FINANCIAL PLANNING
College application trends and how advisors can help clients navigate them
By Cozy Wittman
College is now the second-largest purchase that a family will make, but because the delivery of a college education appears to have stayed basically the same for the last 30 years, families believe they can conduct a college search for their child much like they did their own. However, the Covid-19 pandemic has significantly changed the college landscape in the last three years in ways that may make college much more expensive for many families.
The pandemic created a challenge for colleges: Standardized tests were canceled as people isolated. Colleges had to make a decision about testing. Some schools continued business as usual, however, many either eliminated the test score as part of the acceptance process (making them “test-blind”) or left it to the student to send or not (“test-optional”). A large number of schools chose test-optional, leaving families with the mistaken belief that colleges no longer are interested in test scores. This opened the door to many, many more applicants, driving some of the most significant application trends today (see “The new test-optional landscape” below).
Another complication is that colleges aren’t transparent about pricing and the qualifications required for acceptance. As a result, families are facing much higher prices in the senior year of high school than they had planned for when their student was young and they began saving.
Advisors are uniquely positioned to help keep longer-term goals like retirement at the forefront of the conversation around how much a family can afford to pay for college. To help families, however, advisors need to understand the actual college application and acceptance landscape. While advisors might not want to be college experts, understanding the trends and sharing them with clients will give the family a broader view through which they can make better financial decisions.
Trend #1: The most selective schools became more so, and the list of selective schools got longer
There have always been schools where acceptance rates were challenging, and everyone understood you had to be really smart to get in. But times have changed. Twenty to 30 years ago, many of today’s low-acceptance-rate schools had acceptance rates over 30%. Pre-pandemic, those schools’ rates had fallen below 15% or even 10%.
The situation has become even more challenging since the test-optional/test-blind landscape began with Covid-19. Application numbers have increased at these selective schools because of the impression that it is easier to get into a school now that you don’t have to submit test scores. With application numbers up as much as 30% at some schools, colleges were able to drop their acceptance rates. So not only did making tests optional not make it easier to get in, it actually made it harder to get in because of the number of applicants.
During the first year of the pandemic, we saw the number of total applicants remain the same as pre-Covid, however, this group applied to more schools because of the test-optional landscape. With the high school graduation class of 2022, the number of new applicants also rose, again increasing the number of applications the selective schools are receiving. In both 2021 and 2022, schools around the country saw a record number of applicants; at some schools, that number reached well over 100,000 applications. This isn’t happening only at the Ivy League but also at respected institutions that previously were not considered elite, such as Boston College, Boston University, Northeastern, Case Western Reserve, Tulane, and many others.
And it’s a vicious cycle. If competition is greater, then the seemingly logical answer for a prospective student is to apply to more schools. While that seems to make sense for an individual, it’s made a tough situation even messier when done by tens of thousands of students. We have even more competition for coveted slots.
Applying to more schools—especially the most competitive—is the exact wrong thing to do if finding a good fit is the goal. More applications aimed at the more selective schools does not increase the chance of acceptance, and more applications at less competitive schools the student hasn't researched well increases the pressure on their choice and increases the likelihood of a potential transfer. Not surprisingly, transfers are rampant—with 38% of incoming freshmen eventually changing colleges. In addition to personal disruption, this is costly to families. The increase to the cost of the degree is about $14,000 with a transfer. Finding schools that fit the student well and applying strategically is the top way to avoid a transfer.
With diminishing acceptance rates, students must have more than a great transcript and test scores to get into school. This requires deeply impactful service projects, internships, arts-related activities, and more “extras” to increase candidate viability. To have enough time to do this, families must start their college search earlier than most anticipate—in the sophomore or early in the junior year of high school is best.
Low acceptance rates also mean that schools do not feel compelled to offer scholarships to accepted students. All the extra credentials mentioned above must be leveraged just to get in, but once accepted, the family is likely to find that they don’t have any scholarships to help reduce the price of college unless need-based aid was granted.
Clearly, some families can pay for college from cash flow, regardless of price. However, many assume their very gifted and sharp student will get a scholarship, regardless of the school. There are no merit scholarships at Harvard, Stanford, Rice, Duke, University of Chicago, Vanderbilt, or any other highly selective schools. There is need-based aid at these universities if the outcome of the financial aid forms deems the student eligible for need-based aid. (Selective schools often refer to need-based aid as “scholarships,” not “grants,” confusing families about the kind of aid they are receiving.)
The combination of gap-year and deferred-acceptance kids during Covid, combined with bigger applicant pools, created situations in which some colleges over-enrolled their freshman classes in both 2021 and 2022. Schools compensated by reducing the number of student spots available for the following year’s freshman class. This created challenges for students around getting into schools where they might have thought acceptance would be easy. It’s perhaps worst at public colleges and universities, which announced record numbers of deferrals and students placed on waitlists. At many schools, less than 7% of students receive the opportunity to leave the waitlist.
