<p>There are exceptions. But, unless you can identify a specific goal (such as increasing minority enrollment), it's safe to start with the assumption that any school offering merit aid discounting is looking for the same thing: high stat students who will:</p>
<p>a) provide additional tuition net revenue</p>
<p>b) boost the stats so that the college can attract more affluent customers down the road.</p>
<p>The first one is easy to understand. It's a simple adaptation of the airline pricing scheme. A school would be happy to enroll a high stat kid who will pay $20,000 (after the ego-stroke of a merit-aid discount) than having to turn to lower income students who could only pay $10,000 or, even worse, to not sell the seat at all.</p>
<p>The second is equally important. The higher the published stats of a school (think median SATs), the higher the prestige. Prestige is what attracts wealthy customers. Use the merit aid to boost the stats and you can take some lower-stat full-fare customers happy to pay if they can find a "presitigious" degree for little Johnnie. The merit aid discounting boosts the stats and creates an impression of a more selective school than the underlying applicant pool would indicate.</p>