This game shows how college admissions discriminates against the poor

The player’s manual

College Scholarship Tycoon is a game where you’re asked to move your college up the rankings — but striking the wrong balance might force you to reject poor kids who really need college to give them a shot at a better life.

There are two primary parts to the game.

Who to accept? You see 10 student applications, with various family incomes and test scores. You can choose to accept students with good test scores who are more likely to have higher incomes, or you can choose to accept lower-scoring students who tend to have lower incomes.

Who to give financial aid? You have a limited about of aid. Do you give it to poor students who need it? Or to more affluent students who you want to attract to the school? A better aid package will attract the high-achieving students who will improve your rankings, but they also don’t need the money as much.

You have three years to improve your ranking. In the process, you’ll discover just how the incentives are set up for colleges to discriminate against poor students, and how the entire system has become structured to help out the wealthy.

How to win

First, you need to know what the rankings actually measure

In the game, we use SAT scores and acceptance rate as the inputs for the final ranking; it is, of course, a major oversimplification of how ranking services like US News and World Report create their formula. But it’s able to demonstrate the same effects: Improving your ranking attracts more students to apply — and that means you can be more selective, all while being a college leader who has made a school more “prestigious.”

Here’s how to win the game

Use your financial aid to climb your way up rankings.

You might think financial aid is for helping students who need the money. But this section is about helping you win this game, not be socially responsible.

So let’s put it another way: Give financial aid money to kids who don’t need it. Seriously. Call it “merit-based aid” or a “scholarship” to attract them to your school.

Here’s why it helps you win: If there are a bunch of affluent kids with above-average test scores that you want to attract to your school to boost your SAT averages, for example, give them all modest scholarships and you can get a leg up on your competition. Alternatively, you could spend several students’ worth of financial aid on a single poor student who needs a full-ride scholarship — but that won’t help you climb these rankings.

If you accept a student from a poor family and meet his financial need, you’re sacrificing your ability to bid on several affluent students. It’s just the reality of a world where using “merit-based” aid to recruit students is the norm.

In addition, you could spend your money on fancy amenities, which don’t necessarily contribute to academic outcomes. A paper published in 2013 found that most students value spending on student activities, sports, and dormitories.

Catharine Bond Hill, the former president of Vassar College, said it best: “There is nothing in the rankings valuing diversity or serving a social mission in terms of social mobility. … Basically, every dollar that you reallocate away from need-based financial aid helps you in the rankings.”

Are there other strategies to gaming the system?

You might think college should be about how much upward mobility your school provides or how much financial value your school provides. You might even think it matters that how students perform at your school.

But these rankings don’t care that much. Rankings largely care about who you’re bringing to your school.

If you’re already a super elite college, like an Ivy League school, you’ve already won the game — you don’t have to worry too much about this. But if you’re an elite private college, like Northeastern University, or an elite public school, like Clemson University, you might be thinking about gaming the system.

For example, Northeastern made a change that made it easier for more students to apply, which allowed them to reject more students and report lower acceptance rates. Clemson increased the number of “small classes” — those with 19 or fewer students — but in turn that meant other classes were overly packed with students. (These features are not in the game.)

It sounds like we can use data to pretty much buy the student body that we want. I’m in. How do I do it?

The game somewhat simulates this by using your preferences on 10 applicants and extrapolating what you likely want the incoming class to look like.

The real-life version of this is the enrollment management industry. They are consultants who figure out how you should be spending your money to achieve the goals you want — which, of course, includes climbing in the rankings.

In a 2005 piece for the Atlantic, Matthew Quirk did a deep dive into the enrollment management industry by attending one of their conferences. Here’s how he described the process for one firm:

To decide how to parcel out financial aid, the enrollment manager puts admitted students onto a grid with need on one axis and academic ability on the other. … The school then adjusts financial aid for students by group, with the goal of increasing the “yield rate” for the most desirable prospects — typically academic stars and those willing to pay most or all of the tuition (“full-pays”).

He also reports that sometimes when they want to send a signal to a student that she shouldn’t attend, they give them a terrible financial aid package that pretty much says: “Don’t come.”

In a 2014 Forbes piece, reporters Maggie McGrath and Matt Schifrin describe a data-driven system at Noel-Levitz, the largest enrollment management firm:

The model can instantly predict, for example, that if you offer a $5,500 grant to 100 students in a certain income range from Philadelphia’s Main Line only 24% are likely to enroll. But when you bump the offer up by $500, to $6,000, 48% are likely to come.

