1. 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
For titles and subtitles each word capitalized except articles and prepositions and conjunctions for four or fewer letters. Title and subtitle text appears black on clear/white backgrounds.

2. The American Middle Class
“There are three social classes in America: upper middle class, middle class, and lower middle class.”
-- Judith Martin, (Miss Manners)

3. The Barbell Effect Defined…

4. 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”?

5. Can the Middle Class Get Aid?
Assumptions: using SSS 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 COLA (NYC)
$19, $133,620 $309,140
$21,050 $ 0 - $52,785 $137,620 $319,560
$21, $139,675 $324,910
+NYSAIS members, medians
*Families below this income qualify for FULL financial aid
**Families above this income qualify for NO financial aid

6. Can the Middle Class Get Aid?
Assumptions: using SSS 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 COLA (NYC)
$29, $165,115 $387,460
$31, $172,480 $405,260
$ 0 - $42,015
+NYSAIS members, medians
*Families below this income qualify for FULL financial aid
**Families above this income qualify for NO financial aid

7. % distribution by income range, selected locales
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
$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: American Community Survey,

8. Can the Middle Class Get Aid?
Assumptions: using SSS 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 COLA (1.2)
$16, $119,360 $144,,008
$20,835 $0 - $51,572 $134,592 $163,250
$24, $148,430 $180,360
+CAIS members, medians
*Families below this income qualify for FULL financial aid
**Families above this income qualify for NO financial aid

9. Can the Middle Class Get Aid?
Assumptions: using SSS 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 COLA (1.2)
$32, $171,120 $207,775
$35, $182,558 $223,130
$0 - $41,370
+CAIS members, medians
*Families below this income qualify for FULL financial aid
**Families above this income qualify for NO financial aid

10. % distribution by income range, selected locales
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
18.7
$150K+
7.2
10.6
24.6
13.4
Median Income
$53,692
$71,997
$87,434
$73,458
Source: American Community Survey,

11. Who Applies for Financial Aid?
% distribution by income range, SSS filers
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+
7.2
8.0
Median Income
$53,692
~ $57,500
Sources: American Community Survey,
SSS applicant data, processing year, NAIS

12. 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?
Source: US Census Bureau, 2005 Current Population Survey,

13. Who Attends Independent Schools?
% distribution by income range
% of Current Families
$0 - $50K
5.9
$50-100K
17.8
$ K 21
$ K
13.8
$ K
11.0
$ K
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 giving-dependent income streams)
Sources: NAIS Parent Survey

14. 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

15. 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?

16. 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?

17. Conversation in Context: Three Examples

18. Example 1: DC Area School

19. 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
Quintile
Family Income Range ($)
Number of Grants Awarded
Average Grant ($)
Lowest
0 - 24,780 5
22,898
Second
24,781 – 43,399
21,125
Third
43,400 – 65,827 21
16,817
Fourth
65,828 – 99,999 31
16,829
Fifth
> 100,000 41
11,899

20. 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?

21. 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 ($25 members, $38 nonmembers)

22. Have We Gone Full Circle??
“Initially diversity meant economic and social-class diversity. Economic diversity did not threaten the homogeneity the schools wished to preserve, since a large middle-class population shared the schools’ values and would attend if they could afford to.”
-- A. Powell, Lessons from Privilege: The American Prep School Tradition

23. The Real Challenges Facing Schools
Converting perception into reality…get real data behind the perceived “middle income” problem
Define the range, survey the entire school population, examine patterns of aid recipients by income level
Compare against external income distribution realities…are you talking about the wrong “middle class” to help?
How to get the affluent to recognize their privileged position? Talk about the psychology of socioeconomics in the school
Finding a need-based solution to giving high-income families more help
ONLY if this is the problem to solve
Apply local cost-of-living factors, assess a percentage of the SSS PC for families in the target range
Using funding sources that don’t detract from the ability to meet the needs of more needy families
Work with board, development to cultivate donors or allocate more to financial aid budget