Will Non-Merit Giving Selective LACs Need to Change to Attract High-Income Students?

Parents Forum
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Given how many people now fall into the “no financial aid available due to high income” category, I wonder if selective colleges are going to start to shift away from their current financial aid models.

It is starting to happen a bit, where schools are offering aid to families up to $200 and sometimes $250K in income, but I wouldn’t be surprised if that goes even higher within the next few application cycles.

When schools are set up so they are only enrolling either people who have significant need on side of the spectrum, or kids from parents making 7 figures on the other, the schools will start to suffer.

I know personally, and read about extensively on this and other boards, that people who make over $200K but under seven figures have an entirely different set of schools to choose from, based solely on the fact that they provide merit. I think a lot of those “merit offering” 30%-60% acceptance rate schools are benefitting from it and getting kids of a caliber that otherwise would only apply to T30 schools. But surely, after years of not getting the high stats kids from “regular” high-income families (doctors, lawyers, professors, etc.), it will start to change the makeup of the T30 schools in some noticeable way.

Thoughts? Is anyone seeing a real shift in this direction? Or do people think the SLACs have no incentive to change since they still get tens of thousands of applications and don’t care that their incoming classes are split into two very disparate halves?

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Do you mean to say split between the top 1% and the bottom 97% with none between?

But it is more likely that, at every level of FA need up to and including full-pay-but-not-plutocrat, there are some who can afford the college’s calculated net price and some who cannot.

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Perhaps with the government cutting funding, they’ll need to attract more revenue. Perhaps you’ll see some go away from need blind.

I wouldn’t suspect in time for your daughter and I wouldn’t expect any changes in the next few years.

F&M did change the other year - from no merit to little merit.

btw - those income tables aren’t absolutes - but based on asset levels - and their endowments are spitting off enough revenue to meet those goals.

I think if there are changes - they won’t happen for you - but maybe an 8th grader. Maybe.

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Oh yes, I certainly don’t expect immediate changes, but maybe in the next five years.

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Not exactly. About 14.4% of American households make over $200,000, and only 0.1% make over a million. So there are over 14% of American families in the relevant pool. And it is an income bracket where 80% of their children go to college, so it represents far more than 14% of college-applicant families, and likely an even higher percentage of “high-stats” kids who would be likely candidates for selective schools.

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Are you just curious or wondering for the next kid - because the next kid - whatever they want now will change - as you know - by the time it’s their time.

It’s an interesting question and no idea how it plays out - but it’s a bit premature for an 8th grader.

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Just asking for the purpose of an interesting conversation, and I was interested in other’s thoughts about how selective LACs losing most of the “regular wealthy” might impact admissions approaches moving forward. :slight_smile:

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When schools are set up so they are only enrolling either people who have significant need on side of the spectrum, or kids from parents making 7 figures on the other, the schools will start to suffer.
Or do people think the SLACs have no incentive to change since they still get tens of thousands of applications and don’t care that their incoming classes are split into two very disparate halves?

The myth of a barbell shaped income distribution with a missing middle is regularly brought up in CC threads, but I’ve never heard of it happening, at any college. Unfortunately detailed income stats are rarely published, particularly at LACs. Some selective colleges have student surveys by newspaper showing self reported income distribution, which never show this pattern. For example, one for Princeton’s class of 2028 is below. The distribution is roughly as follows. Wealthy kids are clearly overrpresented, but there is not a missing middle.

1/4 Below US median Income (under $80k)
1/2 Median to 90th percentile Income
1/4 Top 10% income

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It is starting to happen a bit, where schools are offering aid to families up to $200 and sometimes $250K in income, but I wouldn’t be surprised if that goes even higher within the next few application cycles.

This is the norm for selective high endowment per type private college – sliding scale cost by income via FA. Some NPCs suggest FA for ridiculously high incomes. For example, stats from Williams calc is below, assuming US citizen, no other siblings in colleges, and not high savings. It looks like parents are expected to spend an additional $20k/year for each $100k income above $80k.

$80k Income – $0 cost to parents
$130k Income – $10k/year cost to parents
$180k Income – $20k/year cost to parents
$230k Income – $30k/year cost to parents
$280k Income – $40k/year cost to parents
$330k Income – $50k/year cost to parents
$380k Income – $60k/year cost to parents
$430k Income – $70k/year cost to parents
$480k Income – $80k/year cost to parents
$530k Income – $90k/year cost to parents
$550k Income – Full Cost of $92k/year

It’s possible this calc is not accurate and/or my calc entries are not realistic, such as entering not high NW among very high income families. If I instead enter $100k in cash savings, $500k non-retirement investments, and $500k in home equity; then I get the following. If assets increase further, full cost occurs at increasingly lower incomes. With high enough assets, full cost can occur at $0 income.

$0k Income – $11k/year cost to parents
$50k Income – $24k/year cost to parents
$100k Income – $37k/year cost to parents
$150k Income – $49k/year cost to parents
$200k Income – $62k/year cost to parents
$250k Income – $75k/year cost to parents
$300k Income – $88k/year cost to parents
$320k Income – Full Cost of $92k/year

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My easy answer is that I think they don’t have a strong enough incentive to change, so they won’t. Certainly the income thresholds will continue to go up, so what was a $200k limit today will keep creeping up. But I think there are still so many potential applicants at the top selective LACs that they won’t really need to change.

Now, as you go further down the list, I could see more starting to add merit. F&M, as noted above, recently began. I wouldn’t be surprised if a college like Skidmore became a little more obvious with their merit (they do have science and music scholarships). A friend of mine who went to Trinity College (CT) bemoans their fall in the rankings and has wondered aloud if maybe they’d be better off going the merit route versus only need-based aid. So, I’d expect changes, but not at the top.

