Prep School Scam: Chinese Students Exploited by Endowment-Hungry American Schools

Static Chaos

With growing wealth and the long cultural belief that values higher education above almost everything else, it is  easy to understand why more and more Chinese parents want to send their kids to the United States hoping to get a better education leading to a brighter future.

This trend has created a strong, yet hard to fill niche demand.  As we learn from Econ101, someone (an agent, for example) will eventually squeeze out some supply from somewhere to meet that demand, along with a potential to exploit the gap when the good quality supply falls short of demand.

According to Bloomberg,

"...[U.S.] Colleges are prohibited from paying incentives to recruit U.S. students who qualify for federal financial aid. While American schools use agents worldwide, the practice is especially common in China because agents are ingrained in its culture."

In their quest for a world class education in the U.S., some Chinese students as well as parents have been exploited by some of the American schools hungry for endowments in an economy still reeling from the Great Recession.  From Bloomberg:

"Boarding schools with small endowments and less selective admissions policies are boosting their revenue and enrollment by recruiting thousands of Chinese students who pay full freight. As the weak economy has shrunk the pool of well-off U.S. applicants, many of these schools are using agents with misleading sales pitches to tap a growing number of wealthy families in China eager for the prestige of an American degree.

The number of Chinese students at U.S. private high schools soared more than 100-fold to 6,725 in 2010-11 from 65 in 2005- 06, according to the U.S. Department of Homeland Security. China has displaced South Korea as the top source of international students at boarding schools, with the smallest schools having the biggest increases in Chinese enrollment, said Peter Upham, executive director of the Association of Boarding Schools in Asheville, North Carolina.

In addition to agency's cut, Bloomberg quoted a couple of schools that these Chinese families paid first year tuition in the $55,000 range, plus additional international student fees such as English as A Second Language (ESL) classes. A headmaster at a New York school says,

"The ESL fee is justified because classes are smaller, and price isn’t an issue because China has a lot of multimillionaires." 

But instead of the promised elite college-prep experience by agents, these Chinese students often find that over-enrollment of Chinese students has resulted in one-third or more of their dorm mates are also Chinese, which is non-conducive to their English leaning and studying progress, while many of the U.S. students in the same schools have leaning disability / difficulties such as ADHD or ADD.  Reportedly, these conditions were not disclosed to the Chinese families since the disclosure would be “counter-productive,” as one school puts it.

So with this strange student demographic mix, the end result has turned out to be quite interesting:

"The schools end up segregated academically and socially into full-paying Chinese students, many of whom rise to the top of their classes, and American teenagers who fell behind in public schools."

Meanwhile, Bloomberg describes how parents in China are clamoring to pay up to $300 USD a pop to just learn about prep-school education in the U.S.  And Chinese student enrollment remains a big "budget balancer" to many prep schools, as another headmaster at a school in Connecticut told Bloomberg that

“You can turn the valve on and off.... If you need another 20 kids at 50 grand a pop, you get them from China.”

Since this is a commercial activity in the traditional mostly "non-profit" education sector (which is a total joke if you look at how much tuition and book costs have gone up over the years),  there's no clear governing standard or regulation around the student recruiting and enrollment diversity, which is unlikely to change any time soon.

So unfortunately, the best thing the Chinese families wanting to send their kids to the U.S. could do is "buyer beware" by doing a lot of research and on-campus visits if possible, so not to waste precious time, money or worse yet, disrupt the education progress of your young.  

Static Chaos