At a time when private colleges are often criticized for spending too much of their financial aid resources trying to attract students who can already afford to attend, George Washington University is planning to increase need-based aid and substantially decrease merit awards for next year's incoming class.

Noticing a slowing rate of increase in expected family contributions among its applicant pool, the university projects that it will reallocate roughly $2.5 million from merit aid to need-based aid.

Out of the total financial aid budget, about 75 percent goes toward need-based aid. With the change, the average merit-based scholarship would decrease from about $18,500 to $12,500. The number of merit-based scholarships would drop from about 360 to 300 for the incoming class, according to Daniel Small, director of the Office of Student Financial Assistance.

“Knowing that our cost is a factor, and what the climate is in financial aid, the university decided to re-evaluate how to use merit money and redirect funds toward the neediest students,” Small said. “This will help us assist students and meet enrollment diversity goals.”

For the past three years, George Washington has promised entering students both a fixed tuition rate and a financial aid commitment that can be spread across their four (or five) years. The cost of attendance – including tuition, fees, room and board – is likely to break the $50,000 mark for the first time for incoming students this fall.

Tuition for next year’s freshman class is set at $39,210, up nearly 4 percent from the year before. More than 60 percent of students at George Washington receive some type of financial aid, and the college's discount rate is about 35 percent.

“We’re discovering that we need to close the gap for need-based awards in order to be realistic and anticipate family pressures," said Robert Chernak, senior vice president for student and academic support services.

Chernak said that looking at the federal financial aid forms, the university saw a clear trend line – families not borrowing as much this year, in large part because of shrinking assets such as home equity.

George Washington is increasing its financial aid budget by about 5 percent, which means institutional money for financial assistance will reach about $120 million in 2007-8, Small said. The budget increase is almost always set higher than the tuition increase, he added.

George Washington's move only affects students entering in the next academic year. Small said the university's fixed tuition promise sets officials up in a game of projecting finances four years down the line.

"It's a whole new learning process for us," he said. "We aren't clairvoyant, but we can take into account several factors. For us, merit provides a balance. There's still a need for students who would possibly not be able to attend."

Chernak said he doesn’t expect a drop in overall yield. He said only a small minority of students who qualify for merit aid would not be eligible for other institutional or federal aid.

“It would be riskier for us if we didn’t put funds into need-based aid,” he said. “And this might be a more socially responsible thing to do, anyway.”