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<p>Except for the fact that as a group, students from wealthy families score higher on the SAT/ACT than students from lower income families. Since most merit scholarships are tied to SAT/ACT performance, as a group, students from higher income families are more likely to get this form of ‘discounted’ tuition than students from lower income families, and this particular form of ‘tuition discounting’ tends to go to higher income families.</p>
<p>So let’s say a college only offers merit money (which basically the U I work for does). The students from higher income families are more likely to get a merit award, and thus will be paying less than the sticker price than the students from lower income families, who are more likely to be paying the full fare. Thus, the students from lower income families are subsidizing those students from higher income families.</p>