February 26, 2013

Is All Merit Aid Meritorious?

Although there are many types of financial aid, it is typically awarded on the basis of either need or merit. Need-based aid is largely a result of a federal calculation and is somewhat predictable:  to ensure access, students with more financial need receive more financial aid of various forms. And, although there is no universal definition of the merit aid, it traditionally describes scholarship money used to attract top academic achievers. However, Kevin Carey, director of education policy at the New America Foundation, asserts in a recent commentary for The Chronicle that a significant portion of merit aid is actually used to attract “academically marginal students with wealthy parents.”

Carey cites evidence of this trend. A 2011 U.S. Department of Education study found that of the full-time students at four-year institutions who received “merit” aid in 2007-08, almost 20 percent had entered college with a combined SAT score of less than 700 and 45 percent had scored below 1000 (out of a possible 1600). The study also shows that although the percentage of private college students receiving need-based aid showed a slight decline from 1995 to 2007 (going from 43 to 42 percent), the proportion receiving “merit” aid nearly doubled during that time span (from 24 to 44 percent).   At public universities, the percentage of students getting need-based aid increased from 13 to 16 percent, but the growth in merit aid outpaced it, going from 8 to 18 percent.  Thankfully, as discussed in a previous post, a group of private-college presidents has been calling on its peers to limit the amount of financial aid awarded on criteria other than need.

The National Association of State Student Grant and Aid Programs’ (NASSGAP) Annual Survey Report on State-Sponsored Student Financial Aid and Brookings’ Beyond Need and Merit: Strengthening State Grant Programs provide corroborating evidence that merit-aid is becoming more prevalent, while need-based aid is diminishing.  However, neither discusses the academic strength of the students receiving merit aid.

So why is this happening?  If a college offers good scholarships and financial aid packages to an affluent family, it may incentivize them to choose that school.  Even though that family’s son or daughter may be a low academic achiever who has a decent chance of dropping out, it is still lucrative for the school to attract those students.  Noel-Levitz, a higher ed consulting firm, revealed that one of its client colleges was able to generate over $10,000 more per low-achieving student than they could per top-achieving student.

Carey hopes that as taxpayers, the news media, and affiliates of universities become aware of this trend, their vigilance will keep institutions in check.