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Demystifying “The Barbell Effect”:
Financial Aid and the Middle Class
Mark J. Mitchell, VP School Information Services
May, 2006
CAIS/NYSAIS Business Affairs Conference
Mohonk Mountain House
The American Middle Class
“There are three social classes in America: upper
middle class, middle class, and lower middle class.”
-- Judith Martin, (Miss Manners)
Copyright National Association of Independent Schools 2006
The Barbell Effect Defined…
Copyright National Association of Independent Schools 2006
Demystifying the Barbell Step 1:
Defining Middle Class
Who comprises the middle class?
– “What is the income of the ‘middle class’?”
The Census Bureau does not have an official definition of
"middle class." We do, however, derive several measures
related to the distribution of income and income inequality.”
– From the Census Bureau website, Frequently Asked Questions
on Income
– EVERYBODY
Why do affluent people think they’re not affluent?
American phenomenon: “Looking Up” (see 4/3/06 New
Yorker article, “Relatively Deprived” by John Cassidy)
The Independent School Middle Class?
– Varies by school profile and locale
– Starts as low as at $65,000 and goes as high as $200,000
– Is this really “the middle”?
Copyright National Association of Independent Schools 2006
Can the Middle Class Get Aid?
Assumptions: using SSS 2005-06 methodology Family of four, two parents, two children,
parents age 45, both work, no assets - parent or student, NY state/other taxes,
Tuition+-Day Schools
Full Aid Eligible*
No Aid Eligibility**
No COLA
$19,931
$21,050
$ 0 - $52,785
$21,625
+NYSAIS
$133,620
$309,140
$137,620
$319,560
$139,675
$324,910
members, 2005-06 medians
*Families below this income qualify for FULL financial aid
**Families above this income qualify for NO financial aid
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COLA (NYC)
Can the Middle Class Get Aid?
Assumptions: using SSS 2005-06 methodology Family of four, two parents, two children,
parents age 45, both work, no assets - parent or student, NY state/other taxes,
Tuition+-Bdg Schools
Full Aid Eligible*
No Aid Eligibility**
No COLA
$29,949
COLA (NYC)
$165,115
$387,460
$172,480
$405,260
$ 0 - $42,015
$31,908
+NYSAIS
members, 2005-06 medians
*Families below this income qualify for FULL financial aid
**Families above this income qualify for NO financial aid
Copyright National Association of Independent Schools 2006
How Many Families Make That Much?
“No Need” PC at $21,625 tuition = $140,000
% distribution by income range, selected locales
USA
New York
City Metro
Westchester
County
New York
State
$0 - $50K
46.2
48.8
27.8
44.0
$50 - $75K
21.3
16.9
15.2
19.4
$75 - $100K
13.5
11.6
14.9
13.5
$100 - $150K
12.0
12.4
17.3
13.6
$150K+
7.2
10.2
24.8
9.4
Median Income
$53,692
$51,150
$89,249
$56,556
Source: 2004 American Community Survey, www.census.gov
Copyright National Association of Independent Schools 2006
Can the Middle Class Get Aid?
Assumptions: using SSS 2005-06 methodology Family of four, two parents, two children,
parents age 45, both work, no assets - parent or student, CT state/other taxes,
Tuition+-Day Schools
Full Aid Eligible*
No Aid Eligibility**
No COLA
$16,500
$20,835
$0 - $51,572
$24,693
+CAIS
$119,360
$144,,008
$134,592
$163,250
$148,430
$180,360
members, 2005-06 medians
*Families below this income qualify for FULL financial aid
**Families above this income qualify for NO financial aid
Copyright National Association of Independent Schools 2006
COLA (1.2)
Can the Middle Class Get Aid?
Assumptions: using SSS 2005-06 methodology Family of four, two parents, two children,
parents age 45, both work, no assets - parent or student, CT state/other taxes,
Tuition+-Bdg Schools
Full Aid Eligible*
No Aid Eligibility**
No COLA
$32,250
COLA (1.2)
$171,120
$207,775
$182,558
$223,130
$0 - $41,370
$35,444
+CAIS
members, 2005-06 medians
*Families below this income qualify for FULL financial aid
**Families above this income qualify for NO financial aid
Copyright National Association of Independent Schools 2006
How Many Families Make That Much?
“No Need” PC at $24,693 tuition = $148,430
% distribution by income range, selected locales
USA
Hartford
Metro
Fairfield
County
Connecticut
$0 - $50K
46.2
33.6
24.5
31.4
$50 - $75K
21.3
18.5
17.3
19.6
$75 - $100K
13.5
17.6
15.1
16.9
$100 - $150K
12.0
19.7
18.5
18.7
$150K+
7.2
10.6
24.6
13.4
Median Income
$53,692
$71,997
$87,434
$73,458
Source: 2004 American Community Survey, www.census.gov
Copyright National Association of Independent Schools 2006
Who Applies for Financial Aid?
% distribution by income range, SSS filers 2004-05
USA
SSS Filers
$0 - $50K
46.2
36.9
$50 - $75K
21.3
21.9
$75 - $100K
13.5
16.7
$100 - $150K
12.0
16.4
$150K+
Median
Income
7.2
$53,692
8.0
~ $57,500
Sources: 2004 American Community Survey, www.census.gov,
SSS applicant data, 2004-05 processing year, NAIS
Copyright National Association of Independent Schools 2006
So, What is Middle Income?
