Many of your kids are likely completing their junior year and are bracing for senior year. The excitement, the change, the planning. Years of preparation are finally culminating in what will be their application package. Your kiddo, growing up. All wrapped up in one technological file that highlights how spectacular they are. It’s going to be sent to colleges and universities far and wide. Maybe this is your first child and you’re eager for what awaits. It could be your last and you’re silently dreading the waning days of having a teen in the house.
Regardless, take time to reflect and celebrate. You did it. Yay, you!
As a family, you’ve done everything you’ve been told to do. Balanced school with extracurriculars; maybe your applicant is an athlete or a chess player. College counselors have advised you on the correct classes to take; foreign languages are wrapping up and you have a spread of classes that include basic, college prep, and maybe AP, IB, or dual enrollment. Grades are notable, too. Lots of time studying. SAT or ACT prep classes are done, and maybe you have final test scores.
The most exciting part of this equation is the dream list of schools. There are lists upon lists, some calculating finances and others proximity to home and maybe places of worship. You’ve looked into on-campus living, dining options, and you’ve found a cool coffee shop within walking distance from campus. The family is working like a finely tuned machine, everyone focused on the task-at-hand and you’re ready to go.
Except this admissions cycle will be like nothing we have ever seen before.
Wait. What? How can that be? We live in a world divided by politics, rhetoric, and misinformation. Well, and there’s too much information. Everyone has opinions on everything from tariffs to Temu. But what does all of the world’s happenings have to do with college admission next year? More than you know…
So, let’s strip the politics off of the subject and make our way through what promises to be an unpredictable and unprecedented application season. Because the rules of the admissions game have just changed…on a dime. Quite significantly.
Let’s start here. Endowments. What are they? Why do they matter to you?
It all comes down to money.
I’ll pare this down to the simplest explanation possible, which might leave out some nuances that matter in very particular or unique situations. But the basic premise applies. If you’d like to get into the nitty gritty of it all, you can look here.
A college’s general operating fund pays for things like the power, personnel costs, benefits, and the expenses associated with running a business on a day-to-day basis. It’s not much different than a household checking account; a lot of activity happens and money is going in and out all the time. Then, there are big chunks of money, some are in the hundreds of millions of dollars (even billions), and they are called endowments. Endowments differ from general operating funds and are kept completely separate. It’s safe to say that private schools typically have larger endowments than public institutions.
This money is invested and treated differently; endowments are significant to how colleges operate today and how they plan for tomorrow. Think of endowments as strategic investment accounts that allow institutions to expand their facilities, make significant capital purchases, and implement big strategic changes, among many other things. One of the more important functions of endowment funds is that they can provide a somewhat predictable source of income down the line. In this way, endowments are kind of like a household investment account that you plan to use later for home improvements and to replace income once you retire.
The source of this kind of capital is usually, though not always, a gift from a prominent public figure, an alum, or perhaps a large business. Sometimes they come by way of estate transactions or life insurance policies that have been designated for a particular school. Money can be earmarked by the benefactor for specific things, too. Some endowments are for capital projects only, some are for specified research, and some are considered general funds. Sometimes you hear of a professor with the title of, “Endowed Chair of XXX.” This means that the endowment covers the salary and perhaps related expenses for that specific job. It’s very complex, but exceedingly important.
Historically, colleges and universities have been considered non-profit entities under tax code, which means different rules apply when all the accounting and financial record keeping happens. Recording profits and losses of those funds is done differently. Generally speaking and by definition, of the term, “endowment,” they are not taxed. I am not a CPA, and I certainly do not know the nuances of tax code, but you get the gist. Basically, endowments are huge sums of money that sit and grow, which universities use on planned-for or specifically designated expenses, and don’t have a tax liability associated with the money.
Why does all of this matter to you or your student? Various proposals are currently circling congress that change the tax status of endowment funds where they have previously been non-taxable. The result of this change, in practical terms, means smaller budgets. These cuts can delay planned-for expenses like new buildings, translate to hiring freezes for new faculty members (remember endowment income helps provide a stream of predictable income), and an overall decrease in spending. As it relates to your rising senior, it means decidedly fewer scholarships, too.
If you are looking for substantiating information, you can find it here and here. I did a simple Google search and you’ll see hundreds of articles from all types of sources, some more popular and credible than others. I have not picked one type of source for you to read; rather, I have done the search with clear and non-biased language. You can read those that you deem appropriate for your purposes.
What you’ll find – when you pull back the framing, posturing, and political leaning of any of the articles – is that endowment taxes, in some form or fashion, are likely coming. I don’t think anyone knows exactly what they will look like; everything is conjecture. But colleges and universities are pivoting. Institutions far and wide are preparing for the added expense by tightening their belts now and acting based on the presumption that the taxes are coming. Save money. It’s all over the news.
If you’re wondering why it matters now, given that laws and federal initiatives take years to implement, you aren’t alone. Some of this is speculation. Admittedly, nobody has a crystal ball and can predict, with absolute certainty, what will happen and when. But, here’s the key: whether or not the taxes actually happen matters not. What does is that schools are planning and acting like they are. They are spending less now in preparation for what might come.
