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merit aid
Sandy Baum

Sandy Baum, an independent policy analyst for the College Board, discovered recently that colleges and universities awarded $5.3 billion in grants beyond the demonstrated financial need of students and their families this year. Her analysis included state-supported public universities, which in some cases gave more than half of their aid to students who federal formulas showed didn’t need it. Baum’s findings were documented in a Hechinger Report story on November 25th that also ran on the front page of USA Today. Baum spoke with Hechinger Report editor Liz Willen about her findings and what they mean.

Q: New figures from the College Board show that U.S. colleges and universities are handing out $5.3 billion in financial aid to students the government says do not need it, although I’m sure the students and their families would argue otherwise. Do you see this as a problem, and if so, why?

A: It’s certainly true that many students and families who don’t have documented financial need according to the federal government’s need-analysis system have trouble financing college. It would be great to help these students—if it didn’t require diverting funds from students struggling even more. Some students are unable to enroll in college at all because of financial barriers. Others are unable to complete their degrees because of money problems. And some fraction of the dollars that are “beyond need” go to students who would have no trouble at all paying for college on their own. Institutions want to attract them because of their academic qualifications or the tuition they are able to pay. Unfortunately, there are not enough dollars to go around, so too many low and moderate-income students are being left behind.

Should we rethink how so-called ‘merit aid’ is distributed? If so, what would be more equitable?

The labels “need” and “merit” are not always useful, since students with better academic qualifications frequently get more “need-based” aid than less-qualified students with similar need at the same institution. A lot of aid is distributed on the basis of “merit within need.”

“Need within merit” is also an option. Institutions can give more generous grant aid to students from lower-income families than to students with similar academic qualifications who are from more affluent families. It’s important to be careful about looking at college students as a whole as opposed to those within one institution. There are some very wealthy institutions that give very generous need-based aid to students who are relatively affluent but can’t quite afford the high prices. Many less-affluent students are enrolled in colleges without the resources to provide such generous aid.

Does the current system discourage low-income students from attending college?

The federal government has dramatically increased its aid to low-income students through the Pell Grant program in recent years. Some states also have substantial need-based grant programs. And the majority of institutional grant dollars are still awarded to students who depend on these funds in order to finance college. There are many different institutions in the U.S. with a wide range of prices. Paying for college is not easy for most people, but it is possible. On average, low-income students receive enough grant aid to cover all of their tuition at community colleges and most of it at public four-year colleges. Low-income students face a lot of barriers to college enrollment and success. But many of the problems are related to academic preparation, expectations, and aspirations. More money would certainly help. But money alone cannot close the gaps.

How do you respond to arguments that the middle class is more squeezed than ever, between the costs of college, high unemployment and inflation—and that many families on the upper end who are receiving government aid simply could not send their kids to college without it?

Middle-income families are certainly squeezed. Incomes have declined, savings have been depleted, employment is unreliable. But the reality is that the net price of college, after taking grant aid and tax credits and deductions into consideration, is not rising very rapidly. Most families in the upper half of the income distribution can and do manage to send their kids to college. They have to make sacrifices to do so. But the sacrifices are usually well worth it.

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