Why do some people object to merit-based aid?

Parents Forum
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<p>"You are assuming that such people have been making such incomes for awhile. some of us have only recently, thru promotions, job changes, or the addition of a second income, have seen big increases in income. Imagine a family that has had a mom at home for years and dad is just starting to climb the corporate ladder. For years, they struggled. Now dad has been promoted a bit and perhaps mom has taken a part-time job. Now they have a 6 figure income. This is new for them. They couldn't have been "saving all along" as you describe. Even now, they have to play "catch up" with their retirement savings AND college costs."</p>

<p>This is exactly my family's situation. My dad saves like crazy, and my mom took a low-paying job last year, bumping us over the 100k mark. My mom's entire salary goes to the "college fund," which my parents have been putting money into since I was born, practically. So, from FAFSA we got nothing. Apparently it doesn't matter that I've got a younger brother looking at college in two years, and my parents are about ten years from retirement. There's just no way they can pay 45k to send me to school. I think my dad did the math, and 25k is about as much as they can afford while still being able to send my brother to college and without draining their own retirement savings. And I'm "strongly discouraged" against taking out loans, which is perfectly ok with me. Don't want to start out life in debt when I can avoid it. I guess what I'm saying is, if it weren't for the generous merit aid I'm getting, there is no way I'd be able to afford anything but the less-than-impressive local in-state universities without merit aid. For a lot of middle- to upper-middle class people like me I think merit aid is the only kind of help we will get.</p>

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<p>I think that everyone would understand the topic better if you would substitute the words "price discount" for aid. That is how college's think of it. They refer to their "tuition discount" rate.</p>

<p>They offer "tuition discounts" for the same reason that airlines offer "fare discounts" -- because otherwise, they would have empty seats. Like the airlines, colleges use a mixed pricing strategy, adjusting their "discounts" as necessary to fill the seats.</p>

<p>I don't think anyone "dislikes" merit price discounting. I do think that when you look at the pricing model, a tremendous amount of money has been shifting from "need-based" price discounting to "merit" discounting. Here's why.</p>

<p>Let's say that we have $80,000 available for our discount budget. That could pay for two very poor students to get a free ride. Or, deny admission to the poor students and accept 5 wealthier students who might go elsewhere, except you are giving them each a $16,000 a year price discount. Mind you, they are still paying you $24,000 a year to fly in one of your empty seats. $24,000 is better than nothing. Plus, if they have high SATs, they'll make your school more prestigious and better able to attract full-fare customers in the future. If they didn't offer the merit price discounts, they would have to lower their median SATs to fill their seats. Note that the big losers in this are the low-income students.</p>

<p>At the end of the day, it's just good old-fashioned price discounting -- same as Walmart. Put an inflated sticker price on the product and offer a bigger discount. One problem is that virtually every college and university is now offering merit aid and it's just a price war. </p>

<p>There are only a couple dozen colleges and universities that don't offer merit aid discounting. They charge sticker price to wealthy students and use their price discount budgets for need based aid. These tend to be the few dozen schools with the largest endowments AND the most demand from full-fare customers. These schools are offering an across the board "merit discount" to every student (even those paying sticker price) because their per student annual spending is considerably higher than their full sticker price. Thus, if you pay $42,000 at, for example, Williams, you are getting goods and services that Williams spends $65,000 per student to deliver.</p>

<p>The system would be easier to understand if colleges actually had different list prices like cars do. For example, it would probably be easier to understand if Emory's sticker price were lower than Harvard's sticker price, rather than Emory charging the same as Harvard and discounting the price with something called "merit aid".</p>

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<p>Giving/accepting merit aid is an "I'll scratch your back if you scratch my back" kind of deal. Schools would NOT offer merit aid if it didn't benefit themselves in an equal or greater fashion. Schools need students who will win prestigious awards, bring special attention to their schools. </p>

<p>Do those who object to merit scholarships object to athletic scholarships on the same principle that athletic scholarships "take money" that could be available to FA? I know many "non poor" kids who got athletic scholarships. somehow, I think that those who dislike Merit money don't seem to be as upset by athletic scholarships (no, athletic scholarships do not always go to inner city kids). The funny thing is both types (merit and athletic) are win/win. The school wins and the recipient wins. </p>

