<p>January 1, 2006
Aid Lets Smaller Colleges Ask, Why Pay for Ivy League Retail?
By ALAN FINDER
MEADVILLE, Pa. - Lindsey Mackney's choice of colleges came down to two very different places: Boston University, with its urban appeal and lively youth culture, or Allegheny College, a small, friendly liberal arts institution here in the rolling hills of northwest Pennsylvania. </p>
<p>But in the end, Ms. Mackney said, the decision was simple. Boston, where tuition is now $31,530 a year, offered her no financial aid, while Allegheny awarded her a $50,000 merit scholarship, or $12,500 a year. That amounts to nearly a 50 percent discount of Allegheny's $26,650 tuition. </p>
<p>Squeezed on one side by state universities, whose tuition is a tiny fraction of what private colleges charge, and on the other by elite private institutions like Yale, Princeton or Amherst, private liberal arts colleges like Allegheny are routinely offering merit aid to students these days. Such scholarships are particularly pervasive in the Midwest, where many liberal arts colleges award them to as many as half or even three-quarters of their students. </p>
<p>The grants are not based on the traditional rationale of a family's financial need, but on academic achievement and the desire of colleges that are not among the nation's most prestigious to recruit high-achieving students. Sometimes, too, less elite colleges award merit aid simply to fill their freshman classes. </p>
<p>The result is a college pricing system that can feel as varied, or even mysterious, as buying airplane seats, with students sometimes shopping for the best deal. University officials, defending the era of $30,000-a-year tuitions, speak of a "sticker price" and "discount price" and note that many students do not pay close to the full costs of tuition. </p>
<p>"I call it a designer education at a discount price," said Margaret L. Drugovich, vice president of admission and financial aid at Ohio Wesleyan University in Delaware, Ohio. "People have come to expect it."</p>
<p>So prevalent has the practice become that over the last decade, the amount of money granted in merit scholarships nationally grew to $7.3 billion in 2004 from $1.2 billion in 1994, said Kenneth E. Redd, director of research and policy analysis at the National Association of Student Financial Aid Administrators.</p>
<p>The amount of need-based assistance has also grown, though at a slower rate. Need-based grants, including those from private universities and from the state and federal governments, increased to $39.1 billion in 2004 from $18.6 billion in 1994, a 110 percent increase, Mr. Redd said.</p>
<p>Officials at midlevel liberal arts colleges say that as tuition costs rise, they have to use merit scholarships and other aggressive strategies, like waiving admission fees or paying partial airfare for some applicants' campus visits, to hold on to their precarious niche in American higher education.</p>
<p>The most prestigious private universities and colleges, which are swamped in applicants, seldom offer such aid.
Some private colleges and universities ranked just below the dozen or so most selective institutions offer it only on a limited basis. These institutions, large and small, tend to use merit aid to try to lure very talented students, which can enhance the statistical profile of their freshman class, on measures like average SAT scores, in the hope that this will move them up in college ranking guides.</p>
<p>But for less elite institutions, merit aid has become a critical tool to thrive and, in some cases, to survive, particularly as the rising cost of college has strained middle-class and even upper-middle-class families.</p>
<p>"They have to do this because the competitive pressures are just so enormous," said Robert A. Sevier, senior vice president of Stamats Communications, a marketing company in Cedar Rapids, Iowa, that works with colleges and universities. "Some schools have never recruited before - they only had to admit. Now they need to know how to recruit." </p>
<p>Still, while merit aid may be a valuable recruiting tool, it also carries financial burdens. Colleges have to make up the income they forgo through merit scholarships, which can amount to millions of dollars a year. Typically, college presidents use alumni donations and interest from endowments to offset the merit aid offered to students.</p>
<p>But most small liberal arts colleges do not have vast endowments. The challenge for college administrators is to balance the competitive advantages of awarding merit aid with the long-term risks it imposes.</p>
<p>"If you go too far in that direction, you end up without enough resources to have a good faculty and to do all the things you want to do," Richard J. Cook, the president of Allegheny College, said. "If you discount too much, you're on your way toward oblivion." </p>
<p>Critics of merit scholarships, including some admissions directors and the Lumina Foundation, which works to expand access to higher education, argue that the explosion of merit aid has limited the growth in financial assistance available to students who are most in need. But other educators disagree.</p>
<p>"In a lot of instances, the money for merit scholarships comes from a different source than the money for need-based grants," said Mr. Redd of the aid administrators' group. Many private colleges have raised money separately for merit scholarships, and some states have designated lottery revenue for merit aid. "A lot of this is new money, so to speak," he said.</p>
<p>Merit aid is essentially a deep discount meant to narrow the gap between the cost of a private liberal arts education, where tuition alone can cost from $25,000 to $32,000 a year, and the tuition at public universities, which generally ranges from $4,000 to $9,000 for in-state students.</p>
<p>Such scholarships enable admissions officials to shape a freshman class, offering incentives to attract students who are interested in majoring in less popular disciplines or in playing in the orchestra or who are from different parts of the country. It can also be an incentive for parents who are hesitant to spend large sums to send a child to a private college that is not among the most elite.</p>
<p>"Private colleges from a branding standpoint own the word expensive," said John T. Lawlor, the founder of the Lawlor Group, a marketing firm in Minneapolis that advises many liberal arts colleges. "Overcoming the price of attending is a perceived obstacle."</p>
<p>At Allegheny, about 75 percent of the college's 2,000 students receive some kind of financial aid, with about two-thirds getting need-based assistance and three-quarters receiving merit scholarships (many students receive both), W. Scott Friedhoff, Allegheny's vice president for enrollment, said.</p>
<p>At Lafayette College in Easton, Pa., in contrast, about 15 percent of the students are granted merit aid.
At Ohio Wesleyan, 95 percent of the students are on scholarships, with about 40 percent of them based solely on merit, said Dr. Drugovich, the vice president of admission and financial aid. </p>
<p>At Denison University in Granville, Ohio, 95 percent of incoming freshmen also have scholarships; university officials declined to disclose what proportion of the aid was based on financial need or merit.</p>
<p>"You can't just sit back and hope that the students come," said Perry Robinson, vice president and director of admissions at Denison. "You have to be constantly creative in what you do."</p>