The Hidden Economics of College Admissions

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NY Times Magazine has an interesting longread What College Admissions Offices Really Want by Paul Tough, adapted from his new book The Years That Matter Most: How College Makes or Breaks Us. Angel Pérez and Trinity College allowed an inside look at the admissions process of a small liberal arts college. The entire thing is definitely worth a read, but here are my notes and highlights.

  • Both public and private universities stress about making their budget numbers balance. Tuition, endowments, and government funds must cover their expenses. Many colleges lose money year, and some of these are eventually forced to shut down.

    Tuition revenue, which along with room and board provides about two-thirds of Trinity College’s operating budget, had been falling for several years, and Trinity was running a steep deficit, losing $8 million a year.

  • This financial stress makes it hard to be truly need-blind and offer every student the aid package they need to afford college.

    Enrollment managers know there is no shortage of deserving low-income students applying to good colleges. They know this because they regularly reject them — not because they don’t want to admit these students, but because they can’t afford to.

  • The simplest way to balance their budget is to admit more students who can afford to pay full tuition, even if they aren’t the best applicants.
  • “We were taking some students who probably should not have been admitted, but we were taking them because they could pay”

    There is a popular and persistent image of college admissions in which diversity-obsessed universities are using affirmative action to deny spaces to academically talented affluent students while admitting low-income students with lower ability in their place. Boeckenstedt says the opposite is closer to the truth. If you’re an enrollment manager, he explains, the easiest category of students for you to admit are below-average students from high-income families.

  • High-income household have advantages in a few different ways. There are always a certain number of spaces set aside specifically for alumni, big donors, and those who excel at collegiate sports. These all tend to benefit those of high income.

    Most of Trinity’s athletes play sports that are popular in prep schools and rare in low-income public schools: field hockey, lacrosse, rowing and, especially, squash. The result is that at Trinity, as at many other Division III schools in the Northeast, the recruited athletes are actually more likely to be white and wealthy than the rest of the freshman class.

  • SAT and ACT scores also tend to correlate strongly with income.
  • Boeckenstedt’s chart shows an almost perfect correlation between institutional selectivity and students’ average family income, a steady, unwavering diagonal line slicing through the graph. With only a few exceptions, every American college follows the same pattern.

  • Even though many of the most elite colleges now tout their “free tuition” for low-income students, the overall numbers haven’t changed much.

    The most selective colleges in America were the least socioeconomically diverse. […] At “Ivy plus” colleges (Chetty’s term for the Ivy League plus Stanford, M.I.T., Duke and the University of Chicago), more than two-thirds of undergraduates, on average, came from families in the top income quintile, and fewer than 4 percent of students grew up in the bottom income quintile.

  • Hardly anyone pays the full “sticker” price at private universities. In fact, on average, students pay half the sticker price.

    At private, nonprofit four-year colleges — a category that includes most of the nation’s highly selective institutions — 89 percent of students receive some form of financial aid, meaning that almost no one is paying full price.

    In 2018 the average tuition-discount rate for freshmen at private, nonprofit universities hit 50 percent for the first time, meaning that colleges were charging students, on average, less than half of their posted tuition rates.

  • Colleges use variable pricing based on how badly they want you in their class and how much they think you’ll pay. If you get an admission to a private college with zero “merit” aid, sorry but you’re probably on their low end and they want your money to help pay for lower-income students that they want more. “We’ll take you, but only if you pay full price.”

    “Admissions for us is not a matter of turning down students we’d like to admit. It’s a matter of admitting students we’d like to turn down.”

    “Everybody wants to have more selectivity and better academic quality and more socioeconomic diversity, and they want more revenue every single year,” he explained. “Part of my job since arriving at Trinity College has been educating this community about the fact that you can’t have it all at the same time. You’ve got to pick which goals you’re going to pursue.”

  • Capitalism works from the student perspective as well. Parents and students have come to expect such tuition discounts if they are a stronger applicant and have multiple aid offers.

    its wealthy admits were demanding steeper and steeper tuition discounts in order to attend, and overall tuition revenue was falling as a result.

  • Everyone seems to place too much power in “America’s Best Colleges” rankings by U.S. News & World Report.

    The U.S. News list is openly loathed by people who work in admissions; in a 2011 poll, the most recent available, only 3 percent of admissions officials nationwide said they thought the “America’s Best Colleges” list accurately reflected the actual best colleges in America, and 87 percent said the list caused universities to take steps that were “counterproductive” to their educational mission in order to improve their ranking.

Perhaps I am too jaded, but I don’t really mind a private college allowing some extra “full price” students in order to offer more low-income students a full scholarship. I found it more interesting that data analytics now optimize exactly how much tuition they can get out of you. Can you really call it “financial aid” when you have a $70k sticker price and “only” charge someone $60k a year? I always hated calling something a “financial aid package” when it was mostly loans.

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Comments

  1. The funding and financial aid situation is going to vary a lot depending on the college. Someplace like Trinity has a lot different situation from a typical public state or a Ivy league university. Trinity says that tuition is 2/3 of their revenue. I went to a large public school and they only get 8% of their funds from tuition and it only costs ~$10k a year. So thats a huge difference. If 2/3 of your money comes from tuition then you’re going to be entirely dependent on getting that money. Then you’ve got the Ivy schools like Harvard and they have endowments so large they can just live off their interest. So while a small school like Trinity might need to attract rich families that can pay full MSRP of their inflated tuition bill, thats not a concern for many other universities.

    • It would be great if they could get access to do this for a big state school. I know that some public schools have been increasing their out-of-state tuition rates signficicantly and then allowing more of those out-of-state students in order to offset budget cuts and keep in-state tuition from rising as much.

      • Yeah I have heard of that kind of thing. I understand that the international students can be more attractive too since they pay full price.
        Also my alma mater may not be typical of public schools since it is pretty well funded. State funding of state colleges varies 50x ways.

    • Agreed, there’s a huge range of budget situations for the many different colleges and unis out there. But there are a lot more small colleges than large ones, and many of them likely are similar to this. At Villanova (another small-ish northeast liberal arts), they pull in about $300 million from tuition (after discounting 60% off the sticker price on avg) and another $160 million from other sources (aux enterprises, private gifts, govt grants, investments etc), so 2/3 is spot on. For colleges with less name recognition, the situation is often worse. Some colleges around here are dangerously close to having to shut down departments or risk closing entirely.

      The price optimization bit from the article was particularly fascinating, I had no idea they dialed it down so precisely.

  2. I found some data on a NYT site about family income levels for students at universities :
    https://www.nytimes.com/interactive/projects/college-mobility/
    I think you can get some insight from that. If the median incomes and % of higher income families is high then the school MAY be relying more on students who pay full tuition.
    But theres also other factors that can explain that.. higher income students typically have a leg up academically.

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