The New York Times published a front-page article recently which discussed how some colleges are giving preferential treatment to rich students. The trend shouldn’t be surprising. Actually, the vast majority of private colleges have been playing out of this rule book for many years. It didn’t take the current financial crisis to trigger it.
Regardless of how you feel about the practice, wealthy students help a school’s bottom line by paying full price or closer to full fare, which can then allow a college to give more aid to less fortunate kids.
In reality, most private schools have to offer some sort of bribe to attract wealthy students. What I’m talking about is a merit scholarship, which is also referred to in the industry as tuition discounts or non-need-based aid.
Schools perched below the Ivy sphere have to provide college scholarships because affluent kids with attractive academic profiles enjoy plenty of choices. Let’s look, for example, at how a good school like George Washington University competes with a higher ranked institution like Georgetown. George Washington’s average yearly tuition discount is $19,000+.
In contrast, wealthy kids who get into Georgetown will receive this discount: $0. That’s right nothing. Georgetown refuses to cut the price for its wealthy students.
Ultimately, families have to ask this sort of question: Should I capture close to a $100,000 university scholarship from GWU over four years or get nothing from a school like Georgetown.
Unfortunately, many families are unaware of the discounting taking place at so many schools. Parents can figure out what’s going on if they know how to pinpoint the college scholarships (or lack of them) at individual schools.
Of course, middle-class and lower income families have an even bigger incentive to pinpoint schools whose policies are more supportive of their financial need.