This piece is cross-posted from my Medium account. Check it out for more posts like these.

I’ve often been intrigued by the exceptionally low acceptance rates for elite universities—especially in the US. The acceptance rates for the Ivy Leagues and other elite schools like Stanford and MIT mostly fall in a range between 3-5%.

This is especially painful, given the not-so-secretive fact that elite university admissions officers have revealed that about 70% of applicants are well-qualified to thrive in these universities.

How do they whittle down 70% to 3-5%? Well, admissions officers have also admitted that a lot of it comes down to ambiguous and trivial factors—whether your personality lines up with their subjective preferences, whether you’re “interesting” or “boring”, et cetera. Essentially, whether or not you pass the admissions officers’ vibe check. One officer even admitted to rejecting all applications from Buffalo because (s)he got food poisoning from a restaurant in Buffalo the night before.

But apart from the problematic admissions process (which deserves a rant for another day), elite universities have another, distinct admissions problem. They admit too few people in the first place.

Take Yale for example. From 1979 to 2015, the incoming class of Yale College freshmen expanded from 1,346 to 1,360—an increase of a whopping 14 students. Over the same time, the number of applicants tripled from 9,331 to 30,932.

This isn’t an isolated phenomenon. Over the last 30 years, Ivy Leagues grew admissions by 14%, while the number of high school graduates rose 44%. This cut their effective enrollment by 20%.

Why’s this the case?

The most obvious reason is prestige. By restricting enrollment spots whilst applications continue to rise, universities’ admissions rates trend lower and lower.

Universities have incentives to keep acceptance rates low. And it’s not because of university rankings lists: many rankings providers, such as USNews, have stopped using acceptance rates as a factor in their rankings methodology.

But if not because of rankings, then what? The truth is, acceptance rate remains an important metric considered by students, employers, alumni, and the general public. Even if they aren’t considered in many university rankings anymore, there’s still a cultural perception that low acceptance rates are an indicator of exclusivity and prestige.

In particular, one group that low acceptance rates appeal to is alumni. The exclusivity associated with low admission rates can be a massive ego boost for alumni, driven by a sense of loyalty and pride to their alma maters.

And top universities care especially much about their relationships with their alumni. This is because of the way universities are inherently funded.

University funding

Education, philanthropy, research.

How much do you think each category contributed to Harvard’s revenue in FY2023?

I’ll give you a clue: it’s philanthropy, and it’s not even close.

Harvard’s philanthropy revenue is mainly derived from its endowment. This is a collection of 14,000 individual funds (mainly from alumni, parents, and friends) that collectively make up a $50.7bn sum (as of FY2023). A portion of the endowment is paid out as a distribution annually- typically about 5-5.5% of the endowment value, contributing $2.2 billion to Harvard’s operating revenue in 2023. Any excess return is retained so the endowment can grow in the future.

Endowments are meant to exist in perpetuity, and Harvard is obligated to preserve the purchasing power of the endowment long-term. As such, it can’t simply treat the endowment like a bank account to access as and when it pleases. As Harvard puts it:

Endowment gifts are intended by their donors to benefit both current and future generations of students and scholars. As a result, Harvard is obligated to preserve the purchasing power of these gifts by spending only a small fraction of their value each year. Spending significantly more than that over time, for whatever reason, would privilege the present over the future in a manner inconsistent with an endowment’s fundamental purpose of maintaining intergenerational equity.

Also, >80% of the funds have been dedicated by donors to a specific school, program, or activity. As such, there are significant restrictions on what Harvard can and cannot spend the endowment payout on.

With alumni contributions representing such a major portion of Harvard’s funding, it should be clear why Harvard will be extremely perceptive to its relationship with its alumni. Sustained perceptions of selectivity and prestige make alumni more likely to support Harvard through gifts, which will in turn sustain Harvard’s long-term funding.

Note: this also means that Harvard has an added incentive to continue legacy admissions policies, as this will further incentivise alumni donations. And for alumni with children admitted to Harvard, they’ll have an added incentive to keep acceptance rates low – as they think this will increase the prestige of not only their own education, but also their children’s. And Harvard will be forced to comply.

A Moral Obligation..?

Despite this, I’d argue that elite universities like Harvard have a responsibility to increase their enrollment.

