Trends in Financial Aid

Colleges are apparently giving out a lot more merit aid these days. This is according to Education Department’s National Center for Education Statistics, which indicated that colleges are shifting aid strategies away from need-based and toward merit-based aid. Predictably, this strategy has resulted in students from low-income backgrounds getting less financial aid.

According to the report:

In 1995-96, need-based institution-al grants were more common than merit-based grants in both private nonprofit (43 percent vs. 24 per-cent) and public 4-year institutions (13 percent vs. 8 percent).

The percentage of high-income recipients receiving merit aid was larger in 2007-08 (28 percent) than in 1995-96 (23 percent). The percentage of low-income recipients was smaller in 2007-08 (20 percent) than in either 1995-96 (23 percent) or 2003-04 (23 percent).

The distribution of need-based aid recipients across income groups also has changed. The percentage of need-based grant recipients from the lowest income group was higher in 2007-08 than in 1995-96, while the percentage from the high middle-income group was smaller in 2007-08 than in 1995-96.

The report explains that there’s also been a movement of aid to students from more affluent families. Some 41 percent of all aid went to students from the lowest-income families in 1995-96. Only 37 percent of all aid went to students from the lowest-income families in 2007-08. Only 13 percent of aid went to students from the richest families in 1995-96. Today that figure is 18 percent.

Students who receive grants from colleges tend to receive more money from merit grants than from need-based awards. Of all grant recipients, those with merit aid took in an average $4,200 in annual grant money in 2007-2008. Need-based award recipients, in contrast, only got $2,700 a year.

While there might be a lot more merit aid, there’s not much evidence there’s really more much actual merit in today’s college classes. SAT scores are pretty much the same. The distribution of high school grades is about the same. Despite many articles about overworked high school students, there’s no evidence that the average high school students is involved in more activities than he was 15 years ago.

What has changed is how colleges utilize aid. While highly selective colleges often use no merit-based aid (reasoning that all students admitted to the school are quite bright and capable), less selective institutions now often use merit aid to try and attract potential students away from more selective institutions that may have admitted them.

Daniel Luzer

Daniel Luzer is the news editor at Governing Magazine and former web editor of the Washington Monthly. Find him on Twitter: @Daniel_Luzer