College Merit Aid is for Mediocre, Rich Kids

College merit aid is not being used  as it should be, (i.e., for impoverished students with great potential but little ability to afford tuition). Its main purpose has become to attract affluent and often mediocre students in order to gain the most bang for the buck. With the exception of a select few elite universities, this practice is very prevalent and poses a tremendous risk to the competitiveness of our country.

In an excellent article found in Forbes entitled, The Invisible Force Behind College Admissions, the authors Maggie McGrath and Matt Schifrin expose the disturbing details. Consultants advise colleges in a strategy called “financial aid leveraging” on how to attract wealthier clientele at the expense of more deserving, but  lower income students.

It works like this: The colleges first come up with an extravagant price of admission. They next take most of that money and funnel it into luxury dorms, high end gyms, food courts and other luxuries in order to provide the bait for the top 5% or so of their targeted population. Often these amenities will help the schools score higher on the many flawed college rating surveys and provide a further boost to their marketing efforts.

Finally, the merit aid can now be used to lure the affluent who will be given a small discount to placate their ego while they pay the rest of the overpriced tuition. The parents, students, and colleges end up pretty happy while the kids from poorer families get the shaft.

Don’t believe it? The numbers display the monetary value of implementing such strategies. According to the Forbes article, “The formulas might show the benefits of giving four well-heeled applicants with high SAT scores a 10% discount from its $50,000 tuition – rather than giving the lower income applicant the $20,000 scholarship she needs.”

This decision will generate an additional $150,000 in revenue for the college. The four wealthy students will pay $45,000 each. They are given $5,000 in “merit” aid to massage their egos and provide them with some bragging rights. If that same money was given in a lump sum to the deserving student from a poor community, the $20,000 would provide a much lower return on investment for the school.

This strategy, while effective in helping the schools pay their bills, has several damaging side effects. It has contributed to the rise in tuition over the past two decades to a level twice that of the level of inflation.

It has also led to astronomical growth in student loan debt to the astounding sum of over one trillion dollars. This exceeds the amount consumers owe on their credit cards.  The burden of this debt also falls disproportionally on the less well off our nation. They suffer the most when merit aid is diverted in this manner, and must fall back to borrowing to replace the lost and badly needed assistance.

Finally, this strategy is contributing to the inequality of wealth that is one of our nation’s most serious challenges. Rewarding the rich because they have money will not make America a more competitive country in the global economy. Failing to educate our most promising students because their parents are “poor” is devastating to both the students and our nation as a whole.

Schools should not be judged on how they compare to a country club. The money spent on these amenities is doing nothing to spur badly needed research and development in this country. It just perpetuates a system in which meritocracy is ignored while an educational version of crony capitalism compounds our wealth gap and growth potential.

America is at its best when it educates its most deserving students in the most cost effective way possible. “Enrollment Management” violates this core principal. Our universities should not have the same business model as a “discount mattress retailer.” We can do a lot better than “jacking up the price and then selectively discounting.”

The authors suggest creating a system for higher education similar to the NFL’s revenue sharing agreement. In this case, the top 50 schools with the largest endowment would have to share the wealth for the good of all. While not perfect, this sounds like a much better idea than our current conflicted, distorting, procedures to reward merit aid.

While our university system is currently the envy of the world, there is a big threat looming on the horizon. If this issue is not addressed, we just might be stuck with more graduates qualified to wear their tennis whites in Greenwich rather than research a cure for cancer.


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