We estimate the monetary return to attending a highly selective college using the College and Beyond (C&B) Survey linked to Detailed Earnings Records from the Social Security Administration (SSA). This paper extends earlier work by Dale and Krueger (2002) that examined the relationship between the college that students attended in 1976 and the earnings they self-reported reported in 1995 on the C&B follow-up survey. In this analysis, we use administrative earnings data to estimate the return to various measures of college selectivity for a more recent cohort of students: those who entered college in 1989. We also estimate the return to college selectivity for the 1976 cohort of students, but over a longer time horizon (from 1983 through 2007) using administrative data.
We find that the return to college selectivity is sizeable for both cohorts in regression models that control for variables commonly observed by researchers, such as student high school GPA and SAT scores. However, when we adjust for unobserved student ability by controlling for the average SAT score of the colleges that students applied to, our estimates of the return to college selectivity fall substantially and are generally indistinguishable from zero. There were notable exceptions for certain subgroups. For black and Hispanic students and for students who come from less-educated families (in terms of their parents’ education), the estimates of the return to college selectivity remain large, even in models that adjust for unobserved student characteristics.

There are many estimates of the effect of college quality on students’ subsequent earnings. One
difficulty interpreting past estimates, however, is that elite colleges admit students, in part, based on
characteristics that are related to their earnings capacity. Since some of these characteristics are
unobserved by researchers who later estimate wage equations, it is difficult to parse out the effect of
attending a selective college from the students‘ pre-college characteristics. This paper uses
information on the set of colleges at which students were accepted and rejected to remove the effect
of unobserved characteristics that influence college admission. Specifically, we match students in
the newly collected College and Beyond (C&B) Data Set who were admitted to and rejected from a
similar set of institutions, and estimate fixed effects models. As another approach to adjust for
selection bias, we control for the average SAT score of the schools to which students applied using
both the C&B and National Longitudinal Survey of the High School Class of 1972. We find that
students who attended more selective colleges do not earn more than other students who were
accepted and rejected by comparable schools but attended less selective colleges. However, the
average tuition charged by the school is significantly related to the students’ subsequent earnings.
Indeed, we find a substantial internal rate of return from attending a more costly college. Lastly,
the payoff to attending an elite college appears to be greater for students from more disadvantaged
family backgrounds.