NPV = 198k and IRR =13.6%

Texas In-state: NPV = 388k and IRR = 28.7%!!!



You can copy the file here

The reasons for the result are:
(1) the high cost of debt : 12%
(2) the exorbitant total tuition for Ivy League that would need to be financed 
(2) the Ivy league average first year salary and average growth may differ from industry to industry and individuals

In my opinion, if you do not have any financial help in the form of a scholarship, grant or additional income during the 4 years in college, it will make no sense (economically speaking) to attend an Ivy League for your undergraduate program.

But who knows, it may be beneficial to do so for your graduate program, if you are willing to defer further first income; which is all together another study case.

I hope this analysis and the file may help you.

Drop me a note or comment if you have questions.

Cheers!

Daniel Silva


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