Trend #2: Schools are leaning into early decision application deadlines
For years, the use of early decision (ED) in the application process has signaled to the college that this is a student’s top school. However, ED has changed over the years. Formerly, a student agreed they would not apply to other colleges until they heard whether they were accepted at their ED school. In fall 2019, the rules changed. The Department of Justice had lawsuits looming for the schools that participated in this practice, so the colleges changed their practices voluntarily. The colleges agreed that students can continue to apply to other colleges but cannot apply ED to more than one college. The student also agrees to withdraw their applications to those other colleges if they get into their ED school. Because the student is putting all their cards on the table, they lose their leverage for any real merit aid from the college to which they choose to apply ED. Although it is true that many of these schools don’t have many merit scholarships available, it is not true at all of the ED schools.
A family should anticipate paying very close to full price if applying ED. In 2022, colleges in the second tier leaned strongly into ED, filling 45% to more than 60% of their freshman class out of ED applications. This means as little as 18% might be chosen out of regular-decision applicants.
Many families around the country cannot afford to apply ED because they need those scholarship dollars. For those families, early action (EA) is a good option. EA indicates a student’s strong interest in a particular school, but does not include the promise to withdraw applications from other colleges. However, there has also been a trend toward dropping EA and going to a two-tiered ED process—ED1 and ED2—with two separate deadlines. ED serves colleges well, helping them understand who their freshman class will be and guaranteeing filled spots. It bodes less well for families, pushing the cost of college higher.
How the advisor can help
Despite calls from families to lower the cost of a four-year degree, there’s no evidence this will happen. In fact, many schools increased tuition by 2% to 3% in 2022, despite many freezing tuition during the height of the pandemic.
These cost pressures open an opportunity for advisors to connect with families early to get them saving for college, even if it’s small amounts. Advisors should check in with families about how things are trending for the student around middle school so savings can be adjusted accordingly. If it appears a student may not attend college but instead opt for a technical degree, parents might scale back on saving. If it appears the student will aim for more-selective schools than originally anticipated, parents may want to increase the amount they save. Moreover, when parents check prices, they may also discover they haven’t been saving enough to cover what they hoped, so they may wish to contribute more to savings vehicles. Advisors should encourage a college budget meeting early in the high school years so families understand their strategy to pay for school. This is an excellent time to discuss gaps in savings and which loans are best and which to avoid.
There are thousands of schools in the country, so it is a mistake to think of them as public (inexpensive) or private (expensive). These distinctions are outdated. A better distinction is flexibly versus inflexibly priced schools. There are public and private schools in each category.
The challenge for advisors and their clients is determining whether their schools of interest are flexible or inflexible about price. A rough guideline advisors can use: Selective (under 20% acceptance rates) schools and many of the state flagship schools are inflexible. Everyone else tends to be flexible. Parents and students in the U.S. are fortunate to have so many great schools. The quality of the education coming out of flexibles and inflexibles is not different; the experiences are equally compelling for students and their success. In most cases, the main distinction is pricing.
Too many families believe the myth that there are 50 great colleges, and the rest aren’t going to help students be successful. Buying a college education is like buying a car—if it has four wheels and runs, it can get you from point A to point B, but some people just want the luxury version. That’s fine if the family has saved well or has a high income and is comfortable with the prices of luxury colleges. If not, encouraging families to fall in love with colleges they can afford, setting the stage for what those annual budgets look like, and reminding the families of the trends that are making school even more costly is an important role the advisor can play.
The new test-optional landscapeStandardized testing has been part of the application process for more than 30 years. Before the pandemic, a little over 1,000 U.S. schools were test-optional or test-blind. Test-blind schools don’t offer a way to submit a test score. Test-optional schools allow students to decide if they want to submit their scores or not. The pandemic turned this landscape on its head. Closing down testing sites meant that in 2020 students could not take a test, so many schools became test-optional or test-blind. Today there are roughly 1,700 test-optional institutions and just over 80 that are test-blind. Many families incorrectly believe all colleges are test-optional or test-blind. As a result, they wrongfully assume that their student doesn’t need to take a test or doesn’t need to prepare for the test because the score doesn’t matter. That’s not true. The challenge is that colleges aren’t transparent about their policies. Many schools are test-optional for admission but still tie scholarship dollars to test results. It’s clear from acceptance numbers that at many schools many more students are accepted with a score submitted than without. Because that test score can help bring significant scholarship dollars to the table, investing in test prep, taking a couple of rounds of one of the tests (either ACT or SAT), and then determining if a student will submit or not is the best pathway. The future of testing is not yet clear. However, if the trends of the past few years are any indicator, colleges will continue to use test scores as one of the primary considerations for acceptance. |
Cozy Wittman is education and partnerships lead at College Inside Track. She trains advisors nationally around the college landscape and offers options for advisors to pursue partnership to bring additional value to their clients. Reach her at cwittman@collegeinsidetrack.com.
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