<p>I think that merit and athletic scholarships can be rationalized because colleges are convinced that they "pay for themselves" -- meaning that "in the long run" the college gets the money back in prestige, donations, grants, etc. These scholarships are like investments that pay off sooner or later.</p>

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<p>The Democrat elite - Nancy Pelosi and Robert Reich for 2 - tell us that until need based aid is met at 100%, that merit should count for naught.</p>

<p>We should listen to the Dem leadership as they have done such a good job running the public schools in our large cities for the last 50 years.</p>

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<p>
[quote]
Mind you, they are still paying you $24,000 a year to fly in one of your empty seats. $24,000 is better than nothing.

[/quote]

I'm glad to see someone acknowledge this. Some comments on these merit aid threads imply that sleazy rich people are out to squeeze the system for all it's worth, while they have a Lexus in each bay of their 4-car garages. The reality is that many folks with EFCs of 40K and over are digging deep to come up with as much as they can (in our case, it's more than 24K but less than the 40K a private university runs). I've thought about it, and I just can't feel like a sleaze because my husband and I are able to manage 360K-plus for 3 children but not 480K (which is less than half the amount the experts are cautioning us should be saved for retirement - I wish). Merit aid is not a free ride, and certainly not an undeserved free ride - it's a means of bridging the gap.</p>

<p>I've got no problem with any institution that chooses to offer need-based aid only. My children won't be applying there, but they won't have to pine for the Ivy League, either. They have/will apply to those schools we can afford - good in-state or out-of-state publics, or private schools that offer merit aid. (For which I am profoundly grateful!)</p>

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<p>beprepn:</p>

<p>Ditto to your remarks</p>

<p>Also, the dem leadership and their union ilk are so frustrated that they haven't been able to get absolute control over colleges, too. Can you imagine what would happen if they did? American colleges would go from the best in the world to 3rd world level.</p>

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<p>I think that those of us who fall in that "in between" category - EFC's in the $25K-50K - are the ones who most need merit $$ to be available. Many of us only recently came into incomes that give us these EFC's -- were struggling before and need to use the recent "new" money towards retirement, regular savings, etc. It's not that we want to pay "nothing" towards college for our kids, it's just that (if we have 2 or more kids) we can't go from "struggling" to paying 30K a year for college for 6 - 8 straight years. Many of us accept that we will have to pay 10 -15 k per year for each kid, but for many of us who recently find ourselves in the EFC category of 25k-50K, that will is all we can pay and that will be a struggle.</p>

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<p>jlauer,</p>

<p>Yes, most people that object to merit aid often object to athletic scholarships. Note the whole Ivy league, no merit aid, no athletic scholarships.</p>

<p>For me I agree with Riech and Pelosi, after 100% of financial need is met of all students then there should be no merit aid. BTW, there are a number of schools like this right now, i.e. Duke, Notre Dame, Stanford. You will also note that these schools also have a very high graduation rate among their student athletes (one type of merit aid).</p>

<p>Just to put a finer point on this, Stanford and ND do not offer academic merit aid but they do offer athletic merit aid. Duke offers both academic and athletic merit aid.</p>

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<p>Ummmm....</p>

<p>Families can qualify for aid up to about $170,000. That is not in the middle of the income distribution scale. Even if they live in, say, Hawaii. Many universities and colleges that do not gurentee financial aid but give out merit-aid has unintentionally placed a greater burden on those who come from low-income families and who often have less economic and personal support from their immediate community and schools. Ignoring such a fact is being a little bit unfair.</p>

<p>I believe in hard work and rugged individualism, but I also understand that such a belief in myself and others is dependent in part on my development at key turning points as a kid--at least that is what I've learned in my psychology class. If I did not have the support, which depends on funding whether through my parents or governmental programs, my likelihood for success after high school diminishes. By shift from trying to meet the needs of those who qualify for need-based aid towards merit-based aid, a change in thinking occurs and there is a subtle but important shift in who benefits from such assistance with respect to college costs. That is, a low-income family has less of a chance to recieve a merit scholarship unless their parents, schools, and immediate community already have a shared commitment to educate and encourage him or her to go on to college, while it reduces college options further (remember few colleges are truely need blind in admissions or gurentee to meet need).</p>

