Private-College Presidents Urge a Commitment to Need-Based Financial Aid

A group of private-college presidents is taking a first step toward publicly opposing the rising use of merit-based financial aid and the decline in need-based aid. The move comes via a draft pledge unveiled at the Council of Independent Colleges' annual Presidents Institute here.

The one-page document argues for ending the use of the term "merit aid" on participating colleges' Web sites and in their admissions literature, and for making all offers of financial aid final, among other measures. The latter proposal is meant to end the costly financial-aid bidding wars that sometimes erupt when multiple institutions pursue talented students.

Citing the need for "a saner and more equitable admissions process," S. Georgia Nugent, president of Kenyon College, provided copies of the draft statement, which she described as a "work in progress." The statement emerged from recent discussions among college presidents interested in reforming financial aid, according to Ms. Nugent.

The document's headline declares that "High Tuition/High Discount Has No Future." It goes on to call the current method of awarding aid "unsustainable" and states that widespread tuition discounting "has led to an allocation of higher-education resources that is neither efficient nor just and has contributed to the rising cost of higher education."

The statement emerges amid concerns among some administrators that the increased competition among colleges for enrollment has led to more resources going into "merit based" aid for top students, many of whom don't require financial aid to afford college, and to a decline in "need based" aid for promising lower-income students. The document cites a 2009 study by Amanda L. Griffith, a professor of economics at Wake Forest University, who found that "the increased use of merit aid is associated with a decrease in enrollment of low-income and minority students."

According to a 2008 report from the Institute for College Access and Success, U.S. Department of Education statistics showed that merit-based aid at private nonprofit institutions, such as those belonging to the independent-colleges organization, rose from $1.6-billion in the 1996 fiscal year to $4.6-billion in 2004.

The same 2008 report, using College Board data, said that the private colleges surveyed had disbursed about $2.2-billion in "non-need-based aid" in 2006, while incoming freshmen at the same institutions that year faced $1.1-billion in educational financial need that was not met by institutional aid, Pell Grants, or Work-Study.

In her remarks, Ms. Nugent acknowledged the theory that discounting tuition for more affluent students raises enrollment and tuition income, ultimately contributing to aid for lower-income students. But she countered that in terms of financial viability and educational mission, "the Robin Hood system is not working well for us."

A 2012 survey of 400 private colleges by the National Association of College and University Business Officers found that discount rates continued to rise in 2010-11, but that freshman enrollment remained flat or decreased at more than half of the institutions.

The draft pledge says that signers "do not deny our own responsibility for fostering the climate in which we now find ourselves."

Concerns About Collaboration

The standing-room-only session where the pledge was introduced, titled "Collaborative Efforts on Student Aid and Admissions Policies," began with an overview of how admissions and financial aid reached their current state.

The overview touched on the Overlap Group, a group of elite universities that for years collaborated on some admissions and financial-aid decisions, including agreements on aid levels for students admitted to multiple institutions, and on the antitrust charges pursued by the federal government against those universities in 1991. All but one of the universities involved signed consent decrees with the government, acknowledging no wrongdoing but vowing to discontinue the practice.

The Massachusetts Institute of Technology fought the charges in court and negotiated a separate settlement in 1993 that allowed for some cooperation with other institutions, but the federal case put an effective end to significant collaboration between universities regarding admissions and aid.

Many colleges have long embraced "need blind" admissions, in part to assist in enrolling an economically diverse student body. But the rise in tuition, and in tuition discounting, over the past 20 years has led to "increasingly progressive rhetoric and increasingly regressive actions" in awarding financial aid, said Tori Haring-Smith, president of Washington and Jefferson College and one of the panelists.

Ms. Nugent said that the presidents she talks to about reforming the financial-aid process are usually enthusiastic at the outset but succumb to a "progressive stepping backwards—'I'd like to do it, but I can't do it,'" she said. Presidents worry that a commitment to increasing need-based aid and not competing for top students by awarding merit-based aid will lead to decreased enrollment and decreased prestige for their institutions.

"The fear, obviously, is that unilateral disarmament" in merit-aid competition won't work, Ms. Nugent said. "But is a game of chicken the best way to manage our institutions?"

While colleges are still wary of collaborating, given lingering concerns about federal scrutiny, the draft statement of principles may give presidents an opportunity to begin a conversation about possible fixes for a costly practice of which no one seems fond.

The document calls on signatories to "commit ourselves and our institutions" to "strive, as a matter of policy, to meet full need," and to "give priority, in the allocation of financial-aid dollars, to meet full need."

Ms. Nugent concluded her portion of the panel discussion by calling for college presidents interested in the discussion to contact her. "It's not impossible," she said, "for us to stand up and do things differently."