Undermatching: Why Do Smart Low-Income Students Not Enroll In Selective Colleges?

Low-income students are half as likely to enroll in selective colleges as compared with high-income students with similar grades and test scores. This is called undermatching. 

These students are often academically talented and likely to be admitted.¹ ² Still, many end up at less-selective colleges, such as lower-cost public colleges and community colleges. Some don’t enroll in any college at all.

Public policy advocates have claimed that very selective colleges are more affordable for low-income students, despite the higher cost of attendance. For example, Matthew M. Chingos wrote in a Brookings Institution article, “For low-income students, these colleges will generally cost them and their families less than a less-selective institution with a lower sticker price but fewer resources for financial aid.” 

But is this true? Does generous financial aid really make selective colleges more affordable than lower-cost colleges? Or are selective colleges just trying to shift blame for their failure to enroll more low-income students? Below, we take a deep dive into the data to answer those questions.

What Is Undermatching At Selective Colleges?

Undermatching is when qualified students from low-income backgrounds shy away from selective or private colleges and universities. 

The table below shows the percentage of undergraduate students receiving Federal Pell Grants and the percentage who are low-income students at the 25 most selective colleges, based on admissions rates.³ It's based on 2019 data from the Integrated Postsecondary Education Data System (IPEDS).

The key takeaway from this table is that most of these colleges are below-average in their enrollment of low-income students and Federal Pell Grant recipients. However, it's clear that there is significant variation in the enrollment rates.

Are Selective Colleges Really Better?

Critics of undermatching often assert that the affected students miss out of key advantages of enrolling at a more selective college. To summarize, the most selective colleges claim three important advantages:

However, the less selective colleges attended by talented, low-income students also claim to offer better quality educations and lower costs for different reasons. Plus, these colleges don't required students to move halfway across the country. Here are their three main draws:

We see that undermatching is not necessarily always a bad thing for the student. Both types of schools have their own pros and cons.

Why Does Undermatching Happen?

Undermatching is caused, at least in part, by differences in college affordability. As we've already mentioned, selective colleges often claim that they're generous financial aid options actually make them more affordable than less selective schools.

But the most selective colleges aren't necessarily less expensive on a net price basis. This is, in part, because they may involve more debt.

The "net price" is the difference between total college costs and gift aid, such as grants and scholarships. The net price is the discounted sticker price, the amount the family will have to pay from savings, income and loans to cover college costs.

A higher net price correlates with higher debt at graduation. Below, we examine several reasons why low-income students tend to avoid colleges with high net prices.

Low-Income Students Have A Stonger Aversion To Student Debt

The prospect of having to borrow more for their education than their parents earn in a year can have a chilling effect on college enrollment by low-income students. To be fair, middle and high-income students don’t necessarily like debt either. But it doesn’t usually stop them from enrolling in college.

For low-income students, on the other hand, debt aversion goes beyond a mere dislike to a palpable fear of debt. And that fear influences college-going behavior. If enrolling in a very selective college involves more debt, low-income students are more likely to enroll at a different, lower-cost school.

"The sticker shock keeps them from applying."

The high sticker price at some colleges can discourage some low-income students from applying. This is even if the net price is lower. Sticker shock stops them from applying. This is a key problem with the high cost/high aid model. Similarly, application fees stop some students from applying, even when fee waivers are available.

Very few colleges meet the full demonstrated financial need of low-income students. Demonstrated financial need is the difference between the annual cost of attendance and the expected family contribution (EFC). Most of the colleges that claim to meet full need do so by including student loans in the financial aid packages. Student loans must be repaid, usually with interest. They do not cut college costs.

Low-Income Students Have Higher Average "Unmet Needs."

Unmet need: The amount by which a student’s financial need exceeds the grants and scholarships awarded to the student. 

The average unmet need for Federal Pell Grant recipients is thousands of dollars higher at very selective colleges than at less selective colleges. This is money that low-income students do not have and are unable or unwilling to borrow.

The next two tables are based on data from NPSAS:16. They show the percentage of students with unmet need and the average unmet need among these students. The first table shows data for Federal Pell Grant recipients.