Many of you are thinking, “wait, my kid isn’t going to an Ivy League school or some swanky private school, why do I care?” The trickle down effect. That’s why.
Let’s go with the assumption that certain institutions are better than others (based on reputation, graduation rates, jobs secured after college, etc…) and are thus ranked higher. When the nation’s top institutions tighten their budgets, that means fewer faculty members, which means fewer butts-in-seats. This means lower enrollment. Significantly less money for scholarships. In simpler terms, fewer students will matriculate at these prestigious schools because of fewer seats and/or less financial aid.
But what about the little geniuses that require scholarships to attend school that were ideal candidates for those top schools? You know, the ones that nailed the SAT, have excellent grades and extracurriculars, and their application package shines like a diamond? They become top candidates at schools in the next tier down. The creme-de-la-creme. But what about the kids that were previously a fit for that next tier down? Where will they go? To schools the next tier down. Where will those students go? To schools the next tier down. And so the process goes… You see the problem.
We have all heard stories of the kid with a 1450 SAT and great grades that didn’t get into the state school. It’s no secret that the competitive nature of college admissions is already at an all-time high. When you compound endowment taxes with an already emulous admissions process, it only becomes more cut-throat.
It bears noting that even small schools will be impacted by the potential tax and subsequent decrease in spending. Endowments are everywhere in higher education.
The United States Federal government interacts with colleges and universities in three primary ways: institutional support, financial aid, and research and development. Federal grants make up a significant portion of college and university budgets. There are other mechanisms through which the two work together, but they are not as significant to this article.
Federal grants are currently being held back. You can find plenty of substantiating information here about the funding cuts. Remember, the purpose of this article is not to engage in the politics behind the cuts or to debate the merits of them. It is simply to take a complex situation and explain why it impacts every single applicant for schools in the upcoming class. These big-picture shifts have real, day-to-day implications.
How do big federal grants in areas other than where your kid is studying impact you? Here’s how:
Let’s look at graduate students. When universities receive grants from the federal government, money is spent in many places. A lot goes towards research and graduate students. Graduate students are typically responsible for research alongside full-time faculty members. This happens in every department from mathematics, to chemistry, and from history to English literature. Graduate students also teach a lot of new students. Think of the classes that most freshmen have to take: economics 101, political science 101, creative writing 101, etc. The vast majority of these classes are taught by graduate students who are on grants. What I’m trying to emphasize is that graduate students play a significant role in undergraduate education.
Let me put this into perspective for you. When I was in my PhD program, I taught 3 classes in one year. One was a large lecture-style class with well over 150 students and the other two were smaller, seminar-style classes. In total, I taught approximately 225 students. In my department, there were roughly 20 other graduate students teaching. I carried a bigger load, so let’s say an average graduate student carried 150 students. 20 x 150 = 3,000 students.
Now, imagine that grant funding stops. Who will teach those students? Will full-time faculty pick up those classes? Some, but not all of them. Most faculty members are already carrying a full load of teaching, research, advisement, and other departmental activities. Their schedules do not allow for the immediate absorption of 3,000 students a year in other classes.
Many universities have rescinded offers for entire classes of incoming graduate students. You can read about it here. These cutbacks are widespread and seem to be disproportionately impacting students within colleges of arts and sciences. But, let’s say your student isn’t going to be an arts and science major, she’s going for business. It doesn’t matter. Every student has basic, distributional requirements to be met to earn a diploma and a lot of those core classes reside in the colleges of arts and science.
Let’s push this mind experiment a little further. Now imagine this is happening across the university and in several departments. Pretty soon, administrators need to take a hard look at how many students they can enroll. And it’s not just a raw game of numbers; it’s a strategy of placement, too. Can’t have 5,000 business and marketing majors and only 250 history majors in an incoming class. Balance is needed.
There are myriad ways in which budget cuts impact the incoming class of freshmen. The one above regarding graduate students is easy to grasp and links items that aren’t usually seen as connected or interdependent. Yes, graduate funding impacts incoming students fresh out of high school. Who knew, right? The list of other connections is too lengthy to present here.
Making all of the classes larger isn’t possible because of facility constraints; there aren’t tons of places to teach 150+ kids just sitting empty on campuses waiting to be filled. In like fashion, not all classes can be taught in such large formats. What I’m trying to say is this: schools cannot just increase enrollment, thereby bringing in more tuition revenue, to navigate this situation. It’s not that easy.
Remember, we are not getting into the politics of what is currently happening. I’m here to tell you how it impacts your kid. Whether or not you agree with what’s occurring is your decision. But, regardless of whether or not you agree with these events, they impact your rising senior, their school selection, and more. Even if you don’t think it does.
Presidents have used executive orders to implement policies and enact change on small and large scales; the first one was issued by George Washington in 1789. In the modern era, we have seen them impact everything from highway programs to COVID-19 response protocols. This tool is available to the President of the United States, and some have used it more than others. You can see all of them here, going backwards in time.
