Bribing your way to college? Check your math, it may not pay - Whisper Eye

Bribing your way to college? Check your math, it may not pay


More than two dozen wealthy families charged with allegedly cheating or bribing their kids’ way into elite schools are learning the hard way that crime doesn’t pay, even when higher education is the prize.

Potential criminal punishments aside, the scheme raises the question: was the premium parents paid worth the anticipated long-term economic gain for their children?

Take Bruce Isackson, president of a Woodside, California, real estate firm, and his wife Davina, who in July 2015 turned over 2,150 shares worth $251,000 of Facebook Inc stock to help get their daughter into UCLA as a fake soccer recruit, according to a federal criminal complaint. If they had just held on to those shares, they would have been worth around $373,000 today.

They later allegedly spent another $350,000 to get their younger daughter into the University of Southern California as a bogus rowing recruit.

Manuel Henriquez, a resident of Atherton, California, who until Tuesday was chairman of Silicon Valley finance company Hercules Capital Inc, and his wife Elizabeth were arrested in New York after allegedly shelling out more than $500,000 to cheat on entrance exams and fake their daughter’s tennis expertise to get her into Georgetown University.

Just imagine the calculus of the unnamed relatives of a teenaged girl who authorities said paid $1.2 million to get her into Yale University as a soccer recruit, though she did not play competitively.

And then there are the parents accused by prosecutors of paying $15,000 apiece to cheat on standardized tests to make their kids’ applications look better.

All of these were upfront costs incurred even before the first checks for tuition, room and board and other fees were written. In each case, would the crime have even paid off?

DOING THE MATH

Five years ago, San Francisco Federal Reserve Bank President Mary Daly – then associate director of the bank’s research department – asserted in a paper that college costs more often than not are worth the expense over the long term. A student in 2014 paying $21,200 a year for a four-year degree, she found, would break even with someone with only a high school diploma by the age of 38 and would have made a cumulative $831,000 more than that individual by retirement.

But what about the Yale student and her family, who paid $1.2 million up front and then presumably were on the hook for full tuition and room and board adding up to more than $70,000 a year? That’s an all-in tab for that degree of $1.48 million.

Using Daly’s approach as a guide and inputting updated government data on median incomes for individuals with and without college degrees, a Reuters analysis found a college grad whose $70,000 annual tuition was paid upfront would outearn a high school grad by $1.3 million over a lifetime of work, assuming each earned the median national wage for their demographic inflated over time.

But the unidentified student’s family paid more than five times the Yale sticker price after the bribe, a cost that would not be fully recovered until the child reaches age 64, assuming 3 percent annual wage growth and a one-time, 10 percent increase at age 34 to reflect higher earnings of older adults.

In many cases involving wealthy parents, future earnings may be less of a draw than the prestige of saying your offspring were at Yale or Stanford, or the lure of potential connections with influential elite-school graduates. But had some of these parents not been caught, the payoff alone might have been worth it.

In the case of a less expensive school like UCLA, the $391,000 cost to the Isacksons – the $251,000 bribe plus $140,000 for four years of tuition and fees – would still leave a lifetime earnings surplus for their daughter of a bit over $1.2 million.

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