<p>It is easy to point to exceptions to the rule, but that distorts what is actually taking place. You're not ecouraged to use this technique in Psychology or Sociology class in high school, nor do you ignore all the economic costs to society in Economics class. Affluent individuals and families stress individuality in such discussions because it is of benefit to them, while low-income individuals and families prefer that direct cost is in proportion to earned income, which does benefit their ability to attend or afford college. </p>

<p>There are opportunity costs, both short and long-term when it comes to shifting to non-need based aid rather than need-based ones. So the discussion is usually concerned with paying an ill-defined and designated "fair share" of higher education expenses. It is a race to define what fair means given a certain context. Personally, I'd rather insure that more individuals would have access to college so that America's workforce can better keep pace with other countries and developing technology. It promotes prosperity in the longrun and ends up costing society less in terms of state and federally subsidized programs.</p>

<p>Here on CC people report that UPenn, Harvard, Stanford, etc should be applauded for their generous financial aid commitments. However, the reality is that only a very small number of applicants fall under the self-defined caps. It generates publicity and goodwill, as well as gives us a sense of satifaction that access to college truely is on the rise for those who are less affluent, even as we take merit-aid. It is interesting, however, that in most discussions "middle class" is considered to be between $100-150 thousand a year. Maybe Washington is a bit unusual since only around 10-15% of the population can say they earn what is considered "middle class" by many here on CC.</p>

<p>And before I get flamed or insulted, I do come from an affluent family that did have the ability to plan for college. I also happen to be somewhat conservative, and I believe that merit scholarships should be commended as a supplement to need-based but not used as a tool to gain in the college ranking game. Many colleges that cannot gurentee to meet need have instead relied on merit-aid to ensure that statical norms are maintained or raised. That means more applicants, application fees, and such. Who losses when this occurs? You guessed it--low-income individuals of every ethnicity. An object lesson in unintended consequences, I'd say.</p>

<p>Sorry about the semi-rant, but I had to respond to some of the comments posted here. I waited as long as I could.</p>

<p>IB.</p>

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<p>Interesting post. However -

[quote]
Families can qualify for aid up to about $170,000.

[/quote]

Our 2-income family of 5 earns considerably less and does not qualify for aid.</p>

<p>Thankfully, our diverse higher education system provides options for high-achieving students of all economic backgrounds. I applaud Princeton and those other Ivies that have adopted a policy of no loans for lower and lower-middle class students. I applaud those middle-class parents who can manage to pay $40-45K per year per child because of their foresight, financial sacrifice, and (some might say) good fortune; i.e., ability to avoid layoffs and other employment-related hardships, serious illness, investment reversals, etc. And I applaud those colleges that wanted what my child could offer them enough to make it possible for her to attend.</p>

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<p>I don't think anyone's said this yet, so maybe I'm off base, but I think I remember some people on this board indicateing disapproval of merit aid because it causes students to attend schools that are 'beneath them'. I don't remember the exact words but I believe 'merit whore' is two of them.</p>

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<p>I haven't seen that-
I have seen students attend schools that weren't necessarily the best fit, just because they could get merit aid- even just a small amount of merit aid- but depending on the student and their course of study, it isn't necessarily going to make a difference whether they are at a college that costs them $20,000 a year or $40,000.</p>

<p>I have read more posts complaining about schools that only offer need based aid, than I have posts complaining about merit aid.</p>

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<p><<< Families can qualify for aid up to about $170,000. >>></p>

<p>Our family makes much less than this and we qualify for NO AID.</p>

<p>Beware of half-truths and misleading info about FA for high incomes.</p>

<p>someone with such a high income would need 2 or more kids in college at the same time and would likely get "loans" or work-study -- not free money. And the "FA" would be for a portion -- the family would still have to kick in about 50K or more a year.</p>

<p>I don't consider "loans" or "work study" as true FA.</p>

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<p>well we are happy to get both loans and workstudy because without them it wouldn't have been possible to attend</p>