This table shows that average unmet need among Federal Pell Grant recipients is more than $6,100 higher at very selective 4-year colleges as compared with open-admissions 4-year colleges. It's $3,500 higher than at public 4-year colleges and $8,400 higher than at community colleges.⁴

The second table shows data for low-income students with family adjusted gross income (AGI) under $50,000.

So the average unmet need for low-income students is more than $10,600 higher at very selective 4-year colleges than at open-admissions 4-year colleges. It's $7,000 higher than at public 4-year colleges and $12,500 higher than at community colleges.

Thus, Federal Pell Grant recipients and low-income students can save thousands of dollars a year by enrolling at less selective colleges.

Low-Income Students Are More Likely To Face "Admit-Deny" Situations

Even colleges with generous “no loans” financial aid policies may have a higher net price according to the federal definition because they substitute their own definition of financial need for awarding their own financial aid funds.

Many have a minimum student contribution or summer work expectation, even for students with an expected family contribution (EFC) of zero. A minimum student contribution or summer work expectation sets a floor on the EFC and a cap on the amount of financial aid a student can receive. This can make these colleges more expensive than a local public college or community college which relies on the federal definition of financial need.

"But low-income students are already working during the summer – often to put food on the family table."

These colleges say that students can cover the minimum student contribution through work during the summer or student loans. But low-income students are already working during the summer – often to put food on the family table – and can't qualify for private student loans. Thus, many are unable to bridge this gap. They really can’t afford these colleges.

For this reason, many low-income students face an admit-deny situation at the most selective colleges. This is where the colleges admit them but deny them the financial aid they need to be able to afford to attend the college. The colleges don’t provide enough financial support to make their institutions truly affordable to low-income students.

Related: Options To Pay For School If You Don't Have Enough Financial Aid

Low-Income Students Are Financially Incentivized To Choose Less Selective Colleges

Differences in the net price at very selective and less selective colleges demonstrate that very selective colleges are more expensive. And that provides low-income students with a financial incentive to enroll at less selective colleges.

The table below shows how much the net price of less selective schools compares to very selective schools for Federal Pell Grant recipients and students with a family AGI of $30,000 or less.

Low-income students and Federal Pell Grant recipients at very selective 4-year colleges are more likely to have won private scholarships and the average private scholarship amount is higher. But students who haven’t won private scholarships are less likely to enroll at very selective colleges due to a lack of sufficient financial resources.

All of these facts suggests that undermatching is caused, at least in part, by the higher net price at very selective colleges. This is even after accounting for the generous financial aid available to low-income students at these colleges.

In short: Low-income students enroll at public 4-year colleges and community colleges instead of very selective colleges because they're less expensive.

Other Reasons For Undermatching

There are several additional reasons why there's a lack of economic diversity at the most selective colleges. Here are a few more potential contributing factors.

Limited Recruiting

The most selective colleges generally do not recruit in low-income zip codes. This is even though they know which students have top SAT and ACT test scores. 

Direct And Indirect Discrimination

The most selective colleges don’t admit many low-income students. This is partly because the selection criteria tend to discriminate in favor of high-income students, even at colleges with need-blind admissions policies. Colleges with legacy admission policies and policies that favor admission of children of prospective donors provide an admissions preference for wealthy students.

Legacy admissions policies discriminate against first-generation college students, since they're first in their families to go to college. SAT and ACT admissions test scores discriminate against low-income, first-generation and underrepresented students. Low-income students can't afford to pay thousands of dollars for high-quality test prep. 

The Paperwork Barrier

Many of the most selective colleges use the CSS Profile form to apply for their own financial aid funds. The CSS Profile form requires more than twice as many questions as the Free Application for Federal Student Aid (FAFSA), which is already too complicated. These financial aid forms raise obstacles that discourage low-income students and block them from applying for and obtaining financial aid.

Related: How To Fill Out The FAFSA And Why It Matters 

Early Admission Favors Wealthy Students

Low-income students are less likely to apply during early decision periods. The binding commitment prevents them from shopping around for a less expensive college.

Academic Talent Is Not Enough

The most selective colleges often engage in holistic admissions which considers more than just academic performance. But low-income students may not have the luxury of participating in extracurricular activities or sports.

