December 4, 2020

Wealth Matters: The Pros and Cons of Asking a College for Financial Aid

Parents have long used their wealth to try to sway admissions officers, of course. But that doesn’t always work. And it isn’t necessarily true that a needier student is passed up. “The misperception is schools first look at all the kids who can pay full freight and then look at the kids who are left over,” said Kalman A. Chany, a financial aid consultant in New York and author of “Paying for College Without Going Broke.” “Parents like to use this as an excuse. They’ll say that if my kid didn’t have to apply for aid, he’d get in. It’s overblown. It’s a rationalization.”

Still, the vote by the board of trustees at Grinnell, a liberal arts college in Iowa, reflects a broader trend in financial aid. The college counselors I spoke to this week said the majority of colleges had already downgraded their policies to “need aware” — meaning that the colleges accept most of their students without looking at their need for aid but will consider financial need for some percentage of the applicants. Others are already considering a parent’s ability to pay in many of their admissions decisions.

These counselors also said that parents and, by extension, their children should start thinking strategically about what financial aid they might receive. This includes being realistic about how desirable their children are to top colleges since they may receive more aid from a less prestigious college.

Grinnell is among a select group of colleges to be both need-blind in admissions and able to meet 100 percent of that need for admitted students. But it is typical of most colleges that reported a drop in their endowments in 2008. Grinnell’s endowment is now $1.5 billion, down from $1.7 billion in 2008, and, the college has pointed out, it relies on the endowment for 50 percent of its operating budget.

“Grinnell is pretty unusual to be need-blind and to meet 100 percent of the need,” said Jon W. Tarrant, a certified educational planner in Carlisle, Pa. “Most colleges can’t afford to be need-blind.”

There is an argument, too, that need-blind admissions policies have not created greater socioeconomic diversity on campuses. “One of the ways colleges are need-blind is they are quite literally blind to the neediest students and the conditions they’re coming from,” said Shamus Khan, an associate professor of sociology at Columbia University and the author of “Privilege: The Making of an Adolescent Elite at St. Paul’s School.”

“Think about parents who invest $50,000 a year or more in their kids,” Mr. Khan said. “You could be looking at $1 million in investments in a kid over 18 years. What need-blind does is compare those students to every other kid who didn’t get that.”

Still, any talk about changing the way parents’ financial situations are factored into their children’s admissions prospects plays into worries about ever-increasing college tuition bills. A study last year by The Princeton Review found that most students and their parents said financial aid was either extremely or very necessary for them to go to college.

So how much does your financial situation matter in getting children into college? Both more and less than you think. Admissions officials can usually figure out fairly quickly who needs aid and who doesn’t.

“It will be obvious because they didn’t file a financial aid form,” Belinda Stern, an education consultant on Mercer Island, Wash., said. “Some people are a little more brazen and want to make it clear to the college that they are willing to pay the full ride and come right out and say it.”

A student she counseled was admitted to a prestigious college and its business program because his father owned a sports team. But Mr. Chany, the financial aid consultant in New York, said he knew of families who had donated seven figures and their child still did not get in.

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Wall Street Watches and Waits

Opinion »

Asians Need Not Apply

A disproportionate number of Asian-American students ace standardized tests, but, Room for Debate asks, are top colleges limiting the number they admit?

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Bank of Japan Increases Economic Stimulus

Opinion »

Asians Need Not Apply

A disproportionate number of Asian-American students ace standardized tests, but, Room for Debate asks, are top colleges limiting the number they admit?

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Economix: Pushing Colleges on Diversity

How can top colleges be persuaded to admit more talented low- and middle-income students? My column this week laid out a strategy for making colleges more economically diverse and meritocratic, based on policies at Amherst College and the University of California. But I didn’t spent much time on the politics of getting colleges to make changes. Fortunately, several other writers have done so — some today, in response to the column, and some long before.

The first potential lever is the federal government. It pays for and administers Pell Grants, a huge program that benefits, roughly, the bottom half of the income distribution. Goldie Blumenstyk of The Chronicle of Higher Education wrote last year:

… the chancellor of the California State University system, Charles B. Reed, … has been pushing a proposal to reward institutions that enroll higher numbers of Pell Grant students with more federal money and withhold support from colleges whose Pell enrollments fall below 15 percent. Rich institutions should use their endowments to meet those thresholds, Mr. Reed argues, and the tax exemption on their endowments should be yanked or restricted if they fall short.

Similarly, I’ve argued that Pell Grants and other federal aid should be tied to graduation rates, with colleges at risk of losing financing if their graduation rates (adjusted for their student population) are too low. Perhaps students should also be at risk of losing financing, if they do not stay on track to graduate, as is the case in West Virginia.

But the government isn’t the only lever. Foundations can make a difference, too. Writing in the journal Democracy in 2008, Theda Skocpol of Harvard and Suzanne Mettler of Cornell noted:

…the efforts required will be more than just governmental. Community college students often find that few of their credits transfer to four-year institutions, a situation that could be remedied by better institutional cooperation. The Jack Kent Cooke Foundation, for example, has recently created an exemplary program to support efforts by Amherst College and seven other highly selective institutions that have formed partnerships with nearby community colleges. The idea is to identify promising potential transfers and help them make the transition to four-year college.

And private donors can probably have even more influence than foundations, given the donors’ importance to private colleges. Matthew Yglesias writes:

… another channel I would urge people to consider is simply social norms. Fancy colleges and universities are largely funded by charitable donations. People make these donations in part because doing so is a socially esteemed undertaking. If we, as a society, shift our idea of what kinds of activities should be valorized then donor behavior will shift and schools will find ways to be more credible ladders of opportunity.

Obviously, some private donors might blanch at the idea of paying to make their alma mater more diverse and, in the process, potentially reducing the odds of their own children’s getting in. But Amherst’s experiences suggest this will not need be the case with all alumni. Its fund-raising has remained quite strong. Among other things, it received a $100 million anonymous gift recently.

Some graduates may even be more likely to donate because they believe in their college’s mission. As Aaron Carroll, a pediatrician at the Indiana University School of Medicine and an Amherst graduate, wrote on his blog Wednesday, “I don’t think I’ve ever been so proud of my alma mater.”

Georgia Levenson Keohane, a fellow at the Roosevelt Institute who advises nonprofit groups and has studied Amherst, wrote the following to me, in an e-mail:

Amherst has proven that there can be a competitive advantage to this approach. By declaring that it selects for the best and the brightest — not just the best and the brightest of the upper middle class — it has attracted more applicants across the board, which in turn makes it even more selective, and a virtuous cycle ensues.
The trick is paying for this, since the model relies on private fund-raising in addition to Pell Grants. In tough economic times, will full-tuition paying families and alumni who embrace an Amherst-like vision continue to give the kind of additional financial support necessary to sustain the model? And when endowments plunge, can university administrators maintain their commitment to robust financial aid in the face of competing priorities — not just things like nice facilities, but lifeblood stuff: paying enough to attract and retain top faculty? The case of Amherst suggests yes.

I’d like to believe that university presidents and other administrators would not need any arm-twisting on this issue. And some do not. But unfortunately, many presidents seem to, as Richard Kahlenberg of the Century Foundation suggests:

The discouraging news is that most wealthy institutions have not followed Amherst’s lead. Despite a great flurry of activity on the financial aid front, The Chronicle of Higher Education recently found that at the wealthiest 50 institutions, Pell percentages remained flat between 2004-05 and 2008-09. At thirty-one of these wealthy colleges and universities, the proportion of Pell recipients actually declined.

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