–Financial aid application diminish your admission chances to boarding school

Question to the readers of this site
If you are planning to boarding school and you are applying to a financial aid from that boarding school, does that diminish your chances for acceptance specifically if you are denied financial aid?

Most schools (read MOST, as there are some need-blind schools out there), will put FA applicants and FP applicants in different ‘buckets’, and typically prioritize those that are FP. So, yes, it does lessen the chance for acceptance.

But this is sort of an “it depends”. There are plenty of schools that want more SES diversity. If you are applying, for example, from a rural area and your family doesn’t have a lot of money, your need for FA is part of what the school expects in having what offer in their community. It won’t count against you.

Otoh, if you have been living the "typical " suburban life and look like all the applicants who don’t need FA, it can work against you. You all bring essentially the same things to the class but the school doesn’t need to use FA $ to get them.

This is far more nuanced than most people think.

It is VERY nuanced.
Having said that, schools depend on FP students for their economic survival and compete with each other for super-star applicants who can afford the tuition and perhaps even make significant donations. On the other hand, there are simply more candidates competing for fewer spots in the FA bucket.
Most schools are NOT transparent about the difference in acceptance rates. At Thacher, the overall acceptance rate is 11-12%, but it is 16% for FP kids and 9% for FA kids.

Even acceptance rates can be misleading. A school that enjoys a great reputation in Asia, for example, might see a 4% acceptance rate for FP Asian students. And if there is a small pool of FA for foreign students, it may be 1% for them. But if you are applying as an American – regardless of whether you need FA - it’ll be way less selective for you.

And there is also likely a difference between students who need $10,000 of FA and students who need full tuition although they are all lumped into the same category.

@CaliMex is right that the pool of excellent FP students is not huge and every school would love to have them. So yes, if you are an excellent candidate and don’t need FA, that’s a finger on the scale in your favor. But you are also likely to be in a pool of folks who have positioned themselves well as applicants and who will be stiff competition.

The major guidance I would give is that you should not apply for FA if you don’t need it “just to see if you get it”. But if you do, there’s no avoiding that, so don’t sweat it. In all likelihood, your need has put you into a different “bucket” than the FP students. In that bucket, what matters is how you compare with others in your bucket.

Your note makes a lot of sense. Looking and schools websites I aggree with your view