I quickly made a spreadsheet on google doc that I think models the situation well. Heres the link
https://docs.google.com/spreadsheets/d/16GS13khTxaj67H045wC24Ye2YY3cS2DiIkt6SUEgWRk/edit?usp=sharing
Anyways it depends mostly on how much of your salary you are able to save. Anything over 30% means the 60k/year school is worth it.
Comment on the sheet or here if there is something you don’t understand about it, or I made a mistake somewhere.
A good way to try to think about it, but unfortunately there are a few key conceptual errors here that make any predictions like this deceptively hard to make. Not to say it’s impossible, but it’s a bit more complex than that.
The first problem is that you are inferring too much about the future. Personally, whenever I have made forecasts like this, I found that any predictions that go beyond 20 years into the future are impossible to make. While you could probably answer “where do you see yourself in 5 years?” with a decent degree of accuracy, it is much harder to be accurate about “where do you see yourself in 15 years” and you can very well be completely wrong about “where do you see yourself in 25 years” (unless your answer is “in a mirror” 
).
Even as an average case performance (more like “median case” here though), it’s pretty hard to imagine that someone would work and receive a 3% year-on-year raise for 45 years, no more no less. In fact, I’d say that one of the arguments in favor of an elite school is the idea that Elite U credentials would give you a much faster growth curve - that is, not only do you start with a higher salary but your salary will also grow at a faster rate. Those credentials, and perhaps the skills you learned in school, may be more likely to propel you into the high growth positions at the top of the industry, or give you opportunities to found startups that State U would not have. I’d personally try something like giving the Elite U grad a 5% year-on-year raise, while leaving the State U at 3%, to test this assumption, and I’m sure you’d agree that that would skew the results much more in the favor of Elite U over time. It’s not a great assumption, but it’d be a start.
A related issue is considering the bounds of student performance. I’m quite certain that you would find that the low performers (e.g. weakest 10% of students or graduates) of Elite U are going to be much, much better off than the low performers of State U. That would probably look like “worse job than I bargained for” for Elite U, and “no degree or no job, still in debt” for State U. On the high performers, it’s often difficult to separate how much the school does vs how much the person him/herself does to achieve that success. The very top has a tendency to be highly irregular.
The second issue is in how you consider COL to be a simple flat 95% of income. There are two main problems with this:
That will guarantee to shift your model a fair bit.
The third issue is a very simple one but often implicitly supported by people discussing loans. When you choose not to take a loan to go to school, you do not have that money on hand. The government borrowed money to be able to fund a $700 billion stimulus package; I did not borrow that money, so does that mean I have $700 billion on hand? Of course not. The same applies with the loan you do not take for Elite U. And you certainly can’t earn interest on that money you didn’t take in loans either.
The fourth issue has to do with interest rates.
Student loans have a percent interest associated with them, which I usually estimate to be 6% overall. That’s actual money that has to be repaid on some repayment schedule, and the best way to do that is to actually explicitly flesh out a repayment schedule. You may pay more in absolute terms in the future, but perhaps your effective use of that money is going to offset your cost and make the choice of Elite U worth it.
In principle, modeling savings isn’t the worst way to do it, but it’s also not sufficient. Perhaps at a $5k/yr savings, all you can do is invest in an index fund. At a $50k/yr savings, you have enough money to be able to get a significant share of high-risk, high-reward businesses that, on average, will make higher percentages. The $5k/yr saver won’t be able to take those businesses because they can’t diversify enough to avoid a situation in which they might lose all of their money (one bad risk = say goodbye to your entire savings).
I won’t go into detail because it’s a rather in-depth topic, but you really should do the analysis in terms of the [internal rate of return](Internal rate of return - Wikipedia) and [net present value](Net present value - Wikipedia) of the investment. It would be a better way to judge the two.
Hope that helps.
I don’t want to sound too gloomy here… but plenty of engineering students (including one of my own) end up switching majors or even dropping out. When you do the cost analysis analysis, bear in mind there is a small risk that you could pay a tuition premium w/o the salary advantage at the end.
For our kid that took a long and winding road through college (including a year at Walmart along the way… eventually graduated with Econ BA), I’m glad it was all in-state tuition. Otherwise our stressful times would have had added financial angst.
None of the State U vs. Elite U assumptions are germane to the OP’s question. Her daughter isn’t comparing schools with a student standard deviation 1-10 vs. Elite U’s 7-10. She doesn’t have “SE Arkansas Tech” on her list. All of her state options attract very strong students into engineering.
If judging student quality by entry statistics the MIT average SAT was 1505 last year. Cal Poly’s CENG was 1412. Unlike MIT, Cal Poly admits by major, so that number is pulled down by several non-selective majors within CENG (industrial and manufacturing). Majors like ME, Aero and CS won’t have any students who aren’t highly qualified.
So, again, not suggesting Poly is the smart choice, but sticking with the original question, is Elite U worth $140,000 MORE than, not your average or below average ABET accredited State U, but worth $140,000 MORE than a very good State U (insert Texas, Michigan, Florida, UIUC, Purdue, Washington, GT, etc. here)?
One other tidbit that you might want to consider about lower-bounded performance is that Elite U is often much more supportive than Strong State U of its students. One of the old rules that many Elite Us follow that Strong State U usually does not is that they expect everyone to graduate eventually and will prop up those who can’t quite cut it, in ways that a top state school usually will not. Even smart students can do badly in a few semesters for any number of reasons- maybe that one class just really didn’t resonate with them, maybe they’re suffering from depression, maybe life happens. I have seen that Strong State U often boots students from the program and even the school if they aren’t performing up to par. However, in general, Elite Us seem to feel that they are obliged to graduate anyone who they deemed worthy of being accepted. That is a difficult, yet commendable, effort on their part.
