Ivy League vs. State University: Which is the Better Financial Decision?

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Hi Whit,

My wife and I are having a problem deciding what to do about our daughter Kathryn’s college decision.

On the one hand, we and Kathryn are thrilled that she was accepted to an Ivy League school, but on the other hand, she could also go to the state university which has an excellent honors program. The difference is that we would have to pay over twice as much for the Ivy, the one that Kathryn wants to go to.

Despite the large amount of financial assistance that Kathryn would get, the difference is still significant enough to make us lean towards the state school. We would have to take on more debt at a time when we were hoping that we’d be cutting down on what we owe. Or our daughter would have to take our student loans that would impact her lifestyle after college. We would love the idea of her going to an Ivy League school, but it just doesn’t seem practical. Any thoughts?

Down on Debt


Dear Down:

My first thought is that the Ivy League school expects you to pay a significant amount because you have the assets to handle it. As I understand the parental contribution expectations, primary residence and retirement assets are excluded when determining which assets are available for meeting college costs. Look at what you have that can be converted to cash to pay for your daughter Kathryn’s education, and maybe you’ll see how you can manage the costs of an Ivy League education.

Before you do that, however, you and Kathryn should talk about specifically why the Ivy is her first choice as a way to compare relative advantages of the two schools.  What I recommend is a Franklin list (named after famous, financial relativist Benjamin Franklin) or + and – comparison, or a breakdown of the pros and cons to get down on paper or electronic screen what looks so good or not so good about the Ivy and the public.

If Kathryn wants the Ivy League college for its prestige and no other reason, you and your wife and your daughter have a simple choice—the Ivy. The decision becomes more complicated (which is why I recommend the Franklin List first) if other factors contribute to what constitutes the best place for your daughter.

Here are some possible areas that might help you and Kathryn get to the heart of the matter. Intellectual environment: Does she want to be among people who love to use their brains and can stimulate her gray matter? Does she want to increase her chances for monetary success? (Research findings are mixed, although the prestige factor matters in some professions.) Has she picked out a field? If so, what is the reputation of the department at the college? These questions can help put the decision into a focus that might make the relevant factors clear.

Once having fleshed out Kathryn’s requirements, you and your wife have to decide what you can handle as well as what Kathryn should be expected to shoulder as her share of the load. From my experience in the financial realm, I advise that you look at the amount required as an investment rather than a debt.

Consider your contribution to your daughter’s education as a way to increase the odds of a valuable college and life experience. Your intention to minimize if not avoid financial obligation for your daughter is admirable. However, you might want her to have a stake in her investment.

If Kathryn has arrived at a decision through honest self-examination, her selection of a college will bring her both success and happiness, now and later, an outcome most parents would be thrilled to put their money on.


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