In Defense of Merit Aid

Hi everyone. Congratulations to all who have just completed the college admissions process! Yesterday our DD accepted an offer from a wonderful college and paid her deposit. She’s ecstatic; we’re done; and we’re all looking forward to her high school graduation and a happy summer.

The process has been exhausting and intense for many reasons that people have discussed on CC and other sites. As we begin to put it all in our rear-view mirror, I’d like to share my thoughts about an issue that has become a very noisy bee in my bonnet: the controversy surrounding “merit aid”, which is financial assistance given to students that is based not on need but on students’ grades, scores, and accomplishments during high school.

A few possibly relevant facts to clarify our own experience. Our DD applied to a number of schools ranging from large state and private universities to small private colleges. Six of the 7 private colleges which accepted her offered merit aid ranging from $10,000 a year to $25,000 a year. The seventh, a top five LAC, does not give “merit aid” per se but defined her need in such a way that its financial offer fit comfortably into the middle range of that spectrum. But we were very lucky.

According to many college admissions professionals and a fair number of commentators, “merit aid” is a bad thing because (1) students who receive merit awards disproportionately hail from better-educated families with incomes above the norm, and (2) the more merit-based scholarships colleges award, the less money is available for need-based aid, leaving students from poorer families (at least those whose achievements do not qualify them for merit-based assistance) out of luck. Why should “rich” kids get financial assistance they don’t need while kids from low-income families are left in the lurch?

This argument relies on three premises that are just plain wrong.

First, the fact that a school offers merit scholarships never means that it offers no need-based assistance. Most people agree, and I certainly do, that need-based financial aid is a good thing which helps students from low-income families have access to colleges they otherwise could not afford. Great. The question is whether need-based aid should consume all the available funds to assist students. I argue that it should not, and my reasons follow.

The argument that merit-based aid is bad, or even exploitive (on the part of the “rich” families whose children disproportionately receive it) assumes two other things which are just false: (1) that colleges and the federal government make fair and accurate determinations of each family’s “need” – of who can afford to pay the full bill and who cannot – and (2) that the price of going to college (especially to an excellent private college) is fair and reasonable, so that a relatively high-income family that is unwilling to pay that price is somehow unreasonable or even morally faulty, selfish, etc. These two assumptions are related but also distinct.

In fact, the calculations of “need” for financial assistance, based primarily on the FAFSA and the CSS Profile, are neither fair nor accurate. Very wealthy families, perhaps, can afford the $260,000+ bill to attend a selective college or university these days. But other families, even those with relatively high incomes, are in a very different place. A recent article in the Chronicle of Higher Ed put it well: “Everyone can probably agree that Bill Gates’s children don’t need scholarships, says Jon Boecken­stedt, associate vice president for enrollment at DePaul University. But can a family making $160,000 really come up with the $45,000 a year the formula expects? ‘It doesn’t even pass the laugh test,’ he says. A merit scholarship can make college much more affordable for such a family.”

I suppose one could argue that the $160,000 a year family should have saved more for college. But then, one could argue the same thing about many (though certainly not all) families who do qualify for substantial need-based aid. Once we start with the “shoulds”, we go down a very troubling path. Should the parents of a child applying to college have chosen (low-paying) teaching careers when they had the grades and smarts to attend business school for an M.B.A., thereby allowing them to earn enough money to pay for their child’s education? Inquiring minds want to know.

Relatedly, the notion that the student from the $160,000 family should not receive financial aid rests on the assumption that the cost of college is quite fair and reasonable and, thus, any reasonable family should be willing to pay it. To put it mildly, that is not true. As many experts have documented, college costs have risen far above the rate of inflation for decades. $65,000+ per year for an excellent private college is ridiculous. Period. Thus, to the extent colleges are offering merit-based discounts to as many families as possible, I say the more the merrier.

Finally, and independent of the income-related issues, the idea that colleges should not financially recognize high-achieving students for their achievements is anti-excellence in a way so profound that it almost defies description. Watching my daughter work so hard, strive to the utmost, stretch and push herself to reach her goals – and all for the right reasons, because she loves school, loves what she is doing and wants to be the best she can be – my only feeling when she was accepted and when she was offered merit scholarships was pure happiness. Good show, Kid! Well-deserved! Great job! She did it all for the right reasons, but she sure was delighted that some of the colleges to which she applied recognized and valued her achievements. In my opinion, that’s a large part of what a college should be doing.