Might not matter to a lot of people because no one wants to see themselves as a bottom 10% performer. But it happens to the best of us, and Strong State U tends not to be very supportive. I would posit that Elite U lower bound is still much stronger than Strong State U lower bound.
I agree 100%. Where I tend to waiver is deciding if it is “wise” to buy those fairly soft intangibles for $140,000.
I am debating those intangibles for an extra 80K over a place like SUNY Buffalo.
At the end of the day that extra cost is a real dilemma. To be perfectly honest I have to say that there is no single right answer and that I’d be more comfortable making suggestions based on the specific student, their goals, and their academic/social/economic strengths.
That’s not really true for in-state students here in Georgia. Pretty much everyone here who gets into Georgia Tech has stats that automatically give them the top level of the Hope scholarship, which then pays full tuition. So assuming a kid keeps their grades high enough to keep their scholarship, the total bill is 4 years of room and board. When your choice is GaTech @ ~13k per year, versus (slightly more) Elite U @ ~60k per year, the decision for most folks is pretty easy.
SUNY Buffalo with the Merit Scholarship would be $65K (before inflation) all in. The other schools we are looking at (Pitt, WPI, Case and Maryland) are about double that.
@DoyleB, if we are comparing apples to apples, we really need to use COAs provided by the institutions. That’s because no matter where you go you can whittle away at the edges with less spent on food, books, etc. If that’s the benchmark GT’s COA is listed as $27,442 for instate. Less tuition, that would be $17,630 or $70,520 over 4 years if they get the Zell Miller (Hope is less competitive, but capped at $6990). That’s certainly a screaming deal by any measure, but still not a far cry from $100k.
UCLA COA is 128 K vs. Elite U at 252 K over 4 years
@eyemgh Okay that seems reasonable. $17.6k vs $60k. Per year. The decision is still pretty easy.
@DoyleB, personally, I think so too. 
I find school-provided COAs to be overestimates - keep in mind that the COA determines maximum permissible financial aid that can be given, and it’s unlawful to give aid in excess of COA. Deducing an accurate reduced cost for each school is a different matter and is the far more meaningful number. $100k vs $240k is a much different story than $0 vs $140k.
It is not necessarily difficult for Elite U to ensure that (almost) everyone graduates if they admit only top-end students in the first place. Only a few of the students will get into “life happens” stuff that could risk non-graduation, so Elite U can concentrate resources on them. State U admits from a wider range of academic ability and motivation, so that more of those in the lower end of the admission range are at risk of non-graduation simply for academic ability and motivation reasons.
@Ballerina016, if you have the money, then I look at the $124,000 differential as a gift. Then the question is, what gifts could you buy with that money? There’s a cachet associated with the Brass Rat that is undeniable. That in and of itself is a pretty nice gift. When you look at other things though that money can buy, it becomes a tough decision. That could be a down payment on a pretty nice house. It could grow into a pretty nice college fund for grandchildren. You could simply keep it. I do think however that if you analyze it as a banker would, that additional investment would have to translate into about $2M MORE in career earnings to make up for the opportunity cost. The chances of that are unlikely. Just because it isn’t “wise” though doesn’t make it a bad decision. Wish her luck in deciding where to go.
Having gone to Non-Elite U, MIT (Missouri In Town), there’s some value of not only surviving, but thriving in that environment. I’m not saying I’d recommend taking Chemistry with 600 of your closest friends, but resiliency is an underrated characteristic often fostered in environments where the risk of being cast off is real.
Personally I have found that the most savvy individuals (not necessarily always the most academically successful, but it’s correlated) will find their way eventually, even if there are pretty substantial obstacles in their way. Even if the prestige school was the better choice, and they didn’t make it, they will generally make the best of a worse situation and catch up.
I know, for example, some family members who went to law school in weaker schools (as immigrants, they didn’t have the credentials for Harvard or Yale). Even though that is very much a prestige industry, they managed to get into it and reach the high paying, high prestige ranks if they were talented enough based on their own abilities to get there. The path was always a lot more rugged and it took a lot more effort than average, but those that genuinely belonged at the top eventually made it there. In general, people value the highly skilled who can get stuff done, even if they don’t come from prestige - proving that you are highly skilled is the tricky part.
No, it’s really the middle of the pack (and lower-middle and upper-middle) that is most vulnerable to circumstance. Let’s say A would be a 99 (percentile) at State U, but a 90 at Elite U - I’d say that it would be pretty hard to say which is more beneficial. But if B is a 70 at State U and a 50 at Elite U, and C is a 50 at State U and 30 at Elite U, then I’d say that B or C could benefit from the Elite U advantage. A would probably be able to manage to impress any prospective employer/school/investor even without the elite credentials, but B or C would benefit from having Elite U give them a career boost. A lot of what advances people’s careers is what they have been successful at in the past, which often necessitates being given a chance to do important career-building work. Elite U makes middle-range students stand out and have a chance to have that sort of cumulative growth.
All in all, since you have the money, it’s both a gift and investment.
Is your son worthy of the gift? Do you even want to give him that gift? Or use it for something else that’s more valuable to you?
Are his studies a valuable investment to you and can you ask for a return on that investment?
ONLY YOU can decide the answers to these questions.