Let’s talk about family wealth

Robert Carpenter, Contributor

To get into HBS, family money matters. It’s an uncomfortable truth.

“At 38 colleges in America,” The New York Times provocatively declared earlier this year, “more students came from the top 1 percent of the income scale than from the entire bottom 60 percent.”

Stated another way, a child born into the top 1 percent is more than 6,000% more likely to attend an elite university than a child born into the bottom 60 percent. And because low-income households have more children than wealthier households, 6,000% is actually a conservative estimate.

While these conclusions come from a study about undergraduate admissions, it’s hard to imagine HBS is any better. If anything, I’d wager that we are worse.

To contextualize, nationally a family in the “top 1 percent” earns more than $630,000 in annual income. A family in the “bottom” 60 percent earns up to $65,000, which isn’t abject poverty. It’s working class. Yet, the top 1 percent is sending more students to selective schools than the entire working class and those below the working class.

This fact challenges several basic ideals we hold important

First, it tests our university’s meritocratic ideal – that each student “earned” her seat here. That there were no mistakes.

If that’s true, then we must confront the analog: that students who are not enrolled didn’t “earn” their seat here, and that not admitting poor students was also not a mistake.

Second, it confronts our institutional mission – to “educate leaders who make a difference in the world.” Low-income students are more likely to understand the challenges facing poor communities, and to be motivated to address those challenges. A student who comes from poverty is better positioned to “make a difference” for the urban or rural poor than a wealthy student. If we aspire for positive societal impact, then shouldn’t the poor be first to be considered?

Third, economic diversity improves the case method experience for everyone in the classroom. Students who grew up around poverty or even moderate income can help classmates understand the confusion of financial illiteracy, or the inflexibility of a rigid budget, or the threat of unemployment.

These diverse perspectives make us better leaders in business and the world. They add to our empathy with the poor, and to our moral compass as managers. They prepare us to make decisions that affect low-income employees, customers and communities.

Saying that we need more low-income students is undoubtedly the easy argument to make. The more difficult challenge is to do it – to change our class profile.

The first solution is to treat family wealth the same way we treat other diversity metrics in HBS admissions. Universities can consider diversity factors such as race and gender when deciding a class profile, so long as quotas are not involved. Admissions are neither “color-blind” nor “gender-blind,” and should not be “wealth-blind,” either.

HBS is “need-blind” in its admissions. Need-blind policies guarantee that qualified students who require financial aid are not passed over in favor of wealthier students who can afford full tuition. It prevents admissions from putting the financial interest of the university above the merit of the applicant. This is admirable, but if “need blind” equates to “wealth blind,” we deny the value of economic diversity in our student body.

The HBS application asks for information about parents’ employment, level of education, and if they attended HBS. Collectively, these may indicate the privilege a student grew up with. Why not make it less ambiguous? Add family income and assets to the application, itself. Or ask applicants to identify the income or wealth quintile of their family.

Unlike gender and race, growing up in poverty or low income can be hidden during interviews, and students who grew up in poverty may not wear that on their sleeve. This makes it important to be explicit in asking about family income.

Of course, this type of question requires tact and sensitivity, but the information is important. If parents’ income is too sensitive, you could just ask students to describe the circumstances of their youth.

HBS should track the percent of students who come from low-income backgrounds, and, to infuse accountability and energy in the organization, we should publish these statistics alongside other minority enrollment figures. If we are serious about economic diversity, HBS should publish “percent of students from low-income backgrounds” alongside percent of women, international students, and other minority breakdowns.

I don’t know what these percentages would be. It may be embarrassing at first to publicly own that we are doing a poor job reaching low-income students. Here, we can look to the example of Google, which accepted this fate when it publicly disclosed its diversity statistics in 2014, including dismal percentages of women (17% of employees in technical roles) and racial and ethnic minorities (2% Hispanic, 1% African American).

Google took heat for this, but that’s just how it works. You don’t do the right thing because it’s easy. You do it because it’s right. And if a for-profit organization like Google recognizes a responsibility to use transparency to infuse internal discipline, shouldn’t a mission-driven institution like Harvard do the same?

Finally, we should also reconsider our financial aid program, including how it is marketed.

HBS does not offer merit-based financial aid. Low-income students have two need-based fellowship options. The first is based on students’ personal income from the past three years. The second is the Forward Fellowship, which “supports students from lower-income backgrounds who have carried significant financial burdens or obligations.” The fellowship considers family financial circumstances, which is fantastic.

But rather than requiring students to apply for this fellowship separately, as happens today, family wealth should be incorporated into the initial financial aid application. You simply can’t assess a student’s financial need based on personal income without considering family wealth.

Students with the safety net of family wealth can accept low-salaried positions after college, such as high-risk entrepreneurial endeavors. In this context, family wealth isn’t the same as personal income, but it does affect a student’s need profile. Adding family wealth to the application for all students would appropriately address this issue.

HBS should also reconsider the way that it markets tuition. We know from behavioral economics that framing matters. Instead of broadcasting that “tuition starts at $72,000 per year, but fellowships are available to make this affordable,” tell prospective students that “tuition starts at $0 and builds up. We will not charge you more than you can reasonably afford.”

Let’s say a low-income student has a final tuition bill of $22,000 out of a maximum of $72,000. Framed one way, this student needed a $50,000 hand-out to be able to afford attending HBS. Framed the other way, she is able to afford $22,000 tuition based on where she is in life and her expected future income.

The basis of the former is dependency and disadvantage. The basis of the latter is dignity.

When you build up from zero, you don’t alienate students who would be overwhelmed by a $72,000 starting point – which may be a different order of magnitude from investments and risks she is accustomed to considering.

Harvard is a standard-bearer in educational culture, and HBS carries that torch in the business community. When we decide to prioritize economic diversity in the classroom, we not only add to the classroom experience of our students, we challenge the business ecosystem to do the same.

That feels like a goal worth striving for.

Robert Carpenter (HBS ’18) worked in strategy consulting and real estate development in Houston, Texas, before starting at Harvard. He previously attended Texas A&M University, where he was editor in chief of the student publication, The Battalion. Robert is a fan of baseball, ice cream, and Calvin and Hobbes.