Stanford Graduate School of Business is publicly admitting that it misled thousands of applicants and donors about the way it distributes fellowship aid and financial assistance to its MBA students. The disclosure came to light as a result of a computer breach that exposed 14 terabytes of highly confidential student data detailing the most recent 5,120 financial aid applications from 2,288 students, spanning a seven-year period from 2008-2009 to 2015-2016.

The information was unearthed by a current MBA student, Adam Allcock, in February of this year from a shared network directory accessible to any student, faculty member or staffer of the business school. In the same month, on Feb. 23, the student reported the breach to Jack Edwards, director of financial aid, and the records were removed within an hour of his meeting with Edwards.

Allcock, however, says he spent 1,500 hours analyzing the data and compiling an 88-page report on it. His conclusion: “The GSB secretly ranks students as to how valuable (or replaceable) they were seen, and awarded financial aid on that basis. Not only has the GSB also been systematically discriminating by gender, international status and more while lying to their faces for the last 10 to ~25 years.”

DISCLOSURES SUGGEST AN ADMISSIONS STRATEGY THAT LEADS TO HIGH STARTING MBA COMP

Allcock found that Stanford had routinely granted fellowship money to students without regard to their financial needs, often favoring admits who were female and those from the financial sector, even though many had more savings than students who received no scholarship help or less financial support. His analysis also found what he termed “systemic biases against international students…This is inconsistent with a need-based financial aid system,” he wrote in the report.

It’s hardly surprising that Stanford would funnel more scholarship dollars to women and domestic applicants. Business schools have been encouraging more women to apply to MBA programs and have largely used scholarship grants to increase female enrollment. Domestic candidates for full-time MBA experiences have been down for several years across the board so it would make sense for a school, even Stanford, to dangle higher fellowship awards to those admits to get the best of them to go to Stanford. Most elite business schools, on the other hand, have more international applicants than places for them in their enrolled classes.

Allcock’s discovery that more money is being used by Stanford to entice the best students with financial backgrounds suggests an admissions strategy that helps the school achieve the highest starting compensation packages of any MBA program in the world. That is largely because prior work experience in finance is generally required to land jobs in the most lucrative finance fields in private equity, venture capital and hedge funds. Stanford sends a higher percentage of its MBAs into higher paying PE and VC jobs than Wharton, Chicago Booth, Columbia, or Harvard. Last year the median pay for the 12% of the students that went into private equity was a class-high $177,500, well above the overall median of $136,000. Venture capital firms, which hired 7% of last year’s Stanford crop, paid median starting salaries of $167,500.

DEAN CONCEDES SCHOOL PROVIDES NON-FINANCIAL NEED SUPPORT DESPITE CLAIMS TO CONTRARY

The bigger surprise is that Stanford has long claimed it only provides need-based financial need when that is clearly not true. Allcock is an international MBA student who came to Stanford in 2016 from the United Kingdom where he had been the founder of two startups, including a consulting firm for manufacturing companies, according to his LinkedIn profile. Though he is a beneficiary of financial aid at Stanford, Allcock has maxed out on student loans to finance his education, according to a letter he sent to students.

The existence of the report—leaked to Poets&Quants and apparently circulating among students on campus—was made public nearly two weeks ago by Stanford GSB Dean Jon Levin who conceded that the school had failed to come clean on how it distributes financial awards to students and acknowledged the breach of confidential student data.

In a statement to the GSB community issued at 6:39 p.m. on a Friday, Nov. 17, GSB Dean Jon Levin said the data has been “improperly stored in a shared folder that was accessible to all GSB faculty, staff and students. The records were anonymized and did not include names; however, they included income and asset information, and information on prior employment.”

DEAN PLEDGES TO BE ‘SIGNIFICANTLY MORE TRANSPARENT’ ON FINANCIAL AID AWARDS

Though the school has insisted that it does not grant fellowship awards on the basis of merit, Dean Levin wrote that the school “has offered additional fellowship awards to candidates whose biographies make them particularly compelling and competitive in trying to attract a diverse class.”

He promised that the school would be “significantly more transparent about the principles and objectives being applied in making financial aid awards, and about how different awards are made. We are committed to working on this for the current admissions cycle.”

Scholarship awards have become an important competitive weapon for business schools to win over highly desired applicants. In recent years, there has been an arm’s race of sorts for scholarships and Stanford has been among the most generous. In any given year, the school will hand out more than $16 million in fellowship awards, an amount that represented a 31% discount on its published tuition rates. Slightly more than half of Stanford MBA students receive fellowship support, with the average grant at roughly $36,000.

‘SCHOLARSHIPS COULD BE THREE TIMES HIGHER FOR STUDENTS WITH IDENTICAL FINANCIAL NEED’

But through the years, Stanford has insisted that it only awards scholarship money on the basis of financial need—not merit. Most of its peer schools, with the exception of Harvard Business School, make no such claim. More often than not, they dole out scholarship dollars to increase the quality and diversity of a class, with a good deal of money going to candidates with high GMAT scores.

When Allcock went through the data, matching the internal records with the profiles of students on LinkedIn, he was astonished by what he found. “GSB fellowships were only in part determined by a student’s financial need despite publicly repeated claims to the contrary,” he wrote. “The GSB has misrepresented and advertised its financial aid system to the detriment of students who make tangible financial decisions on the basis of these representations. Students with identical financial situations receive vastly different GSB fellowships awards and without any knowledge can graduate with up to an additional $80,000 of debt…”

When Allcock met with financial aid director Edwards, he says that Edwards told him that the minimum base loan at Stanford was $28,500 and the maximum fellowship award was $35,000. But Allcock had discovered in the data he reviewed that the school had given at least 53 awards to 32 students for more than $75,000 a year. Roughly 230 students had received fellowship grants that represented full rides: full tuition or full tuition plus fees. The report claims that scholarships could be three times larger for students with identical financial needs.