So how much influence does the enrollment management industry have on college admissions and financial aid offices? Stephen Burd at the New America Foundation, who has studied the industry, said Noel-Levitz hires admissions directors as consultants to help them sell their products at other schools — and they even used to market this on their site. “I was kind of amazed at such a conflict of interest,” he said.

Let’s talk about the winners

If a student has a high SAT score, she probably deserves that scholarship I have here, right?

It depends on what you believe a college’s mission should be. If it’s about educating students with as high of test scores as possible, then sure.

But here’s the problem: SAT scores are highly correlated with family income. So if you think students with high SAT scores deserve a discount on their education, you’re essentially saying you think colleges should continue making it a lot easier for affluent students to get a college degree, while making it much harder for kids from poor families.

But if you think college should be engines of economic opportunity, then perhaps it’s more fair to spend your financial aid on students who need that money to attend school.

I got a high SAT score. I went to school on scholarship. They just really wanted me, right?

Colleges assume you’ll think this way. And they assume that your parents will love going to cocktail parties and telling their friends that their kids are going to college “on scholarship.” So they can use “merit-based” aid as a recruiting tool.

In fact, Don Hossler, who used to run enrollment management at Indiana University, has a name for this: the “cocktail effect.”

Let’s talk about the losers

I had to reject a lot of kids from low-income families. What happens to those students?

A team led by Stanford University’s Raj Chetty has been working on understanding this exact question. What they’ve found is that those poor students end up attending less-selective universities, two-year community colleges, and for-profit schools, which are schools that don’t give them a great chance at upward mobility.

In fact, as New America’s Ben Barrett points out a recently published report, students whose families are in the top 1 percent (earning at least $631,000 a year) are 77 times more likely to attend an Ivy League school than a student whose family is from the bottom 20 percent.

But surely this is getting better, no?

No. In that same report, Burd analyzed Chetty’s data and found that the 381 selective public universities are now enrolling fewer students from the bottom 40 percent than they were about 20 years ago. Meanwhile, most of them are enrolling more students from the top 20 percent.

In other words, these schools are enrolling more rich kids and enrolling fewer poor kids.

Doesn’t the federal government help students who have financial needs?

Yes, they award Pell Grants, which is need-based aid students don’t need to pay back.

But as Burd wrote in his most recent annual report, “Undermining Pell,” some schools are enrolling these students who get federal aid and then “shifting their own funds to help recruit wealthier students.” So in the game, it’s as if the poor students come in with a certain amount of aid, so you feel like you can just use your financial aid money to attract affluent kids to your school.

So even as the federal government sharply increases spending on Pell Grants, low-income students keep going more and more into debt.

How does the growing wealth inequality in the US affect this behavior?

Imagine you have 10 people who applied to your school, and the richest two have way more money than everyone else, while bottom few have very little money.

Most of the money is at the top. And most colleges need that money to survive. So guess who you should recruit in this game? And guess what you should use to attract them?

Most colleges rely on student tuition to operate their schools, so they need some of the wealthier students to come to their school — even at modestly discounted prices. They can’t just enroll students without money.

This means there’s stiff competition for those wealthier students, and schools start to bid on them.

So the growing wealth inequality in the US has created the groundwork for this merit-aid arms race. “Income inequality is driving the incentives,” Hill said. “Rankings, in a way, are a manifestation of that.”

Quitting the game

Do you believe this game turns colleges into engines of inequality? And you want to quit? This section is for you.

Are my rivals worried about colleges giving too much money to students who don’t need it?

Yes. In a survey earlier this year of college and university presidents, many of them said they are concerned about giving too much financial aid to student who don’t need it.

Some college with big endowments, like American University or George Washington University, don’t have to worry so much about giving big discounts in tuition to both students who need it and students they want to recruit. But most colleges generate a huge portion of their revenue out of student tuition, so they need to recruit enough students who will pay the majority of the sticker price.

What if you go rogue and decide not to use merit-based aid? You might lose out on top students, causing your school to spiral in the rankings. That might cause you to lose your job and put the school in a terrible financial situation. It’s difficult for most schools to just withdraw from the game.

So schools are just stuck playing this merit-aid arms race game?

That’s how Rebecca Blank felt when she took over as chancellor at the University of Wisconsin Madison.

She realized she was losing top students in her state to out-of-state competitors who were offering a lot more merit-based aid. So she announced UW-Madison was increasing its merit-based aid.