<p>Neither my H or I have ever attended a 4 year school or have a degree, and we both feel along with our daughter, that small education loans are a reasonable trade off for the opportunity to go to college.
Work study also is not a hardship, she likes her job, indeed even last year when she took time off, she went back to work during freshman orientation and she will be working there this summer. It gives her enough money that covers her personal and book expenses, and reduces the amount that we need to send her for food.
Workstudy also does not count toward income when filing FAFSA</p>

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<p>My husband and I were just discussing the loan thing yesterday. We don't qualify for aid, will need to do significant loans. How much do you think it's OK to put on kids vs. pay for yourself?</p>

<p>We were thinking them 25% of whatever was not covered by scholarships, us 75%. Would love to know what you all think.</p>

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<p>We pay our EFC
Her school meets 100% of need
If you don't qualify for any need- I think $20,000 in student loans and scholarships for 4 years is reasonable- less than that preferable ( my daughter will have $14,000 and after she cashes in her education stipend then she will only have about $10,000 in loans), more than that really iffy as it limits your future plans</p>

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<p>emerald:</p>

<p>don't get me wrong.... I think loans and work-study are fine, I just don't like it when colleges claim to give 100% of demonstrated need -- misleading families into thinking that they will get all grants.</p>

<p>For instance: My nephew was all excited at the prospect of going to ND. He has 4 siblings (he's the oldest) and when he and my brother (his dad) visited ND they were promised 100% of demonstrated need. After doing FAFSA, they found out their EFC was quite high and ND would only provide loans and work-study for the balance. What a let down since parents couldn't take on loans (not with 4 more siblings behind him!) nor could they pay the full EFC either. Work study would have been ok, but it would have only really paid for "pocket money" throughout the year. Nephew is going to a UC instead.</p>

<p>Paying EFC can be "dicey" if you have several kids and they are spaced to the point that you will have 14 or more years straight of having kids in college.</p>

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<p>some schools do have a reputation for not giving good aid packages
that is why we need to tattoo into everyones brain, that unless aid is NOT a concern, in any way, shape or form- never apply ED,b ecause it limits your ability to find the best fit for your student and your family</p>

<p>That is good that your nephew was able to attend a good school anyway
I know it is frustrating, my niece had carnegie mellon as her first choice school, but the package just wasnt possible for her family. Howver there are some schools that will tweak your need if they really want you, and she has a very nice aid package at Colgate.</p>

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<p><<< My husband and I were just discussing the loan thing yesterday. We don't qualify for aid, will need to do significant loans. How much do you think it's OK to put on kids vs. pay for yourself? >>></p>

<p>It's all a personal choice. However, in our case, our kids will be going into highly paid professions and therefore, should be able to afford to pay for some/all of these loans themselves. </p>

<p>I have wrote about this subject before and gave the example of my OB/Gyn. His small business owning dad lent him the money for college & med school with the agreement that he would pay his dad back once he began his practice. It was a win/win. His parents needed to be paid back so that they could comfortably retire and the son was soon making so much money that he paid his dad back in 5 years. The dad did the same thing with his other two kids. ( Now, my OB/Gyn's oldest child is in med school and he has the same deal with him (even though he (the OB/Gyn) can afford to pay full freight). </p>

<p>There is no reason for middle class parents who have "struggled" to raise their kids to be stuck paying back hundreds of thousands of college loans while their highly paid professional children are living the "high life" driving luxury cars, wearing designer clothes/shoes, and eating at the best restaurants. </p>

<p>Our kids know that we have struggled to pay for private school tuition their whole lives and will be able to pay about the same $$$ when they go to college -- anything more will be up to them thru merit $$, etc.</p>

<p>By the way, both my h and I paid for all our degrees (2 each) by working and by taking out loans.</p>

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<p>Two thoughts:</p>

<p>First, we did think perhaps if we were going to err one way or the other that we should err on the side of putting more loans on the kids, because we would of course choose to help them out more in the end if we were able to, but that they wouldn't choose to help us out :)</p>

<p>Second, we didn't let our S apply ED, thought we wanted to compare the financial aid packages. But comparing no aid to no aid isn't very helpful. We're finding he's only being offered scholarships by the schools that aren't quite in the bracket of his (and our) top choices.</p>