Revenue and rankings: Inside the multibillion-dollar industry shaping college admissions

By Jillian Berman

Critics say enrollment management has pushed colleges to prioritize money and U.S. News at the expense of students

Core to the way people think about college admissions is that it's about merit. That's part of what was at the heart of the cases challenging affirmative action at the Supreme Court last year - were schools illegally putting their thumbs on the scale for certain students? And it's why the so-called Varsity Blues scandal inspired so much outrage, as parents had paid huge sums to secure their kids an admissions advantage.

But the reality is that who applies to and who gets into colleges has more to do with schools' priorities than students' qualifications. A new book, "Lifting the Veil on Enrollment Management: How a Powerful Industry is Limiting Social Mobility in American Higher Education," argues that those priorities are influenced by a multibillion-dollar business that pushes schools toward generating revenue and moving up in the rankings.

The book says universities invite students to apply even if it's unlikely they'll get in so the institutions can then boast of their low admissions rates. Applicants' activities on college websites are tracked closely to see if they're likely to enroll. And financial aid is often used as a tool to lure wealthy students instead of to help poorer ones.

Driving these tactics, according to the book, is a practice known as enrollment management. The term is generally believed to have been coined by Jack Maguire, a theoretical physicist who took over Boston College's admissions department in the early 1970s as the Jesuit school in the Boston suburbs struggled with enrollment. Maguire applied his quantitative skills to the job and broke down walls dividing the financial aid and admissions offices.

Today Boston College meets 100% of the full demonstrated need of its students, Jack Dunn, a spokesperson for the school, wrote in an email. "We do not use merit aid to attract students at the expense of aid for low-income students," Dunn wrote. "The enrollment management effort that Jack Maguire started at BC in the early 1970s - prior to the advent of college rankings - has little resemblance to enrollment management efforts at colleges and universities today."

Maguire's approach spread to other private higher-education institutions as demographic changes and the increased ease of filing admissions applications fueled more aggressive competition among schools. Eventually, public institutions began using enrollment management, too. An entire ecosystem of consulting firms - a new industry, in effect - sprouted up around it, and that is the focus of the book "Lifting the Veil on Enrollment Management."

The enrollment-management business, along with schools, has defended its strategies, saying they help colleges cope with a difficult funding environment. They've also said a precise understanding of the data allows colleges to better weigh trade-offs among priorities.

The book, which features essays from journalists, former enrollment-management leaders and others, highlights how the practice has influenced colleges' approach to admissions and financial aid. It also argues that a lack of scrutiny of enrollment management hurts students and their families.

MarketWatch spoke with the book's editor, Stephen Burd, a senior writer and editor at New America, a think tank. The conversation has been edited and condensed.

MarketWatch: What is enrollment management?

Stephen Burd: Somewhere around the 1970s or so, private colleges first adopted an enrollment-management approach to admissions and financial aid. They broke down barriers between the financial-aid office and admissions and took a strategic approach towards recruiting students.

It was sort of like bringing the market into college admissions. They used a lot of data. And they started using financial aid - instead of as it had been [used] for a few decades to meet financial need, they used financial aid to get the students that the college most desired, which typically are the best applicants and the wealthiest.

The main criteria became about increasing rankings and revenue. Those were the two main goals.

What's kind of amazing to me is how few people know much about it, considering the amount of influence and just how big a change it has been for college admissions and financial aid. The people who do know about enrollment management usually think about the campus enrollment manager, but what this book is really trying to focus on is the consulting industry that has come up around that.

MarketWatch: What were some of the factors that pushed the industry to take off?

Burd: From the 1950s through the late 1970s, colleges were sort of trying to do the right thing and using their financial aid to supplement federal financial aid and to meet the full financial need of their students. Once the economy really went downhill in the late 1970s and there was hyperinflation and the supply of students dropped, private colleges were basically panicking at that point.

And then the Reagan administration came in and cut federal student-aid funding, and they really emphasized that college is a private good rather than a public good. They emphasized student loans over student grants.

Those were some of the factors and then U.S. News came into being first in the early '80s as just a reputational survey, but by the late '80s they had put together a bunch of metrics. One of the major selling points of the enrollment-management industry was to help colleges figure out how to climb up the rankings.

MarketWatch: What are the tactics that they use to help schools shape their classes? The book notes that in 1991 the acceptance rate at the University of Pennsylvania was 47% compared with about 6% today.

Burd: [The U.S. News & World Report Best Colleges rankings] and enrollment management started around the same time. When U.S. News came up with a bunch of metrics that basically became a playbook for the enrollment-management industry, working to help colleges with each of those different metrics became key things.

You got credit for having a lower acceptance rate. So we have seen at the selective colleges these incredible drops in the acceptance rates over time.

[Enrollment-management practitioners encouraged] different things to improve yield, like aggressive use of early decision.

We have a chapter about the use of student-list data. Really narrowing in on that data so that colleges can pick by ZIP Code or other factors that make it much easier for them to figure out exactly where they can find the wealthiest students.

Financial-aid leveraging is really the worst practice. Leveraging means that instead of trying to meet financial need, you're trying to find the precise price point at which you can enroll various students without spending a dollar more than needed.

A few of the really big enrollment-management firms are now marketing products to colleges that encourage them to leverage all of their aid. When you do that, you end up leaving low-income students and middle-income students with large funding gaps.

The policy of financial aid has been completely turned on its head, and the idea that you're using financial aid to raise revenue just seems like it would make [the late U.S. Sen.] Claiborne Pell's head spin in his grave.

MarketWatch: How does the structure of the financial-aid system allow this to go on?

Burd: Originally with the Higher Education Act there was something called cooperative federalism, where basically the federal government, states and colleges were supposed to be working together to try to make college accessible and affordable for low-income students. Colleges would get money [from the government] that they would then provide to financially needy students.

In 1972, they moved away from that model. They created the Pell Grant, and while we all love the Pell Grant - it is the main source of aid for low-income students, and presidents are always trying to raise the maximum grant - it did make it so that it's a voucher system.

In a voucher system, the federal government sort of lets everybody else off the hook. So colleges can take the federal money and spend their own institutional money on merit aid.

When they came up with Pell Grants they thought that low-income students would have grants and that middle-income students would have loans, but the amount of debt that low-income students have had to take on as a result has been a major problem.

MarketWatch: We've talked about students who are hurt by this, but are there students and families that benefit in some way? Is there an ideal student that schools are targeting with these strategies?

Burd: What the colleges want is to get the best applicants that they can get because that will help them increase their rankings. Then they also want to get wealthier students who will help them raise revenue.

The idea that these are the students who are getting financial aid from colleges, really, I just find sort of shocking. It's not necessarily that they get a huge amount, even if you just give them a little bit, it sort of gives bragging rights to the parents. They talk about it at cocktail parties; it makes them feel good because they think that their kids excel in high school - maybe they even feel like they deserve the money. But what they don't realize is that really it's a revenue raiser for the colleges.

It's still just kind of astounding that this is the way that we're operating. If it was just at private colleges I wouldn't be as alarmed, but the fact that public universities have adopted these practices is really where I feel like we're headed for a crisis.

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