Removing the Barriers to Socioeconomic Diversity

In his 1996 book, Lessons from Privilege: The American Prep School Tradition, Arthur Powell states that “[t]he virtue of economic diversity [in independent schools] was linked to the equally democratic virtue of academically strong student bodies…. The idea soon grew that economically diverse student bodies benefitted all students and not just aid recipients. Better students raised academic expectations as well as schools’ reputations.”¹

Two decades later, this perspective remains a key impetus behind the deep and wide investment that independent schools make in financial aid for access and affordability. To enroll and retain a heterogeneous group of the best and brightest students, schools aim to ensure that a family’s ability to pay tuition isn’t a barrier to admission. Since Powell’s assessment in 1996, the median percentage of students receiving financial aid in NAIS-member day schools has grown from 14 percent to 22 percent. In boarding and boarding-day schools, it has moved from 31 percent to 39 percent.²

While the expansion of families receiving financial aid seems like a “win” for growing socioeconomic diversity, a deeper look at the recipients of financial aid today reveals a more complex picture — and a challenge for schools aiming to use financial aid as a means to expand socioeconomic diversity.

SSS by NAIS data³ suggest that, in the past five years alone, a shift has occurred in the proportion of financial-aid awards made to students across the income distribution spectrum. In 2010–11, nearly 25 percent of awards went to families earning less than $51,000, while in 2015–16, families in the same income range received 19 percent of awards. On the other end of the spectrum, families earning more than $121,000 received 30 percent of awards in 2010–11 but 43 percent of awards in 2015–16. These data suggest that today’s financial-aid recipient pool is actually somewhat less socioeconomically diverse than even just five years ago, even though the overall percentage of enrollment receiving aid has steadily grown. In short, financial-aid distribution is skewing toward higher-income families.

There are good and predictable reasons for this trend. First, as tuitions increase faster than both the rate of inflation and income growth, more families across a broader socioeconomic range seek financial aid and increasingly show eligibility to receive awards. At the same time, as schools aim to be more financially sustainable and cost-conscious, attempts to curb steep growth in year-over-year financial-aid budgets increase the inclination to award aid to more families with lower financial need than in years past. This new practice enables a school to ensure healthy enrollments without increasing its overall financial-aid budget (e.g., opting to fund 10 families who each need $2,500 over one family that needs $25,000).

Second, SSS data also show that, given the rising tuitions, more high-income families seeking to send more than one child to a private school or college are feeling this “multi-tuition” pressure, which in turn leads more of them into the financial-aid pool.

With these kinds of dynamics at play, it is not surprising — or unreasonable — to expect a shift in the financial-aid recipient pool. It is important, however, for schools to recognize this shift and to weigh its impact on their missions. If socioeconomic diversity is to remain a moral imperative as well as a key measure of programmatic excellence, it is critical that schools examine the enrollment barriers that they and families face.

Even schools that provide significant financial aid face barriers to broad access and socioeconomic diversity in four areas of financial-aid and enrollment work: purpose, policies, practices, and purse strings. How do these four factors make themselves evident, and what can schools do in response?

Purpose

Once the purpose is clear, it becomes easier to define measurable targets to illustrate whether that purpose is being achieved. With socioeconomic diversity as a clear goal, schools should define what that means in real terms. What does socioeconomic diversity look like for our community? Should we benchmark against external realities of income distribution at-large? Should we aim for a certain balance of families from across income ranges that helps to ensure a multiplicity of perspectives in the classroom while providing access, opportunity, and affordability?

How can a school remove the “purpose” barrier? Use the board or a board task force to affirm the school’s primary purpose for its financial-aid investment. Engage the voice and experience of the admissions, financial-aid, and other staff members to bring data and perspectives based in reality, not assumption. Define what you mean by terms such as “economic diversity,” “middle income,” and “affordability.” Establish markers and goals for what success looks like.

Policies

Another barrier to achieving socioeconomic diversity is having financial-aid policies that do not adequately reflect the inequities of resources that different families bring to the financing table. Two common examples are “gapping” and support (or the lack thereof) for nontuition expenses.

“Gapping” refers to a school’s inability to meet the full demonstrated financial need of a family. Often, schools commit (formally or otherwise) to award only a certain percentage of need or even of tuition. While best practice is to meet 100 percent of financial need, a 2011 study showed that schools typically meet only 70 percent of financial need.4 In this scenario, a family showing it needs a $10,000 grant to make a $20,000 tuition affordable will only be awarded $7,000. The family must provide $13,000 from its resources, even though it has demonstrated it can only afford $10,000. A gapping policy, while imposing an additional burden for all families eligible for assistance, has the greatest effect on families in the middle- and low-income range of the spectrum. A low-income family will be less likely to find the extra resources needed to meet the gap than a high-income family might. This leaves the low-income family less able to accept the admission and aid offer and, thus, unlikely to enroll. Or, not wanting to see the opportunity to enroll escape them, families may commit with the gap and work hard to meet it the first year but increasingly find the strain to do so unmanageable in subsequent years, leading to billing and, ultimately, retention issues. Under these conditions, the scales of socioeconomic diversity tip away from lower- and middle-income families toward high-income families.

Similarly, the policy to provide financial aid for tuition but offer no support for nontuition expenses can also disproportionately impact families on the low- and middle-income sides of the scale. A family earning $60,000 will be more likely find it difficult to find the extra $2,000 to $5,000 needed for expenses such as tablets, books, transportation, and sports equipment than a family earning $160,000 might. Without a policy that offers the additional support, the lower-income family is more likely to not enroll or re-enroll, given the additional, unmanageable financial responsibility.

