In 2011, Clemson University’s goal of becoming a top 20 public university in the U.S. News & World Report rankings hit a snag.
James Barker had set that goal in 1999 when he became president, and his administration had been laser-focused on achieving it ever since. “It is the thing around which almost everything revolves for the president’s office,” Catherine Watt, then a university official, said in a 2009 speech at the Association for Institutional Research’s annual forum.
In her talk, met at times with gasps from the audience for its unusual candor, Watt laid out Clemson’s strategy for climbing up the rankings. Under Barker’s leadership, the university mostly stopped admitting freshman who were not in the top third of their high-school class (because U.S. News rewards colleges for greater selectivity); ran a campaign to get graduates to send the university $5 apiece (in order to inflate its alumni-giving rate, another key metric); and rated all the university’s competitors below average in the reputational survey that weighs heavily in the rankings. “We have walked the fine line between illegal, unethical, and really interesting,” Watt said.
By then, Barker had gotten Clemson close to the goal. But ever-increasing competition from the school’s rivals slowed its momentum. Clemson officials struggled to yield admitted applicants, forcing the school to accept more students than they wanted. A rising acceptance rate threatened to jeopardize the university’s progress in the rankings. Things took a turn for the worse in the fall of 2011 when the school missed its enrollment target by 300 students despite admitting nearly two-thirds of applicants.
Desperate, Clemson turned to outside enrollment-management consultants for help. Huron provided the type of advice such consultants typically do. The company recommended Clemson create “a new organizational structure for enrollment management to elevate its importance within the university” and focus financial aid on “the most academically talented admitted students.” The university’s Board of Trustees embraced Huron’s recommendations and “directed the administration to move forward immediately,” the consulting company boasted.
Institutional ambitions were chased largely on the backs of low- and lower-middle-income students.
Clemson moved quickly to change its financial-aid policies. According to my analysis of data colleges provide to Peterson’s, a publisher, in the fall of 2012 the university increased spending on non-need-based “merit” aid by $6 million, bringing the total to roughly $16 million. Between 2012 and 2019, the university’s inflation-adjusted annual spending on non-need-based aid to relatively affluent students nearly doubled, with the share of such freshmen receiving institutional aid, mostly in the form of tuition discounting, increasing from about one-in-five to one-in-three, and the average annual award doubling.
As Huron promised, Clemson’s generosity with non-need-based aid helped the university lower its acceptance rate and improve its yield. And the average SAT scores of its incoming class rose by about 80 percentage points. But were these “improvements” worth the cost? Clemson briefly achieved its stated goal, ranking 20th among public universities in the 2015 U.S. News ranking, but today, after methodological changes, it ranks 43rd. More consequently, institutional ambitions were chased largely on the backs of low- and lower-middle-income students who have benefited little from the university’s generosity with tuition discounts to students who might not need them.
In fact, students in need of financial assistance have seen the cost of attending Clemson rise substantially since 2012. Not only has Clemson’s list price risen, but as of 2019-20, the university met, on average, just 52 percent of the financial need of its freshmen student-aid recipients, about 20 percentage points less than it covered in 2010, per my analysis. As a result, students in need faced larger funding gaps to attend Clemson than their counterparts did a decade prior.
In academic year 2019-20, Clemson freshmen from families making $30,000 or less paid an average net price — the amount of money that students and their parents have to pay after all grant and scholarship aid is deducted from the list price — of $13,744, representing a huge portion of those families’ yearly earnings.
How exactly are cash-strapped families supposed to come up with this money? Higher education has a solution, courtesy of a federal loan program created in 1980 to help middle- and upper-middle-income students afford expensive colleges: Parent PLUS loans. Unlike federal student loans, which have strict borrowing limits, parents today can borrow up to the full cost of attendance, regardless of their income. To obtain the loans, they only need to pass a lax adverse credit-history check that does not assess whether the borrower will be able to repay the debt. In other words, the families of low- and lower-middle-income students who are admitted to Clemson often have little choice but to take out hefty PLUS loans they may not be able to repay.
In the fall of 2019, Clemson families borrowed nearly $44 million in PLUS loans. Of that total, four-fifths went to the families of students in need. For low-income families with few assets, PLUS loans are a very risky proposition. Like federal student loans, Parent PLUS debt generally cannot be discharged in bankruptcy, and the loans are subject to the government’s extraordinary debt-collection powers, including wage garnishment and partial offsets of defaulted borrowers’ Social Security benefits.
