Need or merit-based aid? A philosophical question at the heart of higher ed

October 29, 2013
  • AACRAO Connect
  • Financial Aid and FAFSA

The use of merit-based aid in higher education to attract higher caliber students is expanding, driven in large measure by the desire of institutions to rise in the US News rankings.  On its face, the goal of attracting students with higher scores seems laudable.  However, the pool of funds available for aid is not limitless or independent of other considerations. Some argue that the growth in merit-based aid has come at the expense of need-based aid to low-income students and therefore has worked at cross purposes to the access agenda.

Here are a few of the salient talking points:

Financial issues. Aside from the rankings, there are financial motivations for merit-based aid.  Although colleges are not businesses, institutions must cover their operating costs.  This became more difficult following the financial crisis.  Many families have become less able to afford the traditional 4-year college education and many state governments have cut back on funding for higher education.   

Enrollment numbers. For many schools, merit-based aid has been used to maintain enrollment and preserve the financial health of the institution.  The competition to attract merit scholars is more prevalent at private institutions.  However, public institutions are also facing financial pressure and adopting some of the same tactics as private institutions, including merit-based aid.  Without it, some argue, colleges would have trouble enrolling enough revenue-generating students, which in turn would reduce the funds available for need-based aid. 

Equal access. Still, some observers are not persuaded that merit-based aid supports the access agenda.  In general, schools have targeted students with good test scores, grades, and class ranking.  But since these students frequently come from higher socioeconomic strata, aid dollars increasingly are benefiting students without financial need. 

As Kevin Kiley explains in Inside Higher Ed, “In pursuit of both prestige and tuition revenue, often to make up for declines in other forms of income, many four-year colleges and universities are making it more difficult for students from low-income backgrounds to afford a college education.”  According to a report from the New America Foundation, even institutions with the capacity to disburse large amounts of need-based aid tend to enroll few low income students. 

This is not to say that higher education is abandoning the low-income student.  According to Stephen Burd, the author of the New America Foundation study, there are a number of institutions that both serve a large percentage of low-income students and charge them a relatively low net price.  Among these institutions are wealthy private liberal arts colleges such as Amherst, Bowdoin and Pomona Colleges, as well as handful of non-wealthy private institutions. 

Award structures: What the trends tell us

Stanley E. Henderson, Vice Chancellor for Enrollment Management and Student Life at the University of Michigan; Katherine Allen, Director of Financial Aid and Scholarships at the University of Michigan-Dearborn; and Christopher Tremblay, Associate Provost for Enrollment Management at Western Michigan University, will explore trends in need- and merit based aid at AACRAO’s Strategic Enrollment Management (SEM) Conference. 

Financial aid is an integral component of effective strategic enrollment management.  Multiple forces are constantly at play that require a philosophical approach, a practical approach, and a strategic approach -- which are not easily prioritized and managed.

This session will review the intersections of recruitment and retention, merit and need-based aid, goals and allocated funds, compliance, leveraging and equity, and outreach and literacy -- all with the purpose of understanding the complexity of financial aid's role in enrollment management.

AACRAO’s 23rd Annual SEM conference will take place during November 10-13, 2013 in Chicago at the Hilton Hotel on Michigan Avenue.  To register for or learn more about SEM, visit www.sem.org.