In an interview she gave Inside Higher Ed, which has now been quoted dozens of times, she said the following:

As far as I’m concerned — I’m an economist — that’s a real waste of where we should be spending our money in higher ed. But I’ve got to keep some of those top students in Wisconsin. … It is one of these arms-race things that I’m not happy with but I don’t quite know what to do about.

Recently, she explained a bit more of her thinking to me: “I don’t want our top students from our very top schools leaving our state to go to other universities. If they come to college, they’re also more likely to stay in the state after college. If they leave the state, the opposite happened.”

So we need all agree to stop playing this merit-aid game. Maybe we can work together to make sure students don’t have to make college decisions based on money?

This used to happen.

Starting in the 1960s, officials from the eight Ivy League schools and the Massachusetts Institute of Technology would hold a meeting each spring. They dubbed themselves the Overlap Group because they would figure out which students got into two or more of their schools — and then agree on how much financial aid they would offer those students. Other less selective Northeastern schools also participated in similar groups.

The basic idea was this: Students shouldn’t have to decide where to go based on how much financial aid they are offered. In addition, this meant schools won’t be competing with one another by trying to bid on students with financial aid.

But in 1989, the Overlap Group caught the attention of the Wall Street Journal in a story headlined “Do Colleges Collude on Financial Aid?” This brought up the question of whether colleges were price-fixing — essentially eliminating competition by working together to raise tuition and offer financial aid in lockstep.

In turn, it caught the attention of the Justice Department, which began investigating these colleges for violating antitrust laws.

In 1991, the eight Ivy League schools agreed to stop sharing information on student aid, and to stop collaborating on tuition increases. MIT held out, went to court, and a federal judge found them guilty of violating antitrust laws. MIT President Charles Vest told the New York Times that the judge decided “not to consider in any depth the social and educational policy matters, but to look at the issue in the very narrow range of antitrust law.” Even then, economist and legal scholars argued that these colleges were just trying to correct a market failure.

Surely there’s a way to talk about this without price-fixing, right?

This is where things get a little tricky.

Kenyon College President Georgia Nugent used to organize meetings to talk about this at a huge gathering of college presidents hosted by the Council of Independent Colleges. But a few years ago, she got a call from the Department of Justice.

“They told us we were under investigation,” she told me, “and that we should not communicate with other folks involved in the meeting.”

After about two months, the Justice Department found nothing and shut down the investigation. But to Nugent, the damage was done.

“That had a chilling effect,” she said. “Effectively, the message to take away from the DOJ is that you can’t even discuss this topic.”

Some groups, like the American Talent Initiative, are still working to bring college leaders together to discuss unilateral disarmament — to mutually agree to not offer merit aid. But it’s not a silver bullet. As Blank, the Wisconsin president, said, “There’s always an incentive for someone to defect.”

What about other solutions?

There are many proposals around redesigning the Pell Grant system so schools can’t just shift their financial aid dollars to recruitment affluent kids. Most of these ideas involve attaching strings to Pell Grants, so schools can’t just treat it as free federal money.

Another, endorsed by many, including Hossler and Nugent, is a “tuition reset” — essentially lowering the sticker price of tuition in the hopes that it will attract more students. It pushes against the broader trend of increasing the sticker price, and then offering discounts on that sticker price using financial aid.

A good way to think about the chart below is looking at the difference between the sticker price and net price, and thinking about that space between as the financial aid schools offer.

But virtually everyone I talked to saw this as a multi-prong problem that creates this failure of markets. The way we evaluate students and schools is broken; the way the courts view school collaboration in an antitrust lens chills the conversation; and the population’s increasing wealth inequality means colleges need to chase after the affluent.

And at the nexus of all those points are industries of people — from enrollment managers, school list-makers, college officials, and legislators — to grease those wheels along.

Join the conversation: #EduInequality

Join me and Stephen Burd, Clare McCann, and Ernest Ezuego of the New America foundation on Wednesday, November 1, at 12 pm EST for a discussion on Twitter about about how colleges are increasingly using financial aid to attract affluent kids, rather than help poor kids.

We’ll dive into the factors that drive this discrimination — things like rankings, wealth inequality, and the enrollment management industry. And we’ll talk about how poor students still don’t have fair access to college, which reinforces inequality. The New America foundation recently released a data-driven report all about this. If you have time to give it a read before the chat, I highly recommend it.

The chat will kick off on Wednesday, November 1, at 12 pm EST from my account, @alv9n. Tweet your questions and reactions with the hashtag #EduInequality to participate. See you there!