Administrators don’t have to worry about how hazardous these loans may be for students’ families.
Back in 2009, Watt shocked her audience with her candor about Clemson’s enrollment-management strategies: “We have favored merit over access in a poor state,” she said. “We are more elite, more white, more privileged.” Her statement remains true today, as Clemson presents the families of less-privileged students with ever-larger funding gaps that many fill with debt they likely can’t afford.
The way that many people, including those in power, think of college admissions and financial aid is not that different than how they thought about it back when I started reporting on higher education for The Chronicle in the early 1990s:
1. Students apply to colleges.
2. The college admissions office picks out the best applicants.
3. The college provides financial aid to those who don’t have enough money to attend.
4. The college also provides a limited amount of merit aid to the very best students or those who excel in different fields, like the arts.
Colleges may fall short of meeting students’ full need, but — the thinking goes — that’s because doing so is very expensive and because the federal government has failed to fully finance federal student-aid programs. If only we could double the maximum Pell Grant, all would be OK.
From this vantage point, colleges are trying to do the right thing by their students. If they are not enrolling very many low-income students or students of color, it’s because there aren’t enough who are qualified to attend. Or maybe these students are qualified, but they don’t apply because they lack information and mistakenly think they wouldn’t get in or wouldn’t be able to get enough financial aid to attend. If the government, or some private entity like the College Board, made sure that these students were better informed about their college options and the availability of financial aid, these students would make more rational decisions and choose better colleges that would fully support them.
This view of college admissions is now a fantasy. It was true for much of the 1960s and the 1970s, but it is no longer. Back then, private colleges really did try to use their financial aid to meet the full need of their students. And rapidly growing public universities kept their prices low enough that they were generally accessible for students.
By the late 1970s, the economy was in turmoil and the college-age population was plummeting. Many private colleges were struggling, and their commitment to meeting student needs was wavering. In the 1980s, the Reagan administration emphasized the private returns of higher education over public ones as it pushed Congress to slash federal student-aid spending. And U.S. News began ranking colleges based on metrics that colleges sought to game. Meanwhile, state disinvestment led public universities to look for alternative revenue sources.
All of these forces led to the emergence of a private for-profit enrollment-management-consulting industry that pushed colleges to operate more like businesses and focus on building their brands and their bottom lines. Firms such as Maguire Associates, Royall & Co., Noel Levitz, and RuffaloCODY entered the market (the latter pair merging in 2014 to become Ruffalo Noel Levitz), promising to help colleges become more competitive in recruiting the students they wanted the most. These firms encouraged colleges to break down the firewalls between the institutions’ admissions and financial-aid offices (and also development offices) and to use non-need-based aid, which they called “merit aid,” to compete for high-quality and more-affluent students. And once some selective colleges started using their financial aid competitively, it became difficult for others to resist doing the same for fear of being put at a competitive disadvantage.
Initially, colleges tried to outbid their competitors by providing larger and larger amounts of merit-based aid. But over the years, they have adopted far more sophisticated strategies. Working with the consulting firms, many colleges engage in “financial-aid leveraging,” an enrollment-management practice in which analysts determine the precise price points needed to enroll different groups of students without spending a dollar more than necessary. At selective colleges, both private and public, the largest discounts go to the students the college wants the most: typically, the best applicants and those who otherwise can pay full freight and help boost the institution’s bottom line.
Leaving low-income students with large funding gaps is part of the game plan.
While less affluent students are likely to receive some aid, that aid is increasingly unlikely to meet their financial need. Under financial-aid leveraging, meeting need is considered inefficient and wasteful. To put it bluntly, leaving low-income students with large funding gaps is part of the game plan to help colleges pursue the students they want most: the best applicants, who can help the institutions rise up the rankings, and the wealthiest, who can help them increase their revenues.
To be clear, many selective colleges use these financial-aid-leveraging strategies for only a subset of their students, and some may use a portion of the additional revenue that they receive from recruiting affluent students to boost need-based aid at their institutions.
However, the country’s largest enrollment-management firms aggressively market financial-aid leveraging or optimization products that are designed to help colleges use all of their aid to pursue the most desirable prospective students. As EAB marketing materials state, “Our Financial Aid Optimization program ensures that every dollar you commit to aid is used to further your enrollment and net tuition revenue goals.” (EAB was formerly a division of the Advisory Board Company, which purchased Royall & Co. for $850 million in 2014.)
