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The myth of merit based aid

By Kristi Allen
On November 13, 2013

The "higher education arms race" is a well-documented phenomenon. Colleges and universities all over the country, including this one, are doing everything they can to attract potential students with new building projects, top tier sports programs and other add-ons and amenities. One of those strategies is merit aid.
Far from the scholarly achievement it's presented as, merit aid was conceived as a way to lure high paying students to a particular campus. It worked so well that it's undercutting need-based aid. In the past 15 years, merit aid awards have increased dramatically at the expense of assistance for lower income students.
A ProPublica analysis published this September outlined the trend. Since 1996, aid awards to the highest quartile of income have increased six percent, and aid to the lowest quartile of income has decreased almost 10 percent. At the moment, about a quarter of students from both the highest and lowest income tiers receive some form of institutional aid. Merit aid is given to many deserving candidates, and it can be especially helpful for students who fall between qualifying for financial aid and being able to pay for college in full, but in general the trend has been detrimental. Despite expanded Pell Grants, skyrocketing tuition prices and a growing need for financial assistance, fewer students are able to access the help they need.
Why are low-income students being left behind and high-income ones given discounts? Unfortunately, the answer isn't as simple as greed and money-grabbing. The evolution of merit-based aid is part of the whole system of college admissions and recruitment, and it's a decision many schools have made to stay financially solvent.
As state contributions to universities declined, schools needed to look elsewhere for revenue. They turned to out-of-state students, who usually pay much more in tuition. Campus beautification projects and other amenities became the prime methods for luring these students in, and "merit scholarship" discounts were introduced to sweeten the deal. These scholarships are not new among Ivy League and other highly selective schools, but they've become incredibly common at mid-range schools and public universities in recent years.
According to a report by the Washington Monthly, the modern incarnation of these policies began at Ohio Wesleyan University in the 1980s. They were the first school in the state to institute merit aid and their intent was to attract students who would otherwise attend the cheaper public schools in the area. The program worked incredibly well, until other schools caught on and OWU had to ramp up their aid offerings to the point where 39 percent of students were receiving merit based aid in 1994.
After a few schools adopted these policies, it started a chain reaction. Colleges had to offer tuition discounts to keep from losing good students to their competitors. Many were reluctant to do so but felt they had no choice, both for financial reasons and to preserve the quality of the student body. When budgets were slashed or strained with new projects, schools had to admit less qualified students who could pay the majority of their tuition.
Merit scholarships also became a convenient way to boost a school's rankings. Students with the two most attractive attributes-high GPA and SAT scores-could be brought in easily with merit aid. For a fraction of the overall cost of tuition, a school could admit a mediocre but high-scoring out-of-state student, knock a few thousand dollars off the tens of thousands that student was already paying, and come out far ahead financially in addition to moving up in the all-important college rankings. Even public universities, which exist to provide affordable, accessible higher education have jumped on the bandwagon, inflating costs and pricing out the students they're supposed to cater to.
Because these scholarships were never designed to simply reward achievement, they're often not all that merited. At Denison University in Ohio, nearly half of all students receive non-need based aid that's supposed to be tied to outstanding achievement and exceptional qualifications. At the University of Denver, it's 38 percent. The University of Rochester gives 29 percent of its students non-need-based aid (UConn gives 60 percent of it's students some kind of institutional aid, but doesn't give a specific breakdown of need and non-need based). According to the Washington Monthly report, one-fifth of students receiving merit aid have less than a B average.
The conflicting priorities of generating revenue and selecting the best students have led to a zero gain situation: the best qualified lower-income students can't pay, and the school gets overrun with middle of the road students who can.
Cheaper college tuition is good thing and it's sorely needed, but merit scholarships don't decrease the actual cost of college for anyone. They were designed for those who already had the means, and lower income students are being systematically pushed out as aid goes down and tuition goes up.

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