For a few years, I’ve been part of an Alumni interview committee for my undergraduate university.  The kids often seem like they have built an impressive resume and seem much more qualified than I think I was at that age.  It always made me wonder- did I just get lucky to get into my school?  Are college admissions as much about external factors like tuition costs, where you live and where you went to high school, factored into the kids applying in your year, or is there a more objective measure of “worthiness” that stays relatively constant over time?

A recent article in the New York Times discusses the drop by as much as 30% in applications to private colleges and universities, and my friend, Christopher S. Penn, over at the Financial Aid Podcast, has been talking openly for some time about how the credit crisis has eviscerated the amount of money available for students in the form of student loans.  The New York Times also reported recently that some traditional “commuter schools” and community colleges were building dorms just like 4 year schools.

This made me start thinking about whether supply and demand, as they teach it in economics, applies to Higher Ed, and if so, is there a lag?

I do think your chances on getting into a school depends a lot on who else is applying.  Number one, the number of applicants in the pool affects your chances of admission purely as a percentile before they even look at your application.  If they have 1000 spots, and there are 10,000 applicants, you have, on average, a 1 in 10 shot at getting in, 10%.  If there are 30,000 applicants, your chance drops down from 1 in 10 to 1 in 30.   You now have to be in the top 3% of qualified applicants instead of the top 10% to get admitted.  That’s now at least two standard deviations above the mean or average applicant.  So it makes sense, that clearly on a numbers game, not even discussing quality factors, that as the applicant pool shrinks, you have a better chance of getting in, than in years when the applicant pool was bigger.

Secondarily, if application fees themselves are high and money is tight, people will apply to fewer schools than in other years.  This will shrink the application pool.  If tuition at the school is high, and money from parents or loans is less available, people will have a tendancy to only apply to schools they think they have the best chance of getting admitted to, and those they will actually be able to afford to attend.  This will further shrink the application pool based on economics alone, before we get to factors regarding quality of education and quality of the applicant pool.  Other students may consider doing the two year/four year shuffle- spend two years at a lower cost community college, and try to transfer to a four year school later, to save money on the whole cost of education.  This means there’s a further cut of kids that might otherwise be in the application pool at a four year school for freshman year.

I would guess then that Adam Smith is probably right on the money- the old supply and demand curves probably do apply, at least to the application pool, in any given college admissions cycle.  In a year like this one, you may then have a slightly better chance at getting admitted to your “dream school”, assuming you will be able to pay for it if you are admitted.

The quality or perceived quality of an education at an Ivy-league or other high-cost first or second tier school probably hasn’t changed.  Professors will keep their jobs and keep teaching. The education delivered will remain relatively constant, presumably.  However, the strength and paper qualifications of the students may decrease a bit, while prestige of the school remains the same.  After all, we determine the quality of a school by its alumni in part, its reputation and research, and many other collective factors.  Even if a college has a slightly lower standard of admission for a year or two, the overall quality of the school and education will remain fairly constant and dependable.

So it’s my best guess that it may be slightly easier for the next few years, as tuition money is tight, and applications low, to get into a slightly more competitive school than ever before.  Whether Universities will start looking at drastic measures like lowering tuition, fees or application costs in order to preserve the quality of the applicant pool and balance the pressures of supply and demand are less certain.  Given what schools are charging and their past performance, I think it’s going to take some time before they start considering these sort of options to balance supply and demand.  In the meantime- if you have always dreamed of the Harvard acceptance, you may have a better shot this year than ever before.