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