Public colleges lure wealthier students with aid they don’t need

  • Needs-based aid grows more slowly than merit, other aid
  • Competition for top students raises concerns over who gets help

Three years ago, Jeffrey Hecker noticed that many of Maine’s top high schoolers were attending private colleges or leaving the state. They had been lured in part by large financial aid packages that allowed them to pay less than they would at their own flagship school, the University of Maine, where Hecker served as provost.

Thus, the university began to offer the best students larger scholarships. And because Maine’s population is older than average, the university offered another offer to attract out-of-state students: Anyone who met certain academic criteria could take the same tuition as the flagship university of his country.

The end result is that the university, like other taxpayer-funded public colleges across the country, is devoting an increasing share of funds to non-need-based aid — money that otherwise might go to students with genuine financial need.

“There may be cases of rewarding someone for any talent, but that’s way beyond that,” said Stephen Burd, senior policy analyst with the education policy program at New America, a group of Washington’s reflection. “All the incentives in the current system are to recruit wealthier students.”

National trend

At the University of Maine, non-need-based aid increased sixfold, from $2 million in 2012-13 to $12 million in the 2017-18 school year. The number of students receiving aid despite being judged to have no financial need increased over the same five years from less than 5% to more than 21% of the school’s population, and the average amount of scholarships has also increased.

The trend is national.

Forty-six flagship universities in the state provided $1.2 billion in aid that was not tied to a student’s financial need in the 2017-18 school year, a 65% increase compared to five years ago, according to a Bloomberg government analysis of school data submitted through the Common Dataset Initiative. For students who colleges assess as having no financial need, the average scholarship was $7,200, up from $6,100 in 2012-13.

Non-need-based aid is often used to attract students with strong academics, athletic ability, or other talents to help raise schools’ positions in national rankings, which can help increase enrollment. According to education experts, it can also help a school’s bottom line by attracting wealthier students who tend to pay more tuition even with aid.

This creates a dilemma: should public universities give money to students who don’t need it and maintain financial health? Or should this aid go to students who cannot afford to go to college without it?

“Of course, we would like to accommodate every student’s needs,” Hecker said. “We track the average gap between the expected family contribution and the cost of coming here, and we try to do our best to close that gap, but we can’t always do that.”

Maine hasn’t neglected low-income students — the university has increased need-based aid to $26 million, a 71% increase, and increased the average financial aid amount. Among the state’s flagship universities, often a state’s largest public college and often a land-grant school, need-based aid rose 53%, to $2.2 billion, the average student in 2017-18 receiving $5,800 in need-based aid, up from $4,000 five years earlier, according to the analysis.

Not all public flagships increase merit aid or use it in the same way. Several top flagships, such as the University of North Carolina and the University of Virginia, are able to cover all student financial needs. But these are the exceptions.

Maximize tuition revenue

Funding for public colleges has taken a hit in recent years. The largest federal grant program for low-income students only covers a maximum of 60% of the state’s average tuition at four-year public colleges, down from the 92% it covered two decades ago, according to the College Board, a nonprofit education corporation.

State support for higher education, which was cut during the Great Recession, has only half-recovered, leaving public colleges in the majority of states more dependent on tuition than state funding and federal officials, according to a 2019 report by the Association of State Higher Education Executives. .

The result is that tuition and fees have become the largest source of revenue for public four-year colleges, according to data from the National Center for Education Statistics. Tuition fees accounted for nearly 21% of public four-year college revenue in 2017-18, up from 16% a decade ago. State funding fell to 17% from 23%. And federal grants and contracts fell from 12% to 8%.

As tuition becomes more important, so does finding students who can afford more of the cost of college without help from the school, Nathan Mueller said, director of EAB, an educational consultancy firm.

“Public universities, probably even more so than private colleges, are in a situation where net tuition revenue has really grown in importance for the funding they need to continue operating,” Mueller said. “Merit-based aid becomes a tool for optimizing the net results of tuition income.”

Complex financing system

To understand how some colleges increase tuition revenue by providing aid, it helps to understand the practice known as “tuition reduction.”

If a college inflates its tuition, then it may offer “discounts” to prospective students through aid. The aid, sometimes presented as a scholarship, incentivizes wealthier students to come to school, although they may end up paying more than their low-income peers who could have received more need-based aid.

The tactic also has a psychological benefit for students – studies have shown that students would rather get a $10,000 scholarship at a $20,000 school than just attend a $10,000 school.

The cost of attending a four-year public school — tuition, tuition, room and board — was $21,400 for the 2017-18 school year, according to the College Board. Yet, few students will pay the full tuition. The average student—after receiving federal, state, and school aid—paid just under $15,000.

Don Hossler, who served as vice chancellor of enrollment services at Indiana University and wrote a book on strategic enrollment management, said colleges initially used discounting and merit aid as a Robin Hood strategy – wealthy students paying slightly less than full tuition subsidized those from low-income families. But he said not all schools are using the strategy yet.

“The whole tuition reduction has gotten totally out of control,” he said. “It’s a terrific example of the prisoners’ dilemma – everyone knows it’s happening, but nobody wants to do anything to unilaterally disarm.”

Aid questioned

It can also hurt low-income students, who often don’t have easy access to advanced placement courses, extracurricular activities and other resources that look good on college applications, said Tiffany Jones, director of education policy at The Education Trust.

Public four-year colleges awarded merit aid to approximately 13% of students in the 2015-2016 school year. According to the National Center for Education Statistics, a quarter of students with household incomes of $100,000 or more received merit aid from their school in 2015-16. For students with household incomes below $20,000, less than 11% received merit aid.

“We should be spending financial aid on students who face the greatest financial barriers,” Jones said. “Not the students who had the biggest head start.”

Release the pressure ?

While merit aid has increased overall among flagships, some public colleges are aiming to focus more on low-income students. The Association of Public Land Grant Universities, which includes 239 public research universities, announced an initiative last year to increase access to college education and strengthen equity.

But cutting merit aid can be difficult for many tuition-dependent colleges that have to compete with other schools in a given region, said Pamela Horne, who has spent her career working on student enrollment. at colleges like Purdue University, University of Michigan, and Michigan State. University.

“You worry. Will my registration change? Will the students we enroll come to us less well prepared? Is our honors program going to be satisfied with the best academics we have? Will teachers be satisfied with the students we admit? Are we even going to make the size class we want? ” she says. “Going from merit-based aid to needs-based aid is a pretty scary proposition for someone in my company.”

To contact the reporters on this story: Emily Wilkins in Washington at [email protected]; Madi Alexander in Washington at [email protected]

To contact the editors responsible for this story: John Dunbar at [email protected]; Paul Hendrie at [email protected]

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