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Merit Aid on the Defensive (Publicly)

It’s clear from the data regarding the use of merit-based financial aid — showing hefty increases in its use over the last decade at most types of institutions — that many colleges really like it. And in one-on-one conversations about the practice, many college leaders say they favor institutional scholarships based on merit, either because it allows them to recruit different sorts of students or because it actually bolsters their financial coffers, by drawing students who can pay large tuition bills over and above the grants.

But you get a very different sense about the subject from the public discourse surrounding financial aid, from the slew of reports in the last year criticizing the practice to discussions like the one held Monday at the annual meeting of the American Council on Education in Washington. Panelists at the session largely criticized the practice, with a mild counterpoint offered by David Longanecker, executive director of the Western Interstate Commission for Higher Education, who said, “Things are not as bad as some might think.” Audience members, including many college presidents whose institutions offer such aid, offered nary a peep to defend merit aid.

The panel led off with comments by the moderator, William E. (Brit) Kirwan, chancellor of the University System of Maryland, who argued that colleges have forgotten about poor students. “Too many states and institutions have lost balance and are subsidizing students who are already college bound,” he said. He pointed out that the rise of “Hope-like scholarships” — Hope is the Georgia scholarship program financed by the state lottery — have created a regressive tax on low income families to pay for the education of the middle class. Studies have found that the vast majority of people playing the lottery come from low-income households, while most of the beneficiaries of the state grants come from middle-income families.

Citing her own research and those of others, Sandy Baum, professor of economics at Skidmore College, said that only about 40 percent of institutional aid at public colleges and universities is now need-based. “The primary goal doesn’t seem to be to help those who can’t afford college,” she said.

Lucie Lapovsky, a professor of economics and former president of Mercy College, who co-wrote the College Board study with Baum, pointed out that public colleges have been giving more and more merit aid, but that the majority of federal aid is still handed out to students in the lowest financial quartile. Private institutions, she noted, have the most progressive policies on the financial support as more of their discount rate goes to support need-based grants.

However, Longanecker offered some contrary statements. He pointed out that worries over the rise of merit-based aid are mostly overblown as many states, such as Georgia, never really gave much in the way of need-based grants. Prior to the Hope Scholarship, Georgia spent around $3 million on need-based aid, but the scholarship has allowed the state to spend $50 million today on students with need, about 20 percent of the annual funds spent on the scholarships.

“It’s not untoward for states to try something a little different,” he said. Longanecker also argued that Hope-like scholarships allow legislatures to build state support for higher education. He also said that these scholarships may create more buzz about higher education and spur more high school graduates to consider college.

Finally, he argued that some of the underlying perceptions about the success of need-based aid may be wrong. He pointed out that many of the students who get into college because of need-based grants never make it to graduation. “We used to think that if we gave them some money, they would go and complete their education,” he said. “But that doesn’t seem to be the case.”

He acknowledged, however, that students on need-based scholarships may not be able to graduate because they must work long hours to pay for their educations.

Paul D. Thacker

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Comments

I think an issue not mentiond in the merit scholarship discussion is motivation to succeed in college. Students from the lower class have access to college through financial aide but do not have a track record of competing and learning well with more academically successful students from middle class homes. Tracking in our K-12 school system has seperated out the haves and have nots from early elementary grades on. I agree with those who say we need to address college access and liklihood to succeed in college not by handing out money taken from Peter to give to Paul, but to instill the expectations, skills and ethic that all students deserve. We can start by improving the quality of reading and social skill instruction in grades K-3.

howard, educator, at 8:20 am EDT on July 10, 2007

needs are more than tuition

There is a belief that a college diploma is the “ticket” to higher income and, hopefully, children with fewer needs in the next generations.

Needs based funding for college bound students must start prior to conception and continue through high school graduation. It should not start when a student applies to an institution of higher education which has never, as an institution, been equipped to deal primarily with fiscal needs and not fully to the larger needs of students, academically and socially.

Many parents worry about choosing the right pre-school so their children get the right “ticket". Unfortunately, few low income parents have the insight and resources to pursue this path. Thus, their children are spit out of the K-12 system with many more needs than just fiscal.

Some low income parents have those insights and thus their children qualify on merit with the fiscal based on needs.

Post secondary institutions need to stop wearing hair shirts and taking on the burdens of a system which fails to put its money where its mouth is- claiming that children are our country’s future. This is true whether the institutions are public or private.

If anything, universities need to respond by engaging society so that the “needs” are addressed in all areas, at least at birth. Prevention is cheaper than remediation in health care as well as intellectual and social well being.

tom abeles, at 11:50 am EST on February 13, 2007

To parents, merit aid is akin to a price adjustment, which is not inappropriate given the horrendous increase in the cost of college at rates far above inflation for many decades now.

To students being admitted, merit aid is a way for colleges to say that “we really do want you” and separate themselves from other colleges admitting the same student. Attending college and doing well is hard work, and it is nice to start out with a positive feeling that the institution really wanted you as much as you wanted them.

People and businesses “give money away” or discount their goods or services for all sorts of reasons. I don’t see that it is anyone else’s business how a private institution chooses to handle this matter any more than it is anyone else’s business which charities I support.