Sorry the for long post, and many thanks to those of who get through it and might be motivated to respond.

One could also argue that a college with an endowment of more than $1,000,000 per student shouldn’t be charging $65,000 a year to attend. As you said, the playing field that these colleges have created is ridiculous.

Great post - totally agree with you, OP.

I could write many things in response, but I thing it comes down to this: an excellent private college is a choice that you are not entitled to. And while going to a less expensive school is unlikely to drop a middle class student down to a lower class student, attending a highly selective school is very likely to raise a lower class student to middle class. You can look into any of the extensive research the Jack Kent Cooke Foundation, etc, has done.

I understand that you’re proud of your kid, but many (most?) of the schools that don’t offer merit are extremely selective. That’s the pay-off/“Good Show, kid!” as you put it. I’m glad that they’re putting the money towards students for whom that school may end up being the only affordable option (heavy financial aid vs. far less at less competitive private/most states).

100% agree with OP. I am 100% for need based aid. However, the idea of no merit aid once again leaves out the middle class. We are middle class and we are getting by with the merit aid. We would have a very difficult time with no merit aid because of what FAFSA assumes we can pay.

I had an interesting discussion with a friend. She was upset that her child did not get accepted as an ambassador for her high school. She was upset that her child had some of the highest stats in the school and should have been chosen based on that. I argued that the students who were chosen would never have any opportunities if everything was based on stats and I approved the schools decision.

I also feel that if all schools went to need based only there would be a lot of students with high stats who are not given the same opportunities.

I believe in balances. Need based as well as merit based. This opens the opportunities to more students than just choosing one or the other.

The problem, from the colleges’ points of view, is that their budgets are not infinite (particularly state universities that tend to get their budgets cut every time an economic downturn causes state tax revenues to drop). A college may have a limited discounting budget and be forced to choose between need-based aid and merit scholarships (or taking the money from elsewhere, or raising the list price tuition and hoping that non-top students from wealthy families will pay). Some may be so budget-limited that they can offer very little of either.

I don’t think merit aid needs a defense. It has been widely adopted by a pretty broad range of college’s because it works from an enrollment management perspective, i.e. the colleges are able to build the class they want at the price they can afford.

I do wish that parents weren’t quite so defensive and/or willfully ignorant about the purpose of merit aid. Colleges which hand out 5 and 10K “scholarships” to upper middle class kids are doing so because they have reams of data which show that people love a discount, love to have bragging rights that college B wanted little Joey so much that “he got a merit scholarship”, and love to report back to their HS that their kid won “$100K in scholarships” (even though- of course- a kid can’t attend more than one college at a time so the awards from the rejected colleges are clearly useless/superfluous).

Go into the process with your eyes open. Merit aid is most often used as a way for the college to increase the stats of the kids it enrolls and/or lock in an applicant pool with a high yield early in the process. If a family gets this from the beginning-- go for it.

But right now there is a thread from an indignant parent that their kid was admitted off the waitlist from a college and was “denied” merit aid. This saddens me- nobody explained the rules of the road to this family (or they chose not to listen). And next year there will be the same number of indignant parents asking why Penn doesn’t give merit aid, they can’t afford college X without merit aid but college X doesn’t give merit aid, it’s so unfair that U Michigan won’t “negotiate” their aid package even though their kid won “thousands of dollars” in merit aid from a college which Michigan does not consider to be a peer institution, etc.

Know what you are dealing with.

Interesting side note … my DD applied to URocheste based in significant part on advice received here and elsewhere that they were generous with merit aid. She did indeed receive a generous $25k merit scholarship, but it did not cover our full need. Although they supplemented with need-based aid, they were significantly less generous in doing so than the other LACs to which my daughter applied (where no merit aid was available). The merit aid is nice in that it is guaranteed, even if our income / financial situation improves over time (especially when our older son graduates from college so we no longer have 2 children in college), but I’ve only now just absorbed the fact that unless the merit aid exceeds your financial need (and anticipated financial need), it’s of little benefit other than the bragging rights (but pfffttt to bragging rights). In our case it just looks like an extra bucket for need-based financial aid.