SSS full need families stop at
~ $53K in day schools—THIS IS
the middle income family; and
they can benefit well with fin aid
Top 5% of family income begins
around $173K
– Many of these would qualify
for aid at high-cost schools
with more than one child
enrolled, especially if COLA
factors are used
Should a need-based aid
program do more? Should it
consider “relative” poorness?
2004
Lowest 5th
<$24,780
Second 5th
$24,781 - $43,399
Third 5th
$43,400 - $65,827
Fourth 5th
$65,828 - $99,999
Highest 5th
>$100,000
Source: US Census Bureau, 2005 Current Population Survey,
http://pubdb3.census.gov/macro/032005/faminc/new06_000.htm
Copyright National Association of Independent Schools 2006
Who Attends Independent Schools?
% distribution by income range
% of Current
Families
$0 - $50K
5.9
$50-100K
17.8
$100-150K
21
$150-200K
13.8
$200-250K
11.0
$250-300K
6.1
>$300K
24.4
44.7% of current families earn less
than $150K
18.9% earn over $350K
“Emotional” middle class is well
represented
“Statistical” middle class is
underrepresented
Financial model requires
preponderance of high-income
families (i.e., tuition- and givingdependent income streams)
Sources: 2003 NAIS Parent Survey
Copyright National Association of Independent Schools 2006
Demystifying the Barbell Step 2:
Reality Check
At NY and CT independent schools, families stop qualifying for
financial aid once income reaches around $140K-$180K
Middle income squeeze implicated ($95K-$180K) and many are led to
believe that these people aren’t enrolling
– Do you know for sure that this is “middle class”?
– Do you know for sure that they aren’t enrolling?
Families in the true middle-income band ($43K-$65K) are served well
through need-based financial aid guidelines
– But they represent a declining proportion of aid applicants
– This is NOT the middle-income group that schools are
expressing concern about, even though underrepresented and
underfunded
Copyright National Association of Independent Schools 2006
Reality Check (cont’d)
Income and need-based aid realities
– About 91% of families in NY and about 87% in CT earn less than
$150K and would qualify for some financial aid at a $25K school
– NYSAIS schools provide financial aid to 18.4% of enrolled students
– CAIS schools provide financial aid to 20.8%
How can a barbell exist if only one-fifth receive aid?
What proportion of the full-pay families at the school fits the
“middle income” range that you think is squeezed out?
Do you need to extend more aid for greater economic diversity? To
which families?
– Shift concern to serving the “real” middle class for truer
socioeconomic diversity
– Or is serving the ‘emotional’ middle class a budget-building
agenda matter? Other motivation?
Copyright National Association of Independent Schools 2006
Demystifying the Barbell Step 3:
Contextualize the Conversation
Explore the psychology of socioeconomics in the school and its impact on experience
and learning
Challenge the perceptions
– “The only people who can easily pay tuition are those with high financial aid
or high income.”
– “No one in the middle is enrolling.”
– “The middle class can’t afford our school.”
Put data in context: Typical NY or CT school has 80-85% full-pay students
– Too many full-pays to presume equal weights on both ends of
the bar
– Not all full-paying students are millionaires
– Not all aid recipients have high need/low income
– Disabuse the notion that high-need families are doing it easily
Study and define the problem very specifically…not a ‘one size fits all’
solution for schools
– Do you really have a middle-income problem? Is it statistical or emotional?
– If so, find solutions that do not siphon limited resources from those who
show greatest need?
Copyright National Association of Independent Schools 2006
Conversation in Context: Three Examples
Copyright National Association of Independent Schools 2006
Example 1: DC Area School
Financial Aid Awards and Family Income (2005 - 2006)
$30,000
Financial Aid Awards ($)
$25,000
$20,000
$15,000
$10,000
$5,000
$0
$0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000 $140,000
Family Income ($)
Copyright National Association of Independent Schools 2006
$160,000 $180,000
$200,000
Example 1: Where’s The Barbell? What’s the “Real” Issue?
Number of Sample’s Financial Aid Grants awarded within each income
quintile (2005 – 2006 academic year)
Source: US Census Bureau
National
Family Income Range
($)
Number of Grants
Awarded
Average Grant ($)
Lowest
0 - 24,780
5
22,898
Second
24,781 – 43,399
5
21,125
Third
43,400 – 65,827
21
16,817
Fourth
65,828 – 99,999
31
16,829
Fifth
> 100,000
41
11,899
Quintile
Copyright National Association of Independent Schools 2006
Addressing Middle Income Issues: Two Paths
Albuquerque Academy (New Mexico)
– Board challenge to increase middle income enrollment through financial aid
and tuition discounts
– Used survey to examine if there was a “barbell effect” and found there was
none
– No need to change policy or commitment of aid dollars to wealthier families
St. Mark’s School (Texas)
– Donor approached school to provide grants to middle income families
– School research yielding a defined “middle-income” target for its population
– Implemented policy of reducing SSS results of contributions for families in
the target range and offered aid from the donor-supported fund to meet the
increased financial need
Study and define the problem very specifically…not a ‘one size fits all’ solution
for schools
– Do you really have a middle income problem? Can you solve it without
siphoning already limited resources from those who show greatest need?
Copyright National Association of Independent Schools 2006
NAIS Resources
School and Student Service for Financial Aid (SSS)
– Need analysis, training workshops and consultation
on policymaking, Comp*Assist software
StatsOnline, other statistical resources
– National, local/regional association
– Trend analyses and environmental scanning
Financing Schools Institute
– July 6 – 9, Bolger Center (Potomac, MD)
Financing Sustainable Schools book
– Available at www.nais.org ($25 members, $38
nonmembers)
Copyright National Association of Independent Schools 2006