Merit Aid Won’t Help Colleges Survive (CHE)

Merit Aid Won’t Help Colleges Survive (CHE)

By Jeffrey Selingo

In the summer of 1994, I interned at U.S. News & World Report, where I was assigned to collect data for the magazine’s annual college rankings, just beginning to grow in influence. A few years later, when I started reporting for The Chronicle, college-enrollment managers and presidents asked me about the methodology employed by U.S. News and just how much they could manipulate the rankings by attracting higher-caliber students. Their approach for moving up in the rankings was relatively simple: Offer financial aid to smart students, whether they needed the money or not.

The merit-aid arms race was in full force by the start of the new millennium. But in 2000, some 53 percent of institutional aid was still going to needy students. As a result, few higher-education leaders worried about the consequences.

But as the cost of college continued to rise over the past decade—making it difficult for more and more families to pay the full tuition bill, or even close to it—the merit-aid game took another turn. With too many institutions using merit aid to play the rankings game, the strategy wasn’t proving as effective. Now some colleges needed “merit” aid to discount their prices to affluent students further up the income scale just to fill their classes and balance their budgets.

Instead of giving a $30,000 full ride to a truly needy student, colleges would give $7,500 discounts to four wealthier kids, allowing them to pull in at least some tuition revenue from each of them. Colleges continued to call it “merit” aid, so that parents could brag at cocktail parties that their child had won a scholarship. In reality, though, it was nothing more than “revenue-management aid,” Brian C. Rosenberg, president of Macalester College, told me.

Rosenberg is worried about the difficulties that talented, low-income students face in paying for college, and he has waged an uphill battle to persuade his fellow presidents to halt the merit-aid arms race. Macalester has largely been an observer in that race. Some 97 percent of its $40-million financial-aid budget is need-based, Rosenberg said. That approach has meant that, particularly in recent years, Macalester has lost high-ability, full-pay students to lower-ranked institutions offering deep discounts. “I’m not complaining,” Rosenberg said, “because we don’t face an existential threat.”

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