Demystifying “The Barbell Effect”: Financial Aid and the Middle Class

Mark J. Mitchell, VP School Information Services April 7, 2006 NYSAIS Diversity Conference Lycee Francais de New York

Guess When??

“… (the headmaster) longed for the day when his school might appear in the newspapers ‘without that abominable adjective ‘exclusive’ prefixed to it.’ It was as if schools such as his were regarded as a ‘curious survival from an aristocratic day, a kind of private preserve of the sons of the rich bound gradually to disappear along with the rich.’” --Arthur Powell,

Tradition Lessons from Privilege: The American Prep School

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The Barbell Effect Defined…

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Demystifying the Barbell Step 1: Defining 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.”

–

Census Bureau website, Frequently Asked Questions on Income



EVERYBODY—except the rich and the poor.

–

Question: why do affluent people think they’re not affluent?

–

American phenomenon: “Looking Up”



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”?

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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 $19,931 Full Aid Eligible* No Aid Eligibility** No COLA COLA (NYC) $133,620 $309,140 $21,050 $ 0 - $52,785 $137,620 $319,560 $21,625 $139,675 +

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

$324,910

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 $29,949 Full Aid Eligible* No Aid Eligibility** No COLA COLA (NYC) $165,115 $387,460 $ 0 - $42,015 $31,908 $172,480 $405,260 +

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 $50 - $75K $75 - $100K $100 - $150K $150K+ Median Income 46.2

21.3

13.5

12.0

7.2

$53,692 48.8

16.9

11.6

12.4

10.2

$51,150 27.8

15.2

14.9

17.3

24.8

$89,249 44.0

19.4

13.5

13.6

9.4

$56,556

Source: 2004 American Community Survey, www.census.gov

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Who Applies for Financial Aid?

% distribution by income range, SSS filers 2004-05

$0 - $50K $50 - $75K $75 - $100K $100 - $150K $150K+ Median Income USA 46.2

21.3

13.5

12.0

7.2

$53,692 SSS Filers 36.9

21.9

16.7

16.4

8.0

~ $57,500

Sources: 2004 American Community Survey, www.census.gov, SSS applicant data, 2004-05 processing year, NAIS

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So, What is Middle Income?

2004

 SSS “First dollar income” at $53K in day schools—

THIS IS

the middle income family; and they can benefit well with fin aid

Lowest 5 th <$24,780 Second 5 th $24,781 - $43,399

 Top 5% of family income begins around $173K

Third 5 th Fourth 5 th $43,400 - $65,827 $65,828 - $99,999

– Many of these would qualify for aid at high-cost schools with more than one child enrolled, especially if COLA factors are used

Highest 5 th >$100,000

 Should a

need-based

aid program do more? Should it consider “relative” poorness?

Source: US Census Bureau, 2005 Current Population Survey, http://pubdb3.census.gov/macro/032005/faminc/new06_000.htm

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Demystifying the Barbell Step 2: Reality Check

   At NY state independent schools, families stop qualifying for financial aid once income reaches around $140K-$170K 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 applicants

declining

proportion of aid – This is NOT the middle-income group that schools are expressing concern about Copyright National Association of Independent Schools 2006

Reality Check (cont’d)

  Income and need-based aid realities – In NY state, about 91% of families 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  What proportion of the 81.6% 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?

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  

Demystifying the Barbell Step 3: Contextualize the Conversation

Explore the

psychology of socioeconomics

and learning in the school and its impact on experience

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

the bar : Typical NYSAIS school has 82% full-pay students – Too many full-pays to presume equal weights on both ends of – 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?

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