Administrators from America’s private colleges are considering a plan to stop issuing merit scholarships, and distribute financial aid based solely on demonstrated financial need.

“High Tuition/High Discount Has No Future” was the title of the draft pledge introduced at the annual Council of Independent Colleges’ Presidents Institute meeting. According to an article in the Chronicle of Higher Education the statement,

Argues for ending the use of the term “merit aid” on participating colleges’ Web sites and in their admissions literature, and for making all offers of financial aid final, among other measures. The latter proposal is meant to end the costly financial-aid bidding wars that sometimes erupt when multiple institutions pursue talented students.

The statement emerges amid concerns among some administrators that the increased competition among colleges for enrollment has led to more resources going into “merit based” aid for top students, many of whom don’t require financial aid to afford college, and to a decline in “need based” aid for promising lower-income students. The document cites a 2009 study by Amanda L. Griffith, a professor of economics at Wake Forest University, who found that “the increased use of merit aid is associated with a decrease in enrollment of low-income and minority students.”

In the last 20 years colleges, particularly private ones, have come to use merit scholarships to attract high achieving students who might otherwise attend more selective institutions. Middle class families are also encouraged to direct their children to apply to lower ranked schools in order to pay less for tuition.

This is an understandable trend— U.S. News doesn’t give institutions credit for keeping education affordable, and it does families no good to pay more for college—but over the long run this results in an arms race of college spending, makes college more expensive, and disguises the real cost of college.

There are some significant barriers to success here. At least in part the problem has to do with the fact that both “merit” and “need” are ambiguous concepts. Many highly selective institutions now offer essentially full scholarships for students from low-income families, defining low-income as a family with an annual income under $65,000. Those same students, however, would not be “low-income” at many cheaper schools, and would thus have to pay more.

In general, however, this seems like a good idea. This is, after all, how financial aid used to work at most institutions. The school cost a certain amount, and most students paid that amount. For rich families, of course, it was easy; for middle class families it was hard, but still possible without going into debt. It was only the very poor who got scholarships to defray the cost of tuition [Image via]

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