Where financial aid was once used to meet financial need, the industry now has a different view of what it should be used for. As Nathan Mueller, a leader of EAB’s financial-aid optimization team, recently told Higher Ed Dive: “The concept is to award financial aid in a way that results in the maximum total amount of net tuition revenue for the institution.”
Compounding the problem for low- and lower-middle-income students, these practices are most effective when colleges jack up their sticker prices so they can provide larger “discounts” to the students they covet the most. In 2015 Kevin Crockett, then a Ruffalo Noel Levitz consultant, acknowledged this to The New York Times Magazine: “I’ve got to have enough room under the top-line sticker price.” (Crockett later became the firm’s president.) The article spelled out the implication: “A school that charges $50,000 is able to offer a huge range of inducements to different sorts of students: some could pay $10,000, others $30,000 or $40,000. And a handful can pay the full price.” But inflating the sticker price to offer bigger discounts to affluent students leaves those in financial need with even larger funding gaps.
For colleges, Parent PLUS loans are easy credit they can offer low-income families to cover their funding gaps. And because colleges are not held accountable if borrowers go into default on this debt, administrators don’t have to worry about how hazardous these loans may be for students’ families. As a 2019 Urban Institute report stated, the PLUS loan program is “a no-strings-attached revenue source for colleges and universities, with the risk shared only by parents and the government,” which loses money if borrowers default.
To make matters worse, low-income families are not always aware of the risks they take on when they borrow PLUS loans, which have higher interest rates and origination fees than other federal loans and offer less-flexible repayment options. Incredibly, many colleges include PLUS debt in the aid packages they offer students without fully explaining the terms of these loans.
It’s bad enough that private colleges engage in aid-leveraging practices that put low-income families’ financial well-being in jeopardy. What makes this a true crisis is that public universities have gotten in on the act as well. These once low-cost universities, which for generations served as a local gateway to the middle class, have hiked up their tuition and dangled generous discounts in front of out-of-state applicants to try to raise their rankings and revenue. According to a 2022 report from the Century Foundation, annual PLUS loan disbursements at public universities increased by nearly 300 percent between 2000 and 2017, from $2.2 billion to $8.1 billion.
That low-income families — and particularly those of color — are taking on an alarming amount of Parent PLUS loan debt is not exactly news. A 2022 report from the Georgetown Law School’s Center on Poverty and Inequality found that the share of students whose families annually earned under $30,000 and borrowed PLUS loans grew from less than one-in-10 in 2008 to nearly one-in-five in 2018. The increase was sharpest for low-income Black students: The share of Black undergraduates whose families had annual incomes of less than $30,000 and borrowed PLUS “nearly tripled,” to a shocking 44 percent.
The Century Foundation report had similar findings: “Because low-income families, and especially Black and Latino/a parents, are disproportionately taking out Parent PLUS loans, their heavy use and unfavorable terms and conditions exacerbate the racial wealth gap.” The country needs to reckon with “the lasting damage that college-related debt burdens cause families, especially families of color,” the report argued.
What is to be done? Both the Education Department and Congress must educate themselves on enrollment management and financial-aid leveraging and conduct their own investigations into the roots of the potential crisis. Lawmakers should bring the leaders of the giant enrollment-management firms to Capitol Hill to testify about the aid-leveraging products they market. Federal policymakers not only have a right to know how these firms’ algorithms work, they have an obligation to do so.
Policymakers should forbid colleges from packaging PLUS loans and require them to use a standardized award letter that clearly lays out how much families will be on the hook for after all grant and scholarship aid is awarded. They also need to tighten the PLUS loan eligibility requirements, while increasing federal-loan limits for low-income students whose families would no longer be eligible to take on this debt. Congress must also increase the government’s investment in HBCUs and other minority-serving institutions that will suffer disproportionately from a tightening of the PLUS loan system.
This may still not be enough. Ultimately, we will have to put the brakes on financial-aid leveraging for good. Doing so will make college more accessible and affordable — and it will allow them to function as engines of opportunity rather than perpetuators of inequality.
This essay is adapted from Lifting the Veil on Enrollment Management, just out from Harvard Education Press.