They often have to work one or two part-time jobs because they are the primary wage-earners for their families. Add class time and homework to the schedule and that leaves little time to learn an instrument.

Too Much Competition

Many colleges with “no loans” financial aid policies have opened them to all students, not just low-income students. This increases the competition for spots at these colleges.

These policies were intended to attract low-income students. But they often simply end up making it harder, not easier, for these students to be accepted.

Resistance From Parents

Some parents don’t think their children need to go to college. Others are worried about going into debt to pay for college or simply don’t want their children to go to college far from home. Finally, some parents may be concerned about the privacy of information provided on lengthy and intrusive financial aid application forms. 

Solutions To Undermatching

Despite all of the issues discussed above, undermatching is a problem that can be improved. Here are a few suggestions for how to increase the enrollment rate of talented, low-income students at selective colleges.

1. Provide Students With Personalized Information About College Quality And Costs

College quality should be measured based on how well the college matches the student’s academic background, career aspirations and financial need. Financial fit should be measured based on the net price.

The idea of undermatching has led to the creation of programs to enable and encourage low-income students to apply to more selective colleges. Examples include the American Talent Initiative, the Coalition for College Application, CollegePoint, Matriculate and QuestBridge.

These programs try to fight against undermatching be providing low-income and first-generation students with personalized college counseling that introduces them to the more selective colleges.

2. Waive Application Fees For Low-Income Students Up Front

This is much easier than requiring the student to apply for a fee waiver. Colleges could determine which students are low-income by asking:

• Whether the student has income below a specific threshold, or
• If someone in the student’s family is receiving certain means-tested federal benefits.

Or, even better, colleges could just eliminate application fees for all students.

With an average application fee of $44, low-income students and families can be deterred from applying, while middle income and high income families won't blink at the price. And let's face it, a $44 average fee isn't making or breaking any college's financials.

3. Eliminate Other Barriers To College Access

Colleges should ask themselves whether they really need every question they ask on the admissions application. Every additional question reduces the number of students who submit an application. Some of the questions are “blocking questions” that stop some low-income students from completing the form.

4. Provide More Financial Support

Finally, if the most selective colleges really want to reduce undermatching, they need to significantly increase the financial aid they provide to low-income students. This will reduce the net price enough to compete with the lower net price at less selective colleges. 

In particular, selective colleges need to eliminate the summer work expectation and minimum student contribution for low-income students.

Advice For Low-Income Students

Low-income students should shop around for the best college based on a combination of factors. These include: financial fit, academic fit, social fit and environmental fit, as well as proximity to home.

Apply to a balanced mix of colleges based on a comparison of the student’s test scores for each college as listed on College Navigator. Use the Education Department's Net Price Calculator to compare the real cost of each school. Also, apply to a financial aid safety school. These are schools where the student is likely to be admitted and can afford to enroll even if they get no financial aid. 

Remember, academic performance isn’t everything, especially when applying for admission to the most selective colleges. Pick a single hobby or activity and go deep. Depth matters more than breadth.  You can also write an essay about your relationships with other people. Talk about their influence on you and your influence on them.

Finally, don’t worry too much about getting in to every college. If a college doesn’t accept you, it’s their loss, not yours. You can do well wherever you end up. 

¹ Low income has many definitions, which can include an adjusted gross income (AGI) that is less than $30,000 or $50,000. This article uses both, depending on the data source. 
² There are several different definitions of selectivity, such as definitions based on the admissions rate and definitions based on admissions test scores.
³A college’s admissions rate or acceptance rate is the percentage of applicants who are accepted for admission to the college. This differs from the enrollment rate, which is the percentage of accepted students who enroll.
⁴The 2015-16 National Postsecondary Student Aid Study (NPSAS:16) defines selectivity by combining the centile distribution of admissions rates (the percentage of applicants who are admitted) with the centile distribution of the midpoint between the 25th and 75th percentile combined SAT and ACT test score distributions at each college. A separate category, open admission, is provided for colleges without minimal admissions requirements. The very selective category covers about 10% of undergraduate students, while the open admissions category covers about 8% of undergraduate students.