According to the report, private colleges use “merit”-based aid to attract wealthier students instead of improving access to the poor.
A new report out this month found that affluent students are given more financial assistance than their lower-income peers. It’s a trend called “gapping,” where low-income students are given a financial aid package that does not come close to meeting their needs.
The report was authored by Stephen Burd, a senior policy analyst with the New America Education Policy Program. It documents financial aid at colleges and universities in the United States.
The gapping trend is a source of concern because a lack of financial assistance for working-class and low-income students may result in a dramatic decline in the number of Americans who are able to obtain a higher education.
While unable to examine every higher learning institution in the U.S., Burd’s report highlighted the worst offenders when it comes to unbalanced costs of education — namely small, private colleges with meager financial resources, and public schools that have moved to a “high tuition, high aid” model, such as public universities like Penn State University.
The thought behind the “high tuition, high aid” model is that the wealthy students would be able to absorb the high tuition costs, and allow the schools to offer large tuition assistance packages to poorer students.
But as this new report illustrates, tuition assistance programs are based more on “merit” than financial need. “After all,” Burd says, “it’s more profitable for schools to provide four scholarships of $5,000 each to induce affluent students who will be able to pay the balance than it is to provide a single $20,000 grant to one low-income student.”
Also surprising are the findings of a recent study by the Department of Education, which found that 19 percent of undergraduates at four-year colleges received merit-based aid even though they scored lower than 700 on the SAT. In his report, Burd suggests the reason wealthy students received tuition assistance was because schools want to attract children of parents with large bank accounts.
Burd argues that while tuition assistance for even the wealthy elite is in itself acceptable, wealthy or middle-class students should not be given an advantage at the expense of the poor.
Of the some 479 private colleges Burd examined, 89 percent of the families earning less than $30,000 a year were charged an average “net price” of more than $10,000 annually. Net price refers to the cost of attendance minus any institutional or government aid — in other words, it’s what a student is expected to pay, including room and board. Since about 40 percent of students who attend private colleges do not live on campus, the actual net price is probably slightly less than what was reported in Burd’s study.
Low-income families at 60 percent of private colleges were charged a net price of more than $15,000 — that, by definition, amounts to more than half of lower-income families’ annual income. This financial aid problem is not as prevalent at public colleges, where the net price for low-income students was under $10,000.
Financial aid as a marketing strategy
“With their relentless pursuit of prestige and revenue,” Burd writes, “the nation’s public and private four-year colleges and universities are in danger of shutting down what has long been a pathway to the middle class for low-income and working-class students.”
In addition to state and federal grants, colleges provide more than $30 billion in institutional aid to students each year. According to a report from The Atlantic, if the federal government were to redirect all of the money they spend on financial aid each year, every public college in the U.S. would be able to offer free tuition or offer a very reduced tuition rate to every student.
But as Burd’s report found, many colleges use their own resources to offer lavish financial aid packages to children of wealthier families, and give money received from federal grants to poor undergraduates. In essence, financial aid has become a marketing ploy to attract the most desired students.
He explained that many poorer colleges offer “deep tuition discounts to wealthier students because they believe it is necessary for their survival,” adding that these colleges hope competitive tuition prices reel in top students that would help increase institutional rankings:
“The competition for the wealthy is so strong that 10 percent of college admissions directors at four-year colleges (and nearly 20 percent of those at private liberal arts colleges) reported that they give affluent students a significant leg up in the admissions process — meaning that they are admitting full-pay students with lower grades and test scores than other applicants. These colleges are, in other words, providing affirmative action for the wealthy, despite all of the extraordinary advantages that these students have over their less-fortunate peers.”
Remembering the intention of financial aid
Much of the government money given to these schools was meant to help make college accessible for low-income Americans. Yet, that’s not happening.
Take the following schools for example:
— At Georgia’s Berry College, 30 percent of students receive Pell Grants, and low-income students pay an average net price of $16,174. Yet 25 percent of its freshmen also receive merit-based aid, averaging more than $10,000 per award.
— At Wabash College in Indiana, 28 percent of students receive Pell Grants, and low-income students pay an average of $15,480. Yet 12 percent of its freshmen get merit-based aid, averaging $15,393 each.
— At Case Western Reserve, one of the better-known institutions among the high-Pell Grant, high-net-price schools, 23 percent of students receive Pell Grants grants, and low-income undergraduates pay $18,381 on average. And yet 19 percent of freshmen also receive merit-based aid, averaging $18,359 each.
These schools highlight an example of another financial aid trend known as “admit-deny,” in which lower-income students are admitted to a higher education institution but are given such a small amount of financial aid that they are unable to attend the school.
According to Brand’s survey, “three-quarters of the private college financial aid directors surveyed said that gapping financially needy students is ‘an ethical practice,’ as did nearly half of the respondents from public four-year colleges.”
Donald Hossler is a professor of educational leadership and policy studies at Indiana University and one of the top experts on enrollment management in the United States. He says the only way to solve this issue is for the government to get involved:
“I generally don’t hope for federal or state intervention, but I sometimes in my quieter moments almost wish for federal and state programs, need-based programs, that require institutional matching because I think institutions are only going to spend so much on financial aid.
And if the playing field were leveled in some way around those issues by the feds or the state governments, I think institutions would probably begin to focus more on need-based aid and might ratchet down the merit arms race a little bit.”