Stratification is a distinctive feature of competitive education markets that can be explained by a preference for good peers. Learning externalities can lead students to care about the ability of their peers, resulting in across-school sorting by ability. This paper shows that a preference for good peers, and therefore stratification, can also emerge endogenously from reputational concerns that arise when graduates use their college of origin to signal their ability. Reputational concerns can also explain puzzling observed trends including the increase in student investment into admissions exam preparation, and the decline in study time at college. (JEL I21, I23, I26, J24)A distinctive feature of competitive education markets is stratification (Hoxby 2009; Bound, Herschbein, and Long 2009). Theoretical models, notably Rothschild and White (1995); Epple and Romano (1998); and Epple, Romano, and Sieg (2006) explain stratification by introducing peer effects. They suppose that learning externalities lead students to care about the ability of other students at their school, resulting in equilibrium across-school sorting of students by ability.The contribution of this paper is to show that a preference for good peers, and therefore stratification, can emerge endogenously from reputational concerns that arise when graduates use their college of origin to signal their ability. We also show that competition for a good reputation can explain some puzzling results in the empirical economics of education literature.The importance of reputation effects in competitive markets was pointed out by Friedman (1962) and Akerlof (1970), who predict that firms with good reputations will expand and gain market share. This is indeed seen in many markets for consumer products, but educational markets often display a different pattern. Bound, Herschbein, and Long (2009) document that while the number of college applicants nearly doubled since the 1970s, elite colleges essentially did not grow but rather became increasingly selective. They suggest that in response, parents and students have invested ever more energy into the admissions process, engaging in possibly