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I mean, when the NYTimes did their analysis, they did see some barbelling based on income. Here’s the analysis for Harvard based on equalized test scores.

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You can compare lots of schools through their interactive graphic: Explore How Income Influences Attendance at 139 Top Colleges - The New York Times

And editing to add Amherst College since we’re talking about selective LACs here:

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Awesome source!
This is such a great visualization of the point.
You can see the dip in the “regular wealthy” zone, and it doesn’t even fully reflect that a much higher percentage of children from families in that range apply to selective colleges than do children in the bottom third of the graph. And adding that the number of families at the very far wealthy end is very small in sheer numbers. So accounting for both of those facts would make the dip even more pronounced.

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I know it doesn’t affect the endowments directly (unless the tax rules change) but we’re seeing reports of these tippy-top colleges freezing hires, rescinding PhD offers etc as a result of the federal funding changes. Could they start reversing direction and lowering the amount of household income that qualifies for FA to help balance the books, rather than going higher as suggested earlier in this thread?

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I guess they could, but I don’t think those families will pay full price, so they would likely just lose even more people to schools with more merit aid. It just really doesn’t make sense to pay $90K a year for undergrad for almost anyone.

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I note that is a VERY important qualification, because there is a strong positive correlation between high test scores and family income.

If you instead don’t normalize for test scores, every single highly selective private college I have ever seen data for has a basically increasing relative frequency of attendance by family income.

Like here is what happens in the same data set with Harvard if you don’t normalize by test score:

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No more “donut hole”, and it is because there are so many more kids from families at, say, the 85th with Harvard-type test scores that it more than makes up for the fact the few kids from families at the 10th with such scores end up attending at a higher frequency.

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Yep - absolutely! It’s the first adjustment you have to make, otherwise it’s just a hockey stick based on income.

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It’s extremely misleading to extrapolate income distribution from “equalized test scores.” This assumes there are expected to be extremely few low income students because extremely few low income students get high test scores, so if there are few low income students rather than extremely few low income students; then low income students are graphed as overrepresented. If you instead look at actual distribution by income, it paints a very different picture.

For example, income stats from the Harvard freshmen survey are below. I chose the most recent year for which they removed the “prefer not to say” category. While low income students may be overrepresented based on test scores, they are underrerpresented based on US population.

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It would be very interesting to have this chart compare applicants to enrolled students. I.e. those who got in but elected not to go in each income bracket. Most “regular wealthy” know the drill by now, i.e. that they won’t get financial aid, but there are still a lot who apply every year only to find out the big surprise after acceptance.

Also, I am guessing they get a lot of applications from students in the $125-$250 category, so it would also be interesting to see acceptance rates by each of these income brackets.

Also, for Harvard at least, I think most in the $125-$250 category still get some aid. It is the $250-$500 and up that for sure won’t.

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As a parent of a child at Williams your second graph is the correct one. They suggest that anyone with an income below 300K and typical assets submit financial aid information. Above that there is no benefit.

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Well, why does that mean you have to try to get rid of the hockey stick? I think for certain questions, the hockey stick is the informative answer.

Like the question at hand is whether Selective LACs need to change their policies to attract higher-income students.

The “unadjusted” graph for, say, “Top Liberal Arts Colleges” as defined by the NYT looks like this:

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And I would say that is suggesting the answer to that question at hand is basically “no”. Meaning despite all this chatter about the donut hole issue (going back many, many years in my experience), these LACs are in fact attracting plenty of students from high-income families.

Now it is true if you normalize for test scores, you can support the hypothesis that assuming all else is equal, for these colleges, you would rather be a low-income applicant with a very high test score than a higher-income applicant with the same very high test score.

Which is not a very meaningful observation since there is no reason to assume that if you took some individual kid from a high income family with high test scores and other highly competitive qualifications and magically switched them into a low income family at birth, that both those test scores and everything else would stay as competitive by the time they were applying for college. And of course almost always the outcome for a given high income/high score applicant who just misses out on Harvard or Williams or whatever is to end up at some other highly selective private college, just a bit less selective.

But in any event, all that is not really relevant to the question at hand. The basic story, which we know, is that the most selective private colleges, universities or LACs, are getting so many applicants from higher-income families with high test scores that they can reject them in droves and still enroll as many as they actually want.

All that being said–for sure there have recently been some splashy announcements about more generous aid policies up to higher income limits. I think when you dig through the caveats about assets, these are maybe less revolutionary than it might seem from the press releases. But that does suggest to me that this has become an important competitive dynamic among various highly selective privates.

So my actual answer is not just a flat no, I think various such colleges are always keeping an eye on their competitors, and always looking to find ways to make their budgets while at the same time marketing themselves as successfully as possible. And they may well sometimes raise new funds to help make themselves a little more competitive on price for certain families.

But again, I see this as more the normal incremental/marginal competitive process unfolding, as opposed to anything very revolutionary.

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I think it is more nuanced, though, than saying “high income students”. SLACs are incredibly good at attracting very high income families (as the top of the hockey stick shows) - i.e. the over $600k crowd. It is the $200k-$600k crowd that I think gets left out of the T50 (in terms of actual enrollment, not admission).

I know anecdotes aren’t data, but I personally know very few people in that bracket who are choosing to be full pay. The vast majority are choosing schools that provide merit, or state schools. $90k just doesn’t make sense financially unless you really have no tether to financial reality (e.g. make 7 figures and have substantial assets).