Investors get what they DON’T pay for. Products like hedge funds, non-traded REITs and private equity are usually inferior to simple index funds.
Expensive products ARE a decided advantage in the college application industry.
According to Doree Lewak, “An increasingly common tactic is getting kids extra time on the ACTs and SATs because of a psychological diagnosis that may or may not be legitimate. Previously, the testing companies alerted colleges when students received extra time, but they stopped doing so in 2003, opening the door for abuse.”
Wealthy parents spend $5,000 an hour for psychological evaluations. This works 85% of the time and leads to extra time plus the use of a calculator or a laptop for standardized exams. Some diagnoses are dubious.
“Susan, an Upper East Side mother, says one of the classmates of her 17-year-old son, Andrew, got extra time for scoliosis and was allowed to take the ACT over a four-day period because she supposedly can’t sit for very long. When she saw pictures of the girl on social media taking a seven-hour flight to Europe, she was suspicious.”
Rich parents pay tutors a small fortune for SAT prep.
“Each hour of tutoring costs $300 to $600, and many students use the services between five and 10 hours each week. A handful of the highest-spending clients have racked up more than 200 hours of tutoring, generating bills in excess of $100,000. ‘New York City is very singular in the assumption that you work with a tutor all through high school,’ said Merrily Bodell, IvyWise’s COO. ‘It’s just the norm.’”
The SAT should be called “The Wealth Test.”
The majority of applicants face a stacked deck. Schools play a big part.
Many colleges have more students from the top 1% than the bottom 60%.
|STUDENTS FROM …||THE TOP 1%
|1.||Washington University in St. Louis||21.7||6.1|
|3.||Washington and Lee University||19.1||8.4|
|5.||Trinity College (Conn.)||26.2||14.3|
Source: The Upshot
According to The New York Times,”Roughly one in four of the richest students attend an elite college – universities that typically cluster toward the top of annual rankings. In contrast, less than one-half of 1 percent of children from the bottom fifth of American families attend an elite college; less than half attend any college at all.”
Studies show poor students who enter top colleges do just as well as their rich classmates. Many never get the chance. Federal financial aid can be a convoluted abomination.
“‘Overwhelming’, ‘confusing,’ ‘scary,’ ‘intimidating,’ ‘nerve-wracking,’ ’embarrassing,’ and ‘miserable.’ The college students I met recently sounded like they were describing a horror film or a tough final exam. Instead, they were recounting their struggles navigating America’s financial aid system.” – Bill Gates
50% of poor high school seniors who are eligible for federal student loans or grants apply for them.
“With 108 detailed questions, the FAFSA is more than three times longer than a standard federal income tax form. It quizzes prospective students on ‘untaxed portions of IRA distributions from IRS Form 1040—Lines (16a minus 15 b)’ and uses confusing terms like ’emancipated minor’ and ‘dislocated worker.’”
Studies show 33% of the questions on the FAFSA need to be answered by just 1% of applicants. Poor students can’t afford to pay consultants and tutors.
America needs a college admittance version of low-cost index funds which have democratized investing.
The rich finally found an alternative investment worth its price. Rigging the college admissions process is a must-own asset class.
Sources: “Some Colleges Have More Students From The Top 1 Percent Than The Bottom 60. Find Yours,” The Upshot, The New York Times, January 18, 2018. “Fixing Financial Aid” by Bill Gates, LinkedIn, May 2, 2018. “Rich parents are using doctor’s notes to help kids cheat the SATs” by Doree Lewak, New York Post, May 2, 2018.