Are Public Universities a Better Deal Than Private Universities?

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If you keep up with our blog, you should already be familiar with the difference between a public and private university. One of the differences we discussed in that article was the cost of attendance. Private institutions are generally more expensive than public institutions by tens of thousands of dollars. In the 2017-18 academic year, the average net price of attendance (total cost minus financial aid) at 4-year public institutions was $24,300, compared to $50,300 at 4-year private nonprofit institutions. Given the price difference, you may be wondering whether private institutions are worth the extra cost. Whether a university education is “worth” the money is a difficult question to answer and is by no means an exact science. The answer will depend on one’s values and priorities, which can be incredibly subjective. That said, there are quantitative data that can help you come to an informed decision about whether a public or private university is a better investment for you. To measure the quality of education an institution offers, one can look at inputs (e.g. instructional spending), outputs (e.g. graduation rate, average earnings of its graduates), or a combination of both. This article compares the inputs and outputs of 4-year public and private universities to see how they stack up against each other. 

 

Instructional Spending

 

One indicator of a high-value program is if the college or university spends a high portion of its tuition revenue on instruction. In the 2015-16 academic year, 4-year private nonprofit institutions spent 44 percent more per full-time-equivalent (FTE) student on instructional costs than public institutions—$17,996 compared to $12,539, respectively. However, because private institutions charge more for tuition, public institutions are the best value from a teaching-per-tuition-dollar perspective. That is, they spend a higher proportion of their tuition revenue on instructional spending, so a large portion of the tuition you pay is going directly to your instruction rather than toward other expenses less central to student success (e.g. advertising and marketing). 

 

That’s not to say, however, that other expenditures aren’t important. A university can also invest in the well-being of its students through student services, academic support, and institutional support. In the 2015-16 academic year, private nonprofit institutions spent 79 percent more per FTE student on the combined expenses of student services, academic support, and institutional support than public institutions ($16,931 compared to $9,483, respectively). Although these expenditures are related to instruction, they do not play a direct role; as a result, the question remains whether they can be a measure of educational value. 

 

Graduation Rate

 

According to the National Center for Education Statistics (NCES), the 6-year graduation rate is higher at private nonprofit institutions (66 percent) than at public institutions (59 percent). Graduation rates also vary by institutional selectivity. The more selective the institution, the higher the graduation rate. Some public universities are highly selective, and at these institutions, the graduation rate can be higher than at many private universities. 

 

Earnings and Employment 

 

According to a report by the National Association of Colleges and Employers, the outcomes results for graduates of public institutions are consistently below those of graduates of private nonprofit institutions. For the Class of 2017, 80 percent of public school graduates were employed or accepted to an advanced degree program six months after graduation. In comparison, 91 percent of private school graduates were employed or accepted to an advanced degree program by that time. Furthermore, private school graduates were more likely to be employed full-time and had higher mean starting salaries than public school graduates. 

 

Keep in mind, however, that a higher salary does not necessarily equate to a higher return on investment. If you’ve read our guide to college ROI, you’ll know that the key to improving your ROI is to minimize spending and to maximize earnings. Even if your salary receives an earnings boost from attending a private university, that doesn’t necessarily translate into a higher ROI: your ROI might be the same as (or lower than) that of a public school graduate because you paid a higher price for your education. Here’s where things get a little bit tricky. Although there are rankings for colleges with the best return on investment (you can easily find them on the internet), these tend to be imprecise and unhelpful. This is because how much you spend on your education and how much you can expect to earn upon graduation depend not only on the school you attend, but also on your financial aid package, choice of major, experiences you have during college, and more. Here at Edmit, we recommend doing your own calculations rather than relying on rankings so that the results you get are relevant and accurate. You can find an explanation of how to calculate your ROI here.  

 

Borrowing and Defaults 

 

Another way to measure how well a college or university prepares its students for success in the job market is by looking at the borrowing and student loan default rates of its graduates. In general, students at private universities are not only more likely to borrow, they also graduate with higher average debt than their peers at public universities. According to a 2016 report by the Brown Center on Education Policy, 51 percent of students at 4-year public universities borrow money of some kind, compared to 63 percent at private nonprofit universities. In 2012, the average debt for graduating seniors at public colleges was $25,550, compared to $32,300 at private nonprofit colleges

 

However, when it comes to paying back their student loans, graduates of private nonprofit institutions have an easier time than graduates of public institutions. The student loan default rate for graduates of 4-year private nonprofit institutions in the fiscal year 2015 was 6.6 percent whereas for graduates of 4-year public institutions, the default rate was 7.1 percent. It seems that despite taking out more student loans, graduates of private nonprofit institutions are, overall, able to find jobs and make regular payments on their debt.  

 

Takeaways

 

In summary, private universities tend to spend more on their students and are linked to more positive outcomes than public universities. However, they also cost significantly more, and for many students, the earnings boost they might get from attending a private university isn’t big enough to justify the higher price. In other words, if you’re comparing public and private universities that are fairly similar and if you’d be paying significantly more at the private university, you may be better off choosing public. One important exception is low-income students, for whom private universities are often cheaper than public universities due to their eligibility for generous financial aid packages. [Related: Attending a Private College Can Be Affordable.]

 

Finally, when it comes to figuring out whether public or private universities are a better investment, be wary of broad generalizations as there is tremendous variation within each sector. Remember that the question you’re asking is a highly personal one: you want to know whether a public or private university is a better investment for you. Here are some further recommendations for making an informed decision about this topic:

  • Always look at the net price. 

Although private nonprofit institutions generally cost more than public institutions, there are times when it’s cheaper to go private. Many private institutions meet 100 percent of a student’s demonstrated financial need. (In fact, we’ve even compiled a list.) When comparing colleges and universities, make sure you’re always looking at the net price, which takes financial aid into account, rather than the sticker price. This will make sure the information you’re using to calculate your ROI is relevant and accurate. To make your job easier, Edmit offers a comprehensive college cost comparison tool that allows you to quickly and easily compare the cost of attendance at different colleges. 

  • Be careful of getting tunnel vision.

The need for relevant, accurate information also applies to figuring out your estimated earnings after graduation. Like we touched on earlier, how much you can expect to earn upon graduation depends on a combination of different factors, only one of which is the type of institution you attend. Although there are important differences in outcomes depending on the type of institution, you don’t want to ignore other factors like the type of degree, institutional selectivity, and more. Tools like College Scorecard can be helpful for estimating your earnings upon graduation, but ideally, your research shouldn’t stop there. Understanding how your choice of major influences your lifetime earnings is an important next step; in fact, differences in earnings by type of degree sometimes far outweigh differences in earnings by type of institution. For more information, check out our articles on the highest-paying and lowest-paying college majors.

  • Not all public/private universities are created equal. 

This article is meant to present a general picture of what the typical experience at a public or private university is like. However, there is tremendous variation within each sector, and it’s crucial that you research individual colleges and universities to get a good sense of the quality of education they offer and how well they prepare their graduates for success in the job market. Be wary of broad generalizations like “public universities are a better investment than private universities,” which ignore the complexity of the issue at hand. 

  • What you do in college matters. 

Sometimes the institution you attend matters less than the type of experiences you have there. A Gallup-Purdue University study found that college graduates feel engaged at work and experience high well-being after graduation if they had certain experiences during college, such as having a mentor, working on a long-term project, participating in an internship, and being active in extracurricular activities. For more information, check out our article on what you should do in college to maximize your success after graduation

 

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