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Ensuring financial aid helps the neediest college students

The desire to improve rankings often outweighs equal access
University Business, August 2016

Need-based financial aid was supposed to give everyone an opportunity to get into college and better their lives and career prospects.

But that assistance is not always applied as intended, says the third edition of New America’s “Undermining Pell” report. Nearly half of the public, four-year colleges studied now leave the most financially needy students on the hook for more than $10,000 of debt per school year.

And, as Stephen Burd, senior policy analyst at New America, notes in the report’s ominous subhead, “The news keeps getting worse for low-income students.”

“Overall, too many four-year colleges, both public and private, are failing to help the federal government achieve national college access goals,” he says. “They are, instead, creating barriers that could stymie the educational progress of low-income students or leave these students with mountains of debt after they graduate.”

Your study shows that in many cases, low-income students are actually paying more. Why do Pell Grants and need-based aid exist if they’re not going to be applied?

The federal government—particularly during the Obama Administration— but also in the Bush Administration—has put a lot of emphasis on the Pell Grant.

I think the real lesson is that the federal government can’t do it alone and that colleges really need to have some stake in it. They have to contribute—too often, the case is that they are not.

Everyone talks about making college accessible to all students but, after looking at your research, is that just lip service?

I think in a lot of cases what they say and what they do are very different. One reason I feel so strongly about this is that I was a reporter at The Chronicle of Higher Education for 15 years covering student aid issues, mostly on the federal student aid side.

I would always talk to college leaders and they’d convince me that they were fully on board; they always talked about their commitment. But when I started to look behind the curtain I was struck by how their words and actions can be very different.

In the first edition of “Undermining Pell” I had a quote from Tori Haring-Smith, the president of Washington & Jefferson College in Pennsylvania. She said that colleges are engaged in increasingly progressive rhetoric and increasingly regressive actions. I think that’s the truth.

You wrote that, faced with state budget cuts, public institutions are applying the enrollment management tactics of their private college counterparts. In what way?

Sometime in the 1980s, private colleges moved away from need-based aid more and more and jumped into the merit aid game. It took publics a little bit longer to get into it, but they are pretty fully engaged now, particularly at flagship schools and research universities. But even the regionals are beginning to get involved in it, with the biggest reason being the state budget situations.

But also, there is the prestige factor—institutions want to look good on the U.S. News rankings, so they try to bring in both the best students and the wealthiest students, because you definitely get points for having those students in your class.

The other part of it, too, is the demographics in a number of states. Colleges certainly have to look at their declining number of high school graduates and they have to go to other states for students.

There’s a fevered competition going on among all four-year colleges now, but it’s far more intense on the public side than it used to be. They are hiring enrollment managers, and they are using all sorts of recruiting tricks and a lot of merit aid.

It sounds like schools are doing this to create a particular student profile and shape incoming classes.

They build a class using merit aid to get the best students and wealthy students. Every year they tout that they have students with better test scores, that this is a better class than last time.

But the problem is, more and more, they use that one model and that model is really harmful to the educational opportunity that we talk about. The numbers show that there are fewer low-income students going to school than there were just a few years ago.

There are too many colleges trying to do the same thing, and so much of it has to do with rankings. I don’t think there should be only one way to build a class.

The other point I would make is these schools do get huge amounts from federal student aid programs. And they also are supposed to be somewhat charitable organizations, so I do think that there should be some responsibility that comes with that.

You say, in some cases, schools provide deep discounts to wealthier students, no matter what their academic record is, because they believe it’s necessary for survival.

That would be the schools with the small endowments. The schools that I really want to call out are the schools that have resources, but are using them in a way that I believe is harmful to socioeconomic diversity and low-income students.

All colleges should be striving to enroll as many low-income students as they can and to give them the best financial aid possible. But I know for a number of schools that is actually very difficult. We’re seeing this with private colleges that are closing.

Tuition discount strategies and merit aid don’t come without a cost to the school. And, some of these schools are struggling because they are discounting so much. So there is a Catch-22 to the whole thing.

Is there a way to reverse or at least slow this trend?

I don’t know that there is a perfect plan, but one I’d recommend is a carrot-and-stick approach. The carrot is to help schools that simply don’t have the resources keep net prices down for low-income students.

The government would do more to help those schools that are really struggling, but who enroll a lot of low-income students. Schools that enroll 25 percent or more Pell Grant recipients would get Pell bonuses to lower the net price that students pay.

The stick is for wealthier colleges that have chosen to divert their aid to try to buy students so that they can rise up the U.S. News rankings and increase their net revenues.

Schools that enroll fewer low-income students but have high net prices would have to pay. It’s not a perfect solution, but I don’t think that colleges are going to fix this on their own, and the federal government has the most ability to incentivize changes.

An alternative plan that we came up with at New America is more revolutionary. It would mean moving away from existing federal aid programs and creating a much stronger federal and state partnership.

States would receive formula funds from the federal government that they would have to partially match and send to colleges that enroll a substantial share of low-income students and serve all students well. To be eligible for the funds, states would be required to maintain or increase their investment in higher education.

Both plans aim to put an end to the merit-aid arms race and to ensure that colleges live up to their commitments to serve as engines of opportunity, rather than as perpetuators of inequality.

What message can higher ed leaders take from your work?

The message would be to put your money where your mouth is. You can’t just talk about how colleges are leveling the playing field and promoting educational opportunity—you actually have to use your resources in that way. That’s number one.

Colleges should review the way they use institutional aid resources to see whether they are accomplishing the goals that they set. Are they shutting down opportunity for lower-income students?

They get a ton of money from the federal government to help lower-income students. The nonprofits are supposed to serve a charitable mission—they should keep that in mind when making decisions for their institutional aid.

Everyone says they don’t pay attention to rankings. But one of the things I do in my research is read the strategic plans of institutions that I’m looking at. In a number of cases, rising up the rankings is actually written into their strategic plans. How much does that really buy you?

Tim Goral is senior editor of UB.

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