“IMO, legacy helps if the person is still very active in the college (e.g. gives their time and $$) to the them consistently over the years.”
It depends on the school. Some schools track giving and involvement; some don’t. My school (along with many others) does not. Look at Notre Dame – king of legacy admissions. 20-25% of the kids at ND are legacies. So it goes way beyond donors.
“Not sure why colleges would care about legacy if the college is getting nothing in return?”
Legacy admissions are more about tuition dollars rather than donation dollars. Most selective schools still reject most legacy applicants. So it is a really poor strategy for getting donations. When my school rejected one of my kids, I stopped giving. That’s pretty common.
But what you get from ENROLLED legacy applicants is very likely a full payor. [Even more so at schools like Penn where legacy has to overlap with ED.] The legacy pool from a selective college will trend strongly upper middle class or better. Maybe not hedge fund plutocrats, but lots of banker/doctor/lawyer type parents. By definition, the legacy pool has zero first gen students.
Had my school accepted my kid, I would have sent $250k to the school over four years. That’s way more than I would ever give.