Criteria for Merit Aid

January, 2014

Washington -- While the President was hosting college presidents this week in a high-profile session at the White House, trying to convince colleges to do more for the low-income, a related session was being held across the country at USC's Center for Enrollment Research, Policy, and Practice.

Of the two sessions, the USC conference delved more deeply into the issue of college "enrollment management" and its often deleterious consequences for the low-income. The conferees tried to define criteria for "merit" aid, a major tool of enrollment management in current practice.

The real issues of merit aid do not revolve around whether a 3.4 versus a 3.5 GPA should be defined as meritorious. Merit aid competes with aid for financially needy students in colleges' budgets. A better term for it would be Vanity Aid, as it is a staple in colleges' quests for vanity rankings in magazines. Another term would be Cocktail Scholarships -- so well-to-do parents can talk at cocktail parties about the "merit scholarships" their children receive.

The huge amount of such aid across the nation is a significant factor in the socio-economic gap in college access that the White House is concerned about. It is also a major factor in forcing loans on the low-income and in creating a trillion dollar student loan burden that overhangs the nation's economic recovery. To the extent its funding source is really Pell Grants (fungible with college aid in financial aid packages), it is abuse of a federal program and a multi-billion dollar reason to explain why increases in Pell grants do not reduce student loan burdens. To the extent its source is actually unfunded discounting, the consequences are increasing showing up as financially threatened and failing colleges.

Several of the USC conferees deserve accolades not only for squarely addressing the role of merit aid in enrollment management, but in demonstrating alternatives at their colleges: Kenyon, Puget Sound, Vassar.

So what are the real criteria for merit aid; how are merit aid amounts set; what are the calculated tradeoffs made by colleges between vanity, access, and student loan burdens; and how are these reflected in individual student financial aid packages? These are not so much philosophical questions, but quantifiable nuts-and-bolts numbers in many colleges' budgets and enrollment management plans. Many institutions pay good money to enrollment management consultants to put numbers to the trade-offs. Customarily these numbers are closely held, lest anyone see the real criteria, the resulting amounts, and who is responsible for making decisions.

I was disappointed that none of the USC conferees brought up (or seemed to know) that a federal regulation actually requires colleges to disclose to their students the "criteria for determining the amount" of student financial aid awards, whether federal, state, local, private, or institutional. [34 CFR 668.42] The incurious U.S. Department of Education has never enforced it, or considered disclosure's potential salutary effect on college decision-making in favor of providing more low-income access and lowering student loan debt.

If the Secretary does not want to enforce the law, then at least he could put a notice in the Federal Register asking for comment about what to do with the existing provision. Some colleges could voluntarily disclose their criteria and their calculations, which might create peer pressure for other colleges to follow suit. Ideally, some colleges would apply to the federal experimental site program, to demonstrate how they are making choices that simultaneously make their colleges financially viable but also serve the public interest, and to work with the Department on what colleges need in the way of federal leadership to move toward overdue enrollment management reforms.