For the record, I absolutely support merit aid, especially for middle income or upper middle income families who would otherwise not be entitled to financial aid (or significant financial aid). College costs are obscene. But it seems to me that merit aid and merit scholarships should be used to reduce the parent and/or student contributions, not the college’s need-based financial aid calculation. For wealthy families, merit aid reduces the family contribution; shouldn’t it be the same for lower income families?

Many colleges do use merit scholarships first against the student contribution. But parent contribution is usually the last to be reduced.

Blossom, what bothers me is the attitude that merit scholarships are somehow illegitimate or even exploitive. See, for example, https://www.insidehighered.com/news/2011/01/07/college_presidents_aim_to_restore_focus_on_need_based_student_aid, discussing one of several recent attempts to convince colleges not to award substantial merit aid. Also, if you are suggesting that merit aid scholarships are always small – $5,000 to $10,000 a year – I have two responses to that. One is that for us, at least, $40,000 over four years is a lot of money and would be a very welcome discount on an enormous college bill! The other is that many many schools, including excellent LACs and some state universities (such as UVA) give half- and full-ride scholarships based on merit. Of course they do it to attract good students – why else would they do it? – but that doesn’t change the fact that the aid can really make a difference and that it recognizes high achievement in a way that helps middle class students and their families.

VAmom- I don’t have time to read this article right now but there have been studies done in Georgia and other states whose state flagships have moved to a merit model (are these studies quoted in your article?) that show a very pernicious impact on needy students when the dollar bucket shifts from need to merit. I remember the Georgia case very well because it quoted faculty who walk past the student parking lots every day-- suddenly filled with BMW’s and other nice, new cars-- to get to the staff/faculty lot filled with dented Honda’s et al.

40,000 over four years is meaningful money and I didn’t mean to suggest otherwise. But state institutions are able to “do more with less” by shifting to merit away from need- a kid whose single mom drives a school bus, or single dad is a school custodian is unlikely to look at a 10K merit award and say “goody, now I can get a college education”. 40K over four years is meaningless to that kid- because in the absence of need based aid to bring the costs down so that their Pell and the Federal loan can cover it- that kid isn’t going to their state’s public institution.

Private U? Different story. They can do what they want with their money- but don’t delude parents into thinking that the merit money is anything but an enrollment management strategy.

Public U giving merit but not meaningful need based aid? I think that’s poor public policy since the studies are now showing that it’s keeping poor, talented kids out of their own state’s universities.

Aid makes a difference to virtually all families. But would your kid be denied a college education absent the merit money? I think that’s what the commentators are trying to understand better from a policy perspective.

Congrats to your family- sounds like a win/win for all of you and your D will continue to make you proud, I’m sure.

Thanks. I’m glad the application part is finished for us and that she’s happy with her choice. And, again, definitely support need-based aid and agree with bhs1978 – both types of aid are important and the question should be how to achieve the best balance.

It isn’t a zero sum game but it’s close.

Merit aid isn’t going anywhere, it’s way too popular and useful a tool for many colleges. I’ve read articles about how it’s harming colleges because many feel forced to use tuition discounting to compete and in the end it hurts them all, but that’s really a separate issue from merit vs need-based aid.

The argument in favor of prioritizing need-based aid over merit scholarships from a policy standpoint is that the need-based aid may be similarly helpful to a student in a low to middle income family. The difference is that the student from a low to middle income family is less likely to be able to go to college at all otherwise, while the student from the upper income “middle class” family is more likely to have some college choices (in-state public schools, possibly those within commuting distance).

Of course, lots of colleges do both, although the proportion of discounting money used in each category differs. Also, the amount of discounting money each college has differs. Some may have enough money to offer good need-based aid and have lots of merit scholarships. Some may have to choose to do well at one and offer little of the other. Some may offer little in both categories.