Harvard proclaims that its mission is to “advance new ideas and promote enduring knowledge.” But it’s hard to do that in a meaningful way when it only admits less than 2,000 freshmen a year. And it’s even harder to justify $50.7 billion endowment for only 25,266 students in total—which computes a figure of $2.0 mln in endowment funds per student. Even at 5% payout ratio (Harvard’s self-reported long-term payout ratio), that’s $100,000 that Harvard can spend per student per year. In my view, a university that barely expands its freshman class—while the population expands and its endowment swells—shouldn’t be allowed to keep its non-profit status, and the ultra-lenient taxes it enjoys on its endowment.

Colleges shouldn’t base their prestige on how few students they admit (or, phrased another way, how many they reject). The use of these metrics is both superficial, and troubling. Instead, as educational institutes, their prestige should be based upon how many students they educate that become competent and productive members of society. And increasing enrollment will boost that metric, not hinder it.

Yet despite this, detractors still raise several arguments against elite universities expanding.

Argument one: that even if these universities wanted to expand, they simply can’t, because of simple Geography. Since most of these universities are located in cities, there’s little vacant land for them to expand onto. And even if there is, it’ll be extremely difficult and costly to get zoning approval and building permits, acquire land, and demolish, renovate, and/or construct buildings.

Argument two: Alternatively, universities can consider admitting commuter and/or online students. But since a big part of the student life in these elite universities is the residential experience, these students won’t be getting the full <insert university name here> experience. This also risks diluting the culture (and potentially brand reputation) of the university. Also, online students will probably have to get different diplomas as well, which will probably be considered “inferior” to the diplomas of fully fledged residential university students.

Both these concerns have some merit. But there are ways to address them.

One paper by a father-son duo at Harvard’s own Graduate School of Education outlines how to expand elite universities without sacrificing their quality or brand value. They suggest that these colleges consider a flexible mix of online learning, hybrid arrangements, internships, field experiences, studying abroad, remote residential campuses (all offered at varying tuition costs).

For example, they suggest universities take measures such as co-designing and sharing the costs of these measures with employers/consortiums with other universities, such as by sharing online courses, service openings, and internship opportunities.

Note: These measures don’t have to be implemented all at once. I’m not advocating for immediate and rapid progress on this issue, I’m just advocating for progress itself. This debate isn’t one over how fast to expand elite colleges, it’s whether to expand them at all.

Second, detractors also argue that expanding in such a manner will erode the brand value of these universities regardless.

I find this concern terribly overblown. Many people think that acceptance rates are an important factor in university prestige purely because others think so. But the reality is, very few people actually do. Alumni and parents that seem to care about acceptance rates only do so because they feel they are obligated to. They have a misplaced notion that society cares about acceptance rates, hence they should too.

They are like sheep following other sheep jumping off a cliff—except that the sheep they’re following simply don’t exist.

Don’t believe me? Just look at the stats. On the other side of the Atlantic, top universities like Oxford and Cambridge have acceptance rates ranging from the high teens to the low twenties. In many cases, that’s triple the acceptance rate of top American universities.

But Oxford and Cambridge aren’t considered second-rate universities. Because the truth is, admissions rates really don’t matter. If overnight, Harvard’s acceptance rate were to triple from 3% to 9%, I’d doubt Harvard would suddenly lose its ‘elite school’ status.

Separately, detractors may argue that though it may be worthwhile to boost enrollment for elite universities, the fruit of these efforts will be negligible compared to boosting enrollment for universities at large. They point out that even if elite universities boost undergraduate enrollment by nearly half —from 170,000 to 250,000—that’s still negligible in comparison to the 17 million undergraduate population in the US. As such, instead of focusing on “providing a very few students on an incremental basis the opportunity to attend a highly selective institution”, we should shift the debate to improving the education provided by ‘non-elite’ universities instead.

True—I agree that the education debate regarding the vast majority of students is far more important than the one regarding a few elite ones.

But the problem arises when these detractors use this argument to dismiss the topic altogether. Why must discussing the fate of elite universities and that of ‘non-elite’ universities be a binary choice?

Overall, these elite universities provide an important avenue for upward social mobility. A 2017 study found that Harvard students born in the bottom income quintile had a 58% chance to rise to the top income quintile by their mid-30s (as compared to 1.7% for the average American). Discussing elite universities’ enrollment is important too, and we must make sure to do so.