College & Workforce Readiness

More College Aid Going to Top Students

By Julie Blair — February 17, 1999 7 min read

Jessica Bostdorf had everything she needed to attend the college of her dreams--stellar grades, extensive leadership experience, athletic ability. Everything, that is, except the money to afford the $22,000-a-year price tag.

But rather than settle for a less expensive school, Ms. Bostdorf, like thousands of other middle-class students, took advantage of a growing trend in higher education: merit-based financial aid.

Ms. Bostdorf’s school of choice, the small, private Lebanon Valley College near Hershey, Pa., rewarded the high achiever with a Vickory Scholarship, entitling her to half off the tuition for four years.

“I’m paying about as much as I would have had I gone to a state school,” said Ms. Bostdorf, now a senior English and communications major who aspires to work on Capitol Hill. “I would never had been able to [attend Lebanon Valley] if it weren’t for this opportunity.”

Merit-based aid, awarded to students for their academic and personal achievements regardless of their financial need, has become an increasingly common recruitment tool for hundreds of public and private colleges and universities over the past decade. Many states, meanwhile, are also building financial- aid programs that emphasize achievement, and the federal government recently implemented a tax credit tied to academic merit.

While need-based aid still makes up the bulk of the approximately $60.5 billion that’s awarded each year to help students attend college, merit-based aid is closing the gap.

Proponents say such programs motivate students, reward success, keep colleges academically competitive, and, in the states that offer merit-based aid, discourage their most talented high school graduates from pursuing their degrees elsewhere.

“We want to send a message to students that if students work hard and do well, they’ll be rewarded,” said Debbie McGuffey, a spokeswoman for the Kentucky Council on Postsecondary Education. The Kentucky Educational Excellence Scholarship program, set up last year, awards funds based on students’ grade point averages in high school; those with higher grades receive up to $2,500 for four years of college.

But critics of merit-based aid argue that such policies serve primarily the accomplished middle and upper classes and divert money from the truly needy. Merit aid, they contend, will result in an elite system of higher education and perpetuate an economically stratified society.

“What colleges, universities, and states are doing is providing funds that focus on students who would be going to college anyway,” said Patrick M. Callan, the president of the National Center for Public Policy and Higher Education, a San Jose, Calif.-based nonprofit organization that analyzes higher education policy. “We’re trying to make it more affordable for those in the system, but we’re not doing what needs to be done to get those who are not in school to college.”

Staying Competitive

Many colleges and universities have been offering merit-based aid, at least on a small scale, for decades. But it wasn’t until recently that the idea took off.

“Back in the mid-1970s, less than 50 percent of institutions offered any type of merit aid,” said Philip G. Wick, the director of financial aid at Williams College in Williamstown, Mass., and an expert on trends in merit-based aid. “By the mid-1980s, it was close to 90 percent, and it’s probably increased a few percentage points since.”

Merit-based aid increased significantly as state governments began to spend less on higher education, said Morton Own Schapiro, a co-author of The Student Aid Game and the dean of the college of letters, arts, and sciences at the University of Southern California.

As funding for prisons, health care, and K-12 education increased, officials at colleges and universities were forced to prove their worth to maintain their share of the budgetary pie, Mr. Schapiro said.

Merit-based aid was seen as a way to attract top scholars, maintain school rankings, and demonstrate to legislators that money on higher education was well-spent.

“Schools were desperate to say they had prestigious programs,” Mr. Schapiro said in an interview.

Between the 1996-97 and 1997-98 academic years, the amount of merit-based aid given out by states skyrocketed 21 percent, from $273 million to $329 million, estimated the New York State Higher Education Services Corp., a state agency that analyzes financial-aid data.

During that time, need-based aid increased just 5 percent, the agency reported, from $2.2 billion in 1996-97 to $2.3 billion during 1997-98.

While increases in merit-based aid are occurring at all schools--public and private, four-year and two-year--the trend is particularly pronounced at competitive and highly competitive schools, Mr. Schapiro said.

‘Anybody Can Do It’

Lebanon Valley College, Ms. Bostdorf’s school, began offering merit-based aid to boost its sagging enrollment.

Before the tuition-discounting plan was implemented, “Lebanon Valley was struggling,” said Bill J. Brown, the dean of admissions and financial aid at the college, which is described as “selective” by Peterson’s, a company that publishes college rankings. “For a number of years, we had unused capacity.

Only 231 new full-time students enrolled at the school in 1991, a year before the program began. In 1992, the figure rose to 335 students; last fall, it was 467.

About 70 percent of Lebanon Valley’s 1,280 current full-time students receive a merit-based aid package.

Students in the top 10 percent of their graduating classes receive half off the $16,100 yearly tuition for four years; those in the top 20th percentile receive one-third off; and those in the top quarter receive one-quarter off.

Other schools are wooing students with merit-based perks. Some, for example, offer specially designed honors colleges--elite schools within a larger university--where class sizes are small and personal attention is touted.

Ball State University in Muncie, Ind., announced last month that it would provide $1 million for desktop computers and color printers to incoming freshmen who graduate from high school with a 3.0 grade point average, score at least 1120 on the SAT, and have not received other merit-based aid. Some 700 students will qualify for the program, said Douglas F. McConkey, the vice president for student affairs.

Ball State made the offer “to remain competitive,” Mr. McConkey said. “All the universities that our students are applying to are doing the same things.”

A growing number of states also are emphasizing merit-based aid. Georgia began the trend in 1993 by offering lottery-funded HOPE Scholarships, which provide up to $3,000 for tuition, fees, and books to high school students who attend college within the state and maintain at least a B average.

Congress approved a version of the program in 1997, offering up to $1,500 a year for two years in federal income-tax credits or a tax deduction of $10,000 for middle-income students who achieve a B average.

“Anybody can do it,” said Stephanie Hutcherson, a spokeswoman for the Georgia Student Finance Commission. “It’s all up to that student to study and earn that B average.”

High Stakes

The problem with such programs, critics say, is that some states and colleges are increasing merit-based funding at the expense of aid based on financial need.

In Georgia, for example, lawmakers cut need-based state funding 51 percent between 1996-97 and 1997-98. In addition, students in Georgia who receive need-based aid from the federal government, in the form of Pell Grants, are not eligible for a full HOPE Scholarship from the state. They receive a discounted portion instead.

Furthermore, the critics argue, the de-emphasis on need-based aid is coming at a time when several other factors are already conspiring against financially strapped students.

A study released last week by the Institution for Higher Education Policy and the Ford Foundation found that college and university tuition rates have increased fivefold over the past two decades.

The federal government has tried to address the situation by increasing funding for Pell Grants, which go to needy students. But an analysis by the Washington-based American Council on Education revealed that those grants don’t buy as much as they used to.

In inflation-adjusted dollars, Pell Grants were worth $4,100 in 1975; this school year, they’re worth $3,125.

Meanwhile, a growing number of colleges are dropping their “need blind” approach to admissions. Instead of accepting all applicants without regard to their financial status, they are now taking students’ ability to pay tuition costs into account.

Those circumstances raise the stakes for disadvantaged students who are trying to compete with their wealthier peers for merit-based aid, said Robert Kronley, the senior counsel for the Atlanta-based Southern Education Foundation, a nonprofit organization that analyzes higher education policy.

“This is going to be an issue for students who have not had the benefit of a better K-12 education, in schools where there are a large percentage of uncertified teachers, and where facilities are not great,” Mr. Kronley said.

While merit-aid programs are not altogether bad, he added, “we need to pay some attention to different kinds of circumstances that students come from.”

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A version of this article appeared in the February 17, 1999 edition of Education Week as More College Aid Going to Top Students

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