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Private college presidents push campaign to limit use of non-need-based aid

Baby Steps for Need-Based Aid
January 7, 2013

TAMPA, Fla. -- The fledgling campaign by some private college presidents to persuade their peers to wean their institutions from financial aid awarded without regard to students’ financial need has not exactly caught fire.

Two years ago, when they unveiled the effort at the annual meeting of presidents in the Council of Independent Colleges, dozens of campus leaders expressed enthusiasm for the idea of curtailing the awarding of financial aid based on criteria other than need (commonly known as "merit-based" financial aid). But in the many subsequent conversations that unfolded in the months that followed, as agreement was sought about practical steps that groups of institutions might take, a pattern always emerged.

“Someone raises their hand and says, ‘I couldn’t go there,’ or ‘My trustees wouldn’t let me do that,’ " S. Georgia Nugent, president of Kenyon College and a leader of the effort, said as the Council of Independent Colleges presidents gathered again here on Saturday. “Or another will say, ‘The state university will eat my lunch.’ And you’d have this progressive stepping back” from the previously expressed enthusiasm.

If Nugent spoke with a hint of frustration in her voice, it was because she so clearly thinks that most presidents know in their hearts that what they’re doing isn’t in the long-term interests of their institutions or of students.

“The merit wars are both wrong and destructive; is a game of chicken the most responsible way to manage our institutions?” she said. “There’s an understandable fear of unilateral disarmament. The question is, can we band together to defend what we think is right?”

As they met at the Council of Independent Colleges' Presidents Institute here, two years later, Nugent and some of her colleagues hoped to generate a bit more of a spark (and a lasting one) than they did last time. And while it'd be foolhardy to predict that they may have, given how the enthusiasm fizzled last time, two developments left participants heartened.

First, Nugent shared with the group a preliminary “statement of principle” (drafted by John McCardell of the University of the South and others) that would represent a “first, baby step” toward reaching some kind of agreement among presidents about eventual actions or changes in financial aid and pricing practices.

And then David L. Warren, president of the National Association of Independent Colleges and Universities, told the group that he’d had a series of preliminary conversations in which officials of the U.S. Justice Department had expressed a willingness to review (and potentially bless) accords in which colleges would agree to take common steps to reduce non-need-based aid that would result either in increased financial aid for students or lowered tuition prices (or both).

A Shift Over 30 Years

There is fairly widespread agreement that the rapid expansion of financial aid awarded based not on financial need but on academic (as well as athletic and racial/ethnic) grounds, and frequently to attract students who are able to afford tuition but whose families won't pay full freight, has undermined the traditional conception of financial aid as a tool to make college possible for students who couldn't otherwise afford it. Aid awarded based on criteria other than need tends to change where people go to college, not make it possible for them to go.

But the arguments against the use of such aid have gained little ground -- not because of disagreement about the agenda (though some exists) but because the competition for students that has driven its use is seen as an unstoppable force, and one that many colleges desperate to attract students will be reluctant to abandon. Officials at private institutions say they must use it to try to compete with the state-subsidized tuitions of public institutions; states have embraced their own merit-based financial aid (like Georgia’s Hope Scholarship) to keep high-performing state residents within their borders.

While this phenomenon has taken hold and has been in place for what seems like many years, Nugent and her colleagues -- Tori Haring-Smith of Washington & Jefferson College and Lloyd Thacker of the Education Conservancy – retraced some financial aid and legal history to show that it was not that long ago that virtually all institutional financial aid (as well as state and federal aid) was awarded based solely on students’ financial need.

The most significant of those developments was a Justice Department antitrust investigation in the late 1980s that brought to an end the practice in which elite institutions (through a collective called the Overlap Group) reviewed the aid offers they were preparing for commonly admitted students. That collaboration, Haring-Smith said Saturday, "allowed limited financial aid funds to be distributed among the greatest number of students and allowed students to make choices that were not influenced by financial factors," but the Justice Department alleged that it was anti-competitive and hurt students.

The competition that ensued is widely held responsible for stoking the expanded use of merit-based aid (which in most cases is given through the discounting of tuition, rather than with actual grants). While critics of the practice have long hoped for a legal challenge that would once again allow collaboration on financial aid practices, they have often seen that such a challenge might prove impractical or politically unappealing.

The shifts in aid in the last 15-20 years have been unmistakable. In 1995-96, private nonprofit and public four-year colleges were far likelier to give need-based grants than merit-based ones (by margins of 43 vs. 24 percent at private nonprofit colleges and 13 percent vs. 8 percent at public universities). In 2007-8, 18 percent of public university students received merit-based awards and 16 percent received need-based grants; at private colleges, 42 percent received merit aid and 44 percent received need-based assistance, a 2011 study by the National Center for Education Statistics showed.

Turning the Tide

How might the powerful trends of recent years be reversed? The document drafted by McCardell and circulated by Nugent on Saturday offered something of a rhetorical blueprint, at least, in a series of statements that would probably find varying degrees of agreement among presidents.

Entitled "High Tuition/High Discount Has No Future," the document characterizes the merit aid/tuition discounting model as unsustainable, and (importantly in the eyes of advocates for the statement, who want to gain public support) acknowledges that campus presidents themselves have helped to create this problem. 

Meeting financial need should be the "highest priority" in awarding aid, the draft statement says, and aid offered to students who do not need it "must not come at the expense of those who do." (The statement relates the results of a 2009 study showing that "the increased use of merit aid is associated with a decrease in enrollment of low-income and minority students, particularly at more selective institutions.")

The statement puts forward a set of principles on which the framers would presumably seek to gain agreement. These are their words:

  • We will strive, as a matter of policy, to meet full need.
  • We will give priority, in the allocation of financial aid dollars, to meeting full need.
  • We will cease, in our publication, on our websites, and in all other forms of admission communication, to use the term "merit aid" to describe non-need-based financial aid (since, they say, all aid recipients are meritorious).
  • A financial aid offer, once made, will be final, unless a family's economic situation changes.
  • We will, as a result, show restraint in setting our tuitions.

A Legal Opening

Warren, the NAICU president, stirred those at the session with his news about the conversations with the Justice Department. He said he had to be necessarily vague about those discussions, given their preliminary nature. But he said they had spoken “in considerable detail” about ways in which groups of presidents might “come together with structured proposals” in which their colleges would agree to adopt certain policies or take certain steps on pricing and/or financial aid that, taken together, would make college more affordable for students.

Federal officials would review the proposals, Warren said, and if they agreed that the accords passed muster, “could issue a letter” that would allow the presidents to “engage in the conversation with no penalty.” The idea would be that other groups of colleges would gain the same latitude to share information about their practices that some of the former Overlap Group colleges have through the 568 Presidents Group.

“They made it clear that, like us, they are determined to find a way out of this particular morass,” Warren said.

Warren’s announcement, together with the standing-room-only attendance at the session and the participants’ enthusiasm, left the group in an upbeat mood. Whether that lasts when Nugent begins trying to move the conversations in more tactical directions (requiring presidents to put themselves on the line) in the coming months, or wilts in the face of practical limitations as it did two years ago, will be evident soon enough.

 

 

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