How can a school remove the “policy” barrier? The director of financial aid and the financial-aid committee should undergo annual reviews of financial-aid policies and identify those that seem to inadequately address the neediest families in the applicant pool. Propose one or two policy revisions that will enable the admissions office to reach the socioeconomic diversity goal more effectively. Estimate the financial impact of policy revision and propose short- and long-term budget targets. Explore with colleagues ways in which other schools manage their policies around the same issues.

Practices

Another example is the growing practice of “need aware” admissions, in which the level of financial need a student has may be a factor in the decision to admit him or her. This is not an uncommon practice in colleges and universities and is increasingly used in some private schools. In a need-aware environment, families with higher need are inherently at greater risk of not being admitted, even when otherwise qualified, since the school is unable to commit to the funding the student needs. While this is intended to spare the family from having to make a choice it cannot afford, it also works against creating broader socioeconomic diversity, as lower- and middle-income families will be more likely to not get an admission offer.

How can a school remove the “practices” barrier? Examine the activities you engage in to recruit and retain students. Do they have equal or disproportionate impact on families across the socioeconomic spectrum? Identify “risk areas” that compromise your ability to enroll lower- and middle-income families. Propose new or revised practices and estimate their budget impact, if any. Seek input from families on their experiences in the admission and financial-aid process and consider where improvements can be made by altering some practices.

Purse Strings

Many of the obstacles to staying consistent with the purpose of financial aid, implementing effective policies, and engaging in supportive practices can be solved by having an adequate financial-aid budget that meets the school’s desire for expanding socioeconomic diversity. For example, schools typically institute gapping policies because they do not have enough funding to meet 100 percent of need for every family demonstrating need. Those schools opt for offering slightly less than 100 percent aid to families in order to spread the limited pool of dollars to more families. Other schools opt to meet more of the need but realize that, in doing so, they can afford to make fewer offers. Each approach has trade-offs as a result of an insufficiently budgeted aid fund, creating an “either/or” choice when the “both/and” solution (i.e., offer more to more people) is optimal. Understanding what “optimal” looks like in terms of purpose, policy, and practice, a school can better hone in on what funding levels are needed to get there.

Because school budgets are heavily tuition-driven, raising tuition to get closer to a fully funded aid budget is one path. But schools must be wary of the potential vicious cycle of funding increased aid budgets solely with tuition increases: raising tuition to increase financial aid makes fewer people able to be full-pay (assuming family incomes are not increasing fast enough, relative to tuition change), which requires an increase in financial aid, which is funded by an increase in tuition. As tuition rises, so will the number of families unable to afford it, creating more financial-aid demand among higher-income families. To avoid this self-defeating cycle, it will be increasingly imperative for schools to find sustainable, renewable sources of support for financial-aid funding, such as endowment, fund-raising, or alternative revenue sources.

How can a school remove the “purse strings” barrier? Identify the budget needed to meet the financial-aid goals without trade-offs. Set a short- and long-term budget plan to reach the optimal funding goal. Limit tuition increases as much as possible. Engage and enlist diversity, development, and advancement professionals to solve the funding challenge collectively and creatively. This is important because in the big-picture view, it’s not just an admission or business office issue and it’s not just about “financial aid.” It’s about building a socioeconomically diverse and inclusive community and understanding what it takes to invest in that sustainably.

Making the Commitment

How do these forces work together in designing an effective financial-aid strategy for broader diversity?

In a school where the leadership recognizes “expanding access” as the primary purpose of the aid investment, the financial-aid policy prioritizes aiding those with the highest financial need and lowest incomes. The school then engages in recruitment practices that focus on outreach and messaging that drive toward “approachability” (so those families are able to see themselves as part of the school community). Financial-aid information on websites is easy to find and understand, so families can better determine whether the price they see will be the price they’re asked to pay. Touch points such as open houses and financial-aid nights are offered as opportunities to keep families informed and confident about not succumbing to sticker shock. Once enrolled, the families benefit from financial-aid practices that support fully demonstrated need as well as costs beyond tuition to mitigate the anxiety of being unable to afford enrolling year after year. A special donor, staff, and/or parent association fund is created or endowed to fund the nontuition support for the neediest families.

None of these outcomes are achievable without a long-term process that ensures the funding is in place to make this priority a reality, not just a hope or a goal that never fully materializes.

This simple example of recruitment practices highlights the three steps toward meaningful and strategic action to remove the barriers to broader socioeconomic diversity with financial aid.

1. Articulate and commit to your purpose of achieving socioeconomic diversity. Know the benefits that this commitment brings to individual students and the school.

2. Revise or eliminate your policies and practices that work against your stated purpose. Make it a point to engage in activity that is consistent with, and driven by, your optimal outcome.

3. Develop a diversified pool of financial-aid funding sources to support socioeconomic diversity from recruitment through graduation. Engage the entire community in identifying creative ways to make the investment a reality without trade-offs.

At the end of Lessons from Privilege, Powell remarks that “a sense that schools are truly special communities often changes the adults and students who join them. Their greatest resource is people, though the importance of socioeconomic resources invested fully in schools should not be underestimated.” Broadening socioeconomic diversity can indeed create the “truly special” community a school aims to be, but not without the commitment, hard work, and resources needed to tear down the barriers that prevent it from happening.

Notes

1. Powell, Arthur G., Lessons from Privilege: The American Prep School Tradition, Harvard University Press, 1996, pg. 91.

2. Data from NAIS Data and Analysis for School Leaders (DASL), as of January 2016.

3. Based on an analysis of more than 35,000 financial-aid awards reported in the School and Student Service for Financial Aid (SSS by NAIS) database for each year studied.

4. “State of Financial Aid,” SSS by NAIS, 2011.