Recent executive orders require colleges and universities to align their policies with the new administration’s agenda and goals. You can do your own research here to read up on the orders themselves. Again, I did a simple Google search and provided you with the link. Read what you want, discard the rest.
The recent round of executive orders have significant implications on how universities are structured, the offices and programs they offer, the classes offered, major and minor course offerings, and more. The result is that some universities are offering fewer and different majors or minors, and some are getting rid of certain majors and minors entirely. Others are getting rid of specific classes altogether, and many are restructuring their current offerings to be in compliance. There are also universities that are pushing back on these executive orders. Regardless of your stance on the orders (whether or not you normatively agree with them) does not matter here. The impact will be felt by every student.
Whether or not you choose to apply at schools complying with orders or those resisting doesn’t matter, either. What does matter is that the institutions themselves are in a period of flux. Actually, the entirety of higher education is in some state of change, be it proactive or reactive. When the schools themselves are in transition, their student bodies are, too. To think that students will not feel some impact would be akin to saying you didn’t feel the impact of an earthquake when you live right near the epicenter.
When major and minor course offerings are changed, some schools are no longer viable targets for certain students. It makes sense; students find schools that match their academic goals. Those students will look elsewhere to apply. So, in addition to the trickle down effect happening because of changes to endowment taxes and fewer scholarship funds, we now have a spread outward in the places students are applying. A lot of movement.
Making news this week are announcements about federal oversight of the system that accredits colleges and universities. You can read about those initiatives here. There is a lot of speculation circling about how this will impact upcoming admissions cycles and applicant pools. I would imagine that schools on the fringe of accreditation issues are likely not the target lists of anyone reading this article. That said, what new accreditation standards will look like and when or if they will take hold are anyone’s guess.
The Department of Education and the FAFSA, both significant components of the college application process, are both subject of much news. Questions regarding their future adds uncertainty to this process. You can read about it here.
There are a confluence of factors happening right now. As schools prepare for the potential taxes on endowments, we can expect:
The freeze on federal funding (via grants and other avenues) means:
When taken together, the already competitive and difficult application process will be made exponentially harder and more tedious. Relied-upon approaches to identifying schools based on their status as safety, match, or reach, as they relate to your student’s profile, need to change.
Where each school sits in reference to policy initiatives (are they in policy compliance, on the way to it, or are they in violation) matters. Higher education is dominating the talking heads these days because institutional compliance seems to be somewhat of a moving target.
Gone are the days of honing in on the 25th and 75th percentile scores (GPA and standardized test scores) to craft your lists. That might have been a targeted approach before, but now it’s going to work more like buckshot. Not a good strategy if you seek to stand out. Applicants need to identify the other factors that make them a better match for each institution. Your best hopes for this upcoming admissions cycle is find good matches, and that is not found by simple campus visits, seeing buildings, and listening to the non-data driven advice of others.
How do you make sure your student is applying to schools that are better matches? Make sure your college counselors are giving you the data behind why they recommend certain schools. Do not apply based on blind faith or their recommendations alone. There are very targeted data points to help guide your decision, and good counselors know where to look, but it takes work. The information to navigate the journey is there, and you need to get your hands on it all. Informed counselors know this and if yours can’t or won’t share it all, that’s a problem.
When entire groups of students begin moving within the college application system, while the system itself is experiencing change, predictability becomes a practical impossibility. Each student has different goals and objectives, and they intersect with new policies and funding cuts in myriad ways. Competition will rise, significantly, and in ways and places we’ve never seen before. In shorter order, this is entirely different terrain.
You can expect the competitive landscape to take on different form. Students will scatter out in the system, in different ways than before, each trying to find their place. This year, and for the foreseeable future, you can expect larger applicant pools. Students often apply to more schools when they lack clear direction. More interestingly, students that would otherwise not apply at certain institutions in years past (for reasons like major/minor offerings, financial aid, etc…) will be considering these places as options moving forward.
But remember, regardless of where you apply, schools are bracing themselves for significant shifts in their finances. This means tighter budgets and fewer faculty members, different course offerings and fewer classes. Schools will have less dollars for scholarships and that impacts incoming populations. Their focus has to shift.
Qualitative aspects of an applicant profile just increased in significance. Monumentally so. When you have 100 students with the same quantitative profile, statistically speaking, who gets the 10 seats? The ones whose words dance on paper and make the parchment come alive. Essays matter, now more than ever. Supplementals are also likely to increase in quantity and scope. In short, scrutiny of applicant pools will reflect the climate of the situation. That said, those few extra points on your SAT and ACT are also worth studying for. Make certain your test preparation is focused, with razor-like precision. We are huge fans of Brian & Dr. Sylvia Eufinger at Edison Prep. They know their stuff.
My advice is this: do not wait. Many high school counselors have staunch opinions about starting according to their prescribed timeline and using their tactics. Question all of it. Begin your process now and stay informed. Do not take no for an answer when the yes exists. Questions, questions, questions – ask them until you find an answer. There is no reason to wait and the most priceless gift you can have in this process is time. Pressure cookers lend themselves to hasty decisions…you need time.
And, for the love of all that is good and right in this world, get that CommonApp essay done. Standing out has never been more important.
