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The Fight for Financial Aid

Merit-based aid often results in bidding wars for higher achieving students.

Elizabeth Hoyt

January 08, 2013

The Fight for Financial Aid
Private college presidents have come together in drafting a pledge with the goal of resolving the decline in need-based aid. Need-based aid has been in rapid-decline since merit-based financial aid has been on the rise, being offered to students as an incentive to attend particular schools, though the high-achieving students may not necessarily need the funding. Merit-based aid has been on the rise, from $1.6 billion in 1996 to $4.6 billion in 2004, according to statistics from the U.S. Department of Education.

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Some believe the merit-based aid merely results in schools fighting over the same talented students, the outcome often becoming a financial bidding war for the student’s attendance to a particular school. Such bidding wars do attribute to schools attaining high-ranking students, however, take away finances that could be given to need-based financial aid funding for students that are promising but cannot afford to attend the institution. In theory, discounting tuition for higher-achieving students may actually raise enrollment numbers and a school’s income, which can contribute to aid. However, that doesn't seem to be what’s actually happening.

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In fact, the increase in merit-aid directly correlates with a decreased percentage of enrolled lower-income and/or minority students, according to an economics study performed in 2009. It becomes an issue when the aid is disbursed in an unbalanced fashion. For example, College Board surveyed private colleges in 2006 and found that the data provided showed that $2.2 billion dollars was provided in non-need based aid versus a $1.1 billion need in aid that was not met for students that requested aid through the institution, work studies or Pell Grants.

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The presidents who drafted the pledge acknowledged their part in the creation of the situation and various academics officials have further acknowledged that the competitive drive of schools make it difficult for changes to take place. Many presidents have concerns that decreasing the merit-based aid in favor of returning to need-based aid will cause a decline in decreased enrollment due to a lack of competitive advantage. An abrupt halt to competition for the nation’s top students would certainly affect a university’s prestige, they argue. The best resolution, the pledge creators decided, was collaborating together in order to avoid “a game of chicken.” The pledge outlines principles in hopes to begin discussion amongst colleges regarding potential resolutions of the current practices, since most schools seem to agree that the current situation is either ideal or successful. The pledge’s ultimate hope is to create a conversation that will lead to re-prioritizing financial aid to, once again, help meet students’ needs.

Do you think merit-based aid has gone too far?

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