Lynn Davis, at 11:50 am EST on February 13, 2007

Hypocrisy 101

This behavior is parallel to the public posturing by college “leaders” about those harmful institutional rankings put out by magazines while simultaneously crowing about how well one’s own school fared in some such publication.

peter, at 11:50 am EST on February 13, 2007

No Merit Aid Entrenches the Elites

Merit Aid is one way that that non-elite schools can try increase the quality of their students. If schools are limited to need-based aid the cost of going to college will be the same for all schools a student gets into, and the currently elite schools will continue to get the best students. These schools love to make sure that there there is no effective competition for students (ask the DOJ), but unless other schools should not. Nor should students. I find it interesting that much of the dismay in this article comes from public universities, whose reduced tuition financed by taxpayers is itself not a subsidy to the lower class, but rather a subsidy to the upper middle classes. On average taxpayers are poorer than the families that send their students to public universities. There is a solution, not supported by any public university that I know of. Raise the tuition at Ole’State U to $35,000 or so (like what a private charges), take no money from the state, and let the state spend all the money that it now spends on the public university and establish a truly need based state scholarship, which in state students could use to attend the college of their choice. This would probably help more poor students attend college.

weinst, at 12:45 pm EST on February 13, 2007

The “big lie” of need-based aid

Need-based aid from colleges is simply an income-transfer program, whereby university elites decide to take money from one family and award it to another family. The colleges are not giving the aid. The professors and provosts are not dipping into their own pockets to pay for these scholarships. Quite the contrary; their kids often attend for free. No, the funds for these scholarships are raised by inflating the tuition for those who don’t get aid and transferring those funds to families who do. Without the guarantee of need-blind admissions, leading universities could lower their tuition rates by $10,000 a year or more. To those schools who claim that it comes out of the endowment, I respond that capital and operating expenses are paid for by the combination of endowment and tuition. With a given endowment and operating expenses, scholarships simply must come out of the tuition of others.

However desirable a public policy it is to educate those with talent but limited ability to pay (and it is), I am at a loss as to why a family that is already facing the incredible financial strain of “aid-free” tuition is expected to personally and directly subsidize another family. Isn’t this what tax policy is for?

Pete, at 4:10 pm EST on February 20, 2007

In response to, “the big lie-need based aid".

It does seem to be an unfortunate fact that insitutions use their own need based aid to take from those that have and give to those that have not. Me and my husband have put two children through undergraduate school with no need based aid and little merit aid. The system may be faulty but it is all we have currently.

Here is our perspective on how we have “subsidized” the education of other students simply by paying for the education of our own children: To complete an education usually means (if we are to believe the statistics) a young person will have greater earnings over a lifetime. They will purchase more, helping the economy, and pay more taxes. I also have the hope they give back in some way over their lifetime and encourage others to obtain an education.

Those who do not complete higher education may be more likely to depend on welfare and may even become part of our penal system, thereby straining our tax dollars.

So, having the attitude that I would rather help subsidize someone to finish their education at an Ohio public university by paying full-tuition than pay for them to be on welfare or spend time in prison is what helps me and my husband feel lucky to be able to pay for our childrens’ education. After all, it is their tax dollars that will help us when we reach retirement age.

Sue Goley, Scholarship Manager, at 5:10 pm EST on February 22, 2007

Count me as fully supportive of merit-based scholarships. Nothing in merit-based scholarships discriminate against meritorious low income students, of which I was an example.

Those who wish to help low income students should focus on improving the K-12 programs that turn out unable students at all income levels. Low income parents who are concerned about their children’s college access should focus on their child’s learning of math, reading, and other academic topics.

Marvin McConoughey, at 8:55 am EST on March 5, 2007

Merit VS Need Aid

I dont totally agree with either Merit or Need based aid concepts. I have sat through a couple of High School Awards Session with my own kids and see things from a real perspective. On average you may have 20 kids out of 600 or 2,000 that will tend to get all the big time scholarships. Most of these students will have an almost perfect 4.0 GPA. These kids deserve a chance to go to college regardless of whether they have a financial need or not, but most of them can get a scholarship if they apply themselves. Generally these young adults dont have problems achieving high grades and will do well in a college environment.

Then you will of course have some very bright children who may also have very low family incomes. They may not have an a 4.0 GPA but only because of their need they get a Zero EFC and get a free ride to college based on their low income level. Some of these will do well and some may not. Some may not even deserve to go to college or even have an interest. However, in the USA we feel obliged to give them a chance to succeed and throw money at the problem.

Then there is everyone else. There is a large population of people whose parents may not be making much over the average of say $40,000.00 a year gross family income, get no special help and can barely afford to pay for gorceries and gasoline so both parents can get to work in their cars that are 10 years old or older and barely run. If you can do nothing for the people that basically are the lower middle class, then you are failing America and dooming them to a meager existence for the rest of their lives. These people in the middle class that are barely above the poverty line are all falling by the wayside. They struggle to earn a living and the average price of a house is now over $100,000.00.

How can these people afford to go to college? They could get a loan but then they can not hardly afford to make loan payments. They have an average of say $10,000 or more in debt on their credit cards and one more debt payment will push them into bankruptcy. I personally feel that the outlook for most people happens to be rather dim. However, I think these people deserve just as much of a chance as the rest of the people in college. If the average American is left behind, we are doomed to mediocracy.

Charles Hammond, System Analyst, at 5:50 pm EST on March 7, 2007

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