I disagree. The Pell student who also gets $10k in merit money is exactly the kid who says ‘goody, now I can get a college education!’ At a public school, where the tuition is under $10k, and the other expenses are $10k, the merit aid, the Pell, any state money, the $5500 loan, a little work study and the costs are covered. If that $10k was need based aid and not merit, the student would lose it if he brought in another merit scholarship from the Elks, or got a department scholarship for being in the band, or even if the school decided the need wasn’t as great the second or third years (student doesn’t need $10k so only gets $8k that year). The student may not be able to pick any school in the world, but with $20k to work with (merit, pell, work study, summer job), most states offer at least a few options for that child of a school bus driver or custodian, and it may be the same options that a student of a school teacher and an insurance salesman has, because all that middle class family can pay is the $6k that the middle class student isn’t getting in Pell . Both students need the $10k merit award.

My kids couldn’t go to school without merit based aid. At first they didn’t qualify for any need based aid, but it wasn’t like I had enough to pay 2 full college tuitions (I’d just lost my job, had savings, but had high need too - the FA forms just didn’t show that). We were able to stack several small merit awards (and one big one) to make their colleges work. Even when they became eligible for need based aid, the merit awards were still needed to make it work. The schools didn’t give any extra need based aid, just the federal dollars for Pell, SEOG, and work study.

Anyone else find it ironic that this conference focusing on reducing merit aid in order to boost need-based aid was held in January in Palm Springs?

If they really cared so much about their students, these hypocrites could have Skyp’d the conference, saved the airfare and $500 a night resorts in order to reduce tuition for everyone. Instead, they took a college funded vacation to one of the most expensive resort areas in the country at the height of the season.

I tend to agree with Blossom. But I, personally, would like to see an end to merit tuition discounting and return to a totally need based system.

@Zinhead Wow you seem to have a little hostility here. The conference wasn’t about aid. That was one discussion at one part of a large conference.

I’m guessing they always go in January because their colleges are not in session then. They go somewhere warm (this year it was in Orlando) because presumably that gets more participation than holding it in, say, Minnesota.

https://www.cic.edu/programs/2017-presidents-institute

But sure, yeah, they could skype. So could every conference in the world. Now I’m mad that my doctor and surgeon attend nice conferences when they could be charging me less and staying home in front of a laptop. How dare they meet other doctors and compare notes about care and further their medical knowledge in person when they could just skype?

The reality is that when a school offers $10,000 a year to a student who would have been FP, that student will still pay $55,000 a year. So the discounting really benefits both parties. I would also guess that one of the fastest and cheapest ways to improve a school is to improve the quality of the students, so by enticing the high stats kid with $20,000, they are on a fast track to that. Profs like to teach these kids and use them as research assistants, the middle tier of standardized test scores goes up, recruiters love the grads - it’s all good for everyone.

The real problem here is that it’s so darn expensive in the first place. And without discounting, all the schools cost pretty much the same even though they may offer very different experiences and make varying levels of resources available to students.

My state made the decision way back when to put the flagship U in a rural area. Made sense- land was cheap. Labor was cheap.

But there is no public transportation there. And it is far away (totally not commutable) from any of the population centers in the state. Yes- there are a couple of towns and small communities close by where a dozen kids per year probably commute to keep the costs down to where Pell plus loans plus work study makes it work.

But for kids who live in another part of the state?

No. The numbers don’t add up once you need room and board.

Sure- they can go to community college. They can attend one of the non-flagship campuses or one of the directionals which are closer to the population centers and if they are interested in getting a degree in nursing, education, of accounting that is a fantastic choice and would allow them to live at home, pay tuition, and get a degree.

But not engineering. Not CS. Nothing technology related. And not really any of the humanities. Major in math? Sure- if you want to teach math, but these directionals are not strong enough in actual, theoretical or applied math for a career in anything but Ed.

So from a policy perspective- sure. The custodian’s kid can go to college. Just not the flagship, and not anywhere to study one of the alleged STEM subjects politicians keep claiming are the future of our country.

So to the OP- this is why there is pushback. Your D’s accomplishments are her own and it’s fantastic she’s made such good choices. But once you go state by state and take a look at where the aid dollars flow, it gets messy. Because in some parts of the country, the aid money flows towards the upper middle class, the middle class, and the down right affluent… whose kids have far more options than the below or at the federal poverty line families.