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If you are worried about the status of low-income students at the nation’s top public universities, recent news out of Madison, Wisconsin is disheartening.

In December, Inside Higher Ed (IHE) revealed that the University of Wisconsin at Madison is planning to substantially boost the amount of money it spends on non-need-based aid, which is popularly known as “merit aid.” The university’s primary goal is to use this aid to keep top Wisconsin students in the state. In recent years, some of the school’s Big Ten rivals have been luring high-achieving Wisconsin students to their campuses with generous offers of merit aid.

By investing heavily in non-need-based aid, University of Wisconsin officials want to “build a wall around our state and make sure that our own students have every reason to consider us,” Steve Hahn, UW-Madison’s vice provost for enrollment management, told the online publication.

But that’s not the only way the university wants to spend this money. The school is also planning to increase spending on merit aid so that it can better compete for out-of-state students. In other words, at the same time that the university is fighting tooth and nail to keep Wisconsin students in the state, it plans to be more aggressive in raiding other states for top students.

Related: How public colleges use merit aid to compete in the out-of-state student arms race

Unfortunately, what is happening in Wisconsin is occurring at public flagship and research universities nationwide. Stung by sharp state budget cuts at the same time they are seeking greater prestige, these universities are increasingly pitted against one another, fiercely competing for the students they most desire: the “best and brightest,” and those wealthy enough to pay full freight. And they are using a large share of their institutional aid dollars—money that could be going to students who truly need it—to entice these generally well-off students to their schools.

Low-income and working-class students are paying a high price for these policies. As public colleges and universities use non-need-based aid to bring in more and more high-achieving and affluent out-of-state students, fewer institutional aid dollars and seats are available for in-state students who come from less-privileged backgrounds.

Related: Getting more high-achieving low-income students into selective colleges

As Richard Kneedler, president emeritus of Franklin & Marshall College and a college consultant, told IHE, “If you look at it as a country, the public system is at war with itself, and that’s a shame because that means money is being wasted in a zero-sum arms race.”

Up until now, the University of Wisconsin at Madison has not been much of a player in the merit-aid arms race. In 2014-15, Wisconsin’s flagship university provided scholarships to only 8 percent of freshmen who lacked financial need, according to data that the school provides to magazines that rank colleges. In comparison, nearly one-third of non-needy freshmen at Ohio State University received merit aid that year.

But according to the Milwaukee Journal Sentinel, “Between 10,000 and 14,000 Wisconsin high school graduates leave the state each year for colleges in other states. Minnesota, Illinois, Indiana and Ohio are the top destinations.”

Related: Financial aid not always going to neediest college students

University of Wisconsin at Madison Chancellor Rebecca Blank told IHE that the university doesn’t have any choice but to use merit aid to stop these institutions from grabbing up the best Wisconsin students. “We’re going to have to work harder to attract top Wisconsin students and keep them in the state,” she said. “The students who are going to go to Harvard, I may not be able to keep them at Wisconsin if that’s the sort of experience that they want. But I have a lot of top students who get recruited away [by] Iowa and Indiana and Illinois and Minnesota. And I’ll say this, we’re a better school than them. They should be coming to us and not going out of state.”

Still, Blank understands that providing scholarships to non-needy students is not the best way for a college to spend its institutional aid dollars. “It worries me a great deal, the type of merit aid I see being offered to top students from Wisconsin,” she said. “As far as I’m concerned—I’m an economist—that’s a real waste of where we should be spending our money in higher ed. But I’ve got to keep some of those top students in Wisconsin.”

“We’ve got to play in that game. We just have to,” she added. “It is one of these arms-race things that I’m not happy with but I don’t quite know what to do about.” Left unsaid is that if the University of Wisconsin at Madison misses out on these students, it could see its standing in the U.S. News rankings, and those of other publications, plunge.

Related: Are public universities becoming bastions of privilege?

University officials acknowledge that they also plan to use merit aid to attract high-achieving out-of-state students, many of whom come from affluent families. The school, which has seen its state funding slashed in recent years, can make up for lost revenue by recruiting students who could otherwise afford to pay full freight.

The university’s efforts received a major lift in October when the university system’s Board of Regents agreed to temporarily remove a cap on the number of nonresident students the school can enroll. For the next three years, the institution will not abide by the limit, which has prohibited the school from enrolling more than 27.5 percent of its students from out of state, although many of its competitors bring in a greater share. As part of a compromise, the board required the university to guarantee that it will continue to enroll at least 3,600 in-state freshmen annually—although that is still a decrease from previous years’ totals.

Related: Grinnell shows what it takes for an elite private college to be socioeconomically diverse

But the Regents’ actions did not assuage critics who worry that the make-up of the student body will change. “If the campus no longer has a cap on non-resident undergraduates, will it focus more on recruitment efforts at affluent non-Wisconsin high schools and less on Wisconsin high schools, particularly those with large numbers of low-income and underrepresented students?” Noel Radomski, the director of the university’s Wisconsin Center for the Advancement of Postsecondary Education, wrote prior to the board’s vote.

Variations on that question need to be asked at public universities across the country.

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