Over the last two decades, public colleges have sharply increased the amount of merit aid they’ve offered — a strategy that comes at the expense of low-income and working-class students, a new study finds.
A report on the study, released by the policy think tank New America, examines how 339 public institutions spent their aid dollars from 2001 to 2017. The study is based on data from the college-guidebook publisher Peterson’s. During that period, more than half of the universities in the study doubled the inflation-adjusted amount they spent on non-need-based aid.
That increased spending is part of a long-term trend that is often driven by a desire to attract wealthier students, said Donald E. Heller, a professor of education at the University of San Francisco who has done similar research.
The pressure to attract wealthier students often stems from the financial pressures colleges face. State governments, strapped for cash, are increasingly divesting from public institutions. Meanwhile, both private and public colleges are increasingly concerned with raising their ranking and status.
That has led to a change in philosophy about student recruitment, said Stephen Burd, the report’s author. (Burd was a reporter for The Chronicle from 1991 to 2007.)
Because of those pressures, providing financial aid is sometimes focused on meeting an institution’s goals instead of satisfying student need. “That, unfortunately, means that the emphasis becomes more on raising revenue and on rising up the rankings, and in all those ways creates incentives for the schools to go after wealthier students,” Burd said.
The changing dynamics among students entering higher education are also playing a role, Heller said. “Students are applying to more and more universities, which means they’re getting into more and more universities, which means they have more and more financial-aid offers to play off against other institutions,” he said. “I think institutions are feeling more pressure to put the best financial-aid offer they can on the table when they admit a student.”
The new report does more than chronicle a trend. It also names the colleges that saw the largest jump in non-need-based aid. Topping the list were the University of Alabama and Temple and Arizona State Universities. The University of Alabama recorded a more than $123-million increase in non-need-based aid from 2001 to 2017.
Reached by phone, representatives of Arizona State said the increase in non-need-based awards could be traced to an enormous increase in enrollment — the 12-month head count rose by 42,520 students from 2001 to 2017, the representatives said, with nonresident enrollment roughly doubling. They also cited a conscious shift to recruiting out-of-state students, who often receive merit aid.
A Temple University representative also cited an increase in students and said the institution’s philosophy toward aid had shifted, since 2017, toward helping students in financial need. The University of Alabama did not respond to a request for comment.
Ronald G. Ehrenberg, director of Cornell University’s Higher Education Research Institute, said that colleges often face a trade-off between public service and private prestige in offering financial aid.
He said a college’s president and governing board are often the ones who can set its direction and determine whether to focus on providing need-based or non-need-based aid.
“They can make a decision to say, We want our institution to focus more on social mobility and focus more on helping poor students get to college, rather than just moving up in the U.S. News & World Report rankings,” Heller said.
When interpreting studies that examine spending on aid, Heller said, people must take into account that some of the merit spending is directed toward low-income students. Still, wealthy students are more likely to receive merit-based aid. “There’s no question that when an institution is spending more money on merit, all other things being equal, more of their money is going to be funneled to wealthier students,” he said.
Burd, the report’s author, said the federal government needs to get involved in the issue to ensure that students who need aid are receiving it.
“Colleges are not spending their financial-aid dollars the way that they’re supposed to be,” Burd said. “And they’re leaving low-income students in the lurch.” That is true of “even our public universities, which are supposed to be the ones that are helping, even more so than private colleges, low-income and working-class students rise up and to be able to provide a ladder to the middle class.”
