Why did public universities give $32B in aid to students without financial need?

Between 2001 and 2017, more than half of four-year public colleges and universities doubled the inflation-adjusted amount they spent on non-need-based aid, according to a new analysis from the policy think tank New America. Enrollment, in comparison, rose by nearly one-third during that time frame.

The report, titled “Crisis Point: How Enrollment Management and the Merit-Aid Arms Race Are Derailing Public Higher Education,” uses data acquired from Peterson’s college guide to highlight how 339 public institutions spent their aid funds. It finds that, of $81 billion spent on institutional aid across the 17-year period, 40 percent—or $32 billion—went to students without financial need, Education Dive reports. Increasingly, the report says, public institutions are “leaving low-income and working-class students in the lurch while using their financial aid to pursue wealthier students.”

The largest jumps in non-need-based aid occurred at the University of Alabama, where it rose from nearly $13 million in 2001 to more than $136 million in 2017, and Temple University, where non-need-based aid spending rose from nearly $5 million to approximately $80 million.

State disinvestment fueling institutions’ pursuit of wealthy students

Author Stephen Burd points to several factors driving the growth in spending on non-need-based aid, which since 2014, has outpaced spending on need-based aid. States, he notes, have increasingly divested from higher education, leaving public institutions facing financial pressures. Looking to fill those gaps, colleges and universities have attempted to attract wealthier, out-of-state students—amid stiff competition from peer institutions looking to do the same.

In that environment, “the emphasis becomes more on raising revenue and on rising up the rankings, and in all those ways creates incentives for the schools to go after wealthier students,” he told The Chronicle of Higher Education

Saying that public institutions are trapped in an “arms race,” where “everything keeps ratcheting up,” Burd calls on federal officials to intervene. “Colleges are not spending their financial-aid dollars the way that they’re supposed to be,” he said, adding that public universities “are supposed to be the ones that are helping, even more so than private colleges, low-income and working-class students rise up and to be able to provide a ladder to the middle class.”

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