It pays to be rich. You already knew that, but you might not appreciate that being rich helps students who are applying to college.
This reality isn't something that colleges and universities are proud of and they certainly don't publicize it. Wealthy students, however, can enjoy an advantage in the college admission process simply because of their parents' net worth. Affluent students can also capture price discounts from the vast majority of colleges even when they are fully capable of picking up the entire tab.
Evidence of the rich-student advantage is plentiful.
A recent survey of 462 senior college admission officers across the country, for instance, revealed that a growing percentage of state and private schools are increasingly interested in attracting more rich students to their campuses. Among state universities, 51 percent of administrators said their top focus was attracting full-pay (i.e. affluent) students, according to the survey by Inside Higher Ed, a respected trade publication. Among liberal arts colleges, 31 percent said they are paying more attention to students' ability to pay.
In the survey, the interest in rich students was so strong that 10 percent of colleges admitted that the wealthy students they were accepting earned lower test scores and grade point averages than other applicants.
The growing popularity of merit scholarships to wealthy students was also documented by a major federal study released in October that compared the use of merit scholarships in the mid-1990s with the practice in the 2007-2008 school year. During those years, colleges shifted more and more merit awards to wealthy applicants. In the mid-1990s, 24 percent of merit awards at private colleges were given to students with no financial need, but 12 years later the figure had jumped to 42 percent.
There are many pragmatic reasons why rich students enjoy favored status. In part, they are in big demand because they can help schools underwrite the cost of educating low- and middle-income students. This is actually commonplace at most private colleges. These so-called tuition-driven schools need to attract enough wealthy applicants to help defray the financial aid costs of other students.
Public universities are also keenly interested in attracting affluent students from outside their own states as financial support from state governments continues to dwindle. Nonresidents pay a stiff premium to attend schools like the University of Michigan, University of Virginia, University of Colorado and University of California, Berkeley. The growing number of wealthy nonresidents attending public institutions has led to accusations that some state flagships are looking more like private schools.
The New York Times wrote a front-page story in 2009 about the admission process at Reed College, a prestigious school in Portland, OR, that illustrates the necessity of most colleges to attract rich students. The college, faced with finite financial aid resources and a large number of new and returning students who needed more assistance in the recession, decided it had to cut 100 needy students from the accepted freshmen list before the acceptance letters were sent out. Those unlucky students were replaced with wealthy applicants, who hadn't survived the original selection process.
While there was condemnation from critics about what Reed did, what got overlooked was this fact: Colleges routinely make similar decisions that favor wealthy applicants. Other schools, however, don't reveal their plans to swap out needy students with rich teenagers when a New York Times reporter is on campus.
Another reason for the rich-kid favoritism can be traced to the colleges' obsession with U.S. News & World Report's college rankings. The methodology of U.S. News' college rankings is terribly flawed — that will be a subject for a future column — but they matter to people who count in the admission process. College presidents and boards of trustees care deeply about how their institutions fare in the rankings, and affluent parents also are more likely to put stock in the rankings, beauty contest.
Colleges believe that they need these coveted wealthy teenagers to help them inch up in the rankings, or at least prevent themselves from dropping a few notches. These students, after all, are more likely to attend private or high-achieving suburban high schools that better prepare them for college and will lead them to graduate in four years. These teens are also more likely to have earned higher SAT/ACT scores and grade point averages, which are things that U.S. News cares about.
Colleges compete for these desirable students by offering them merit scholarships. Nearly all colleges and universities attract wealthy students in this way. In fact, there are probably only three dozen colleges and universities in the country that don't provide merit scholarships to wealthy applicants. Schools in this category include all the Ivy League institutions, Georgetown, MIT and the most elite liberal arts colleges including Amherst, Williams, Haverford, Swarthmore and Pomona. They don't have to offer carrots to wealthy students because their parents will eagerly write checks for more than $225,000 if their children get into what they perceive to be the best and most prestigious colleges in the land.
Bottom line: Obviously, the students who require the least amount of help getting accepted into college and paying the tab are the ones benefiting the most from the current higher-ed practices. I don't see this trend changing anytime soon.
Lynn O'Shaughnessy is a college consultant, author and speaker. She writes three college blogs for CBSMoneyWatch, U.S. News & World Report and TheCollegeSolutionBlog.com.