The changing nature of ‘merit’ aid at public institutions

Higher education experts are voicing concern that need-based financial aid is taking a back seat at some public nonprofit institutions as they increasingly provide “merit” scholarships to entice wealthier students away from competing schools and boost enrollment, experts tell Inside Higher Ed.

“The term ‘merit aid’ is really a misnomer,” Robert Massa, vice president emeritus for enrollment at Dickinson College, tells Inside Higher Ed. “It’s a competitive pricing strategy. And it’s really gotten out of hand.” 

Related: The uneven burden and benefit of state merit scholarships >

Rise in non-need-based aid

Although state funding for public colleges has increased in the last two years, due, in part, to COVID-19 relief funding, overall state contributions to higher education have decreased over the last two decades, leaving colleges and universities searching for levers that can boost enrollment and revenue. Originally a tactic employed by selective private colleges, merit aid has increasingly been used by struggling state colleges—starting in the South and then throughout the country—since the 2008 recession, as they compete for wealthier, out-of-state students. Even with non-need- based tuition discounts, out-of-state students still pay higher tuition than in-state students. These discounts, critics note, are more likely to go to white and Asian students than Black and Latine students. 

Related: Report: States’ higher ed funding cuts ‘threaten access and equity’ >

Merit vs. need-based aid

Proponents of merit-based aid point out that institutions with increased tuition revenue and a healthy bottom line are better positioned to meet the financial needs of their low-income students. However, college access advocates fear that public colleges are placing too much emphasis on meeting financial and enrollment goals, noting that at some schools, the amount of funding directed toward merit scholarships has begun to catch up with funding for need-based aid. 

“Ideally, merit aid can actually help with equity, and it does at many institutions. Where this starts to break down is at institutions with gaps between financial aid and merit, those that do not meet 100 percent of demonstrated need and yet are giving a ton of institutional aid to attract new students,” Massa told Inside Higher Ed.

Between the periods of 2000-2001 and 2016-2017, public institutions increased their non-need-based aid spending from $1.1 billion to $3 billion, according to an analysis from New America. Within that period, over half of public institutions (52%) doubled their merit aid spending and more than a quarter of them (27%) quadrupled it. Public institutions also began to narrow the gap between merit-based and need-based funding, with schools spending nearly $32 billion on non-need aid funding and $49 billion on need-based aid. 

To make merit aid more equitable, experts say that institutions need to prioritize meeting the demonstrated financial need of all students before trying to attract wealthier students by doling out non-need-based aid.

Georgetown’s commitment to access and affordability

More than 45 years ago, Georgetown made a defining commitment to admit undergraduate students on a need-blind basis and meet U.S. students’ full demonstrated financial need. Read more about our ambition to increase the number of philanthropically funded undergraduate scholarships, the foremost priority of Georgetown’s Called to Be campaign.

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