Colleges Using Financial Aid to Woo Wealthy Students Rather Than Help Low-Income Students Afford Tuition

In their relentless pursuit of prestige and revenue, American private and public four-year colleges and universities are increasingly using financial aid to attract the best and most affluent students rather than to help low-income and working-class families pay for college, according to a new report released by the New America Foundation’s Education Policy Program.

The report presents a brand new analysis of little-examined U.S. Department of Education data showing the “net price” the lowest-income students pay after all grant aid has been exhausted. The analysis shows that hundreds of colleges expect the neediest students — those from families making $30,000 or less annually — to pay an amount equal to or even more than their families’ yearly earnings.

The report finds that over the past two decades colleges have made a dramatic switch in how they use the majority of their financial aid. Schools have gone from helping to make college more affordable for those with the greatest financial need to strategically awarding merit aid to students who can increase their standings in rankings like U.S. News & World Report and bring in more revenue. This report identifies colleges that are committed to enrolling low-income students and charging them affordable prices and others that are stingy with their admissions slots, their financial aid dollars, or both.

“Too many four-year colleges, both public and private, are failing to help the government achieve its college access mission,” Stephen Burd, author of the report, writes. “They are, instead, adding hurdles that could hamper the education progress of needy students or leave them with mountains of debt after they graduate.”

The report shows the situation is not as extreme at public universities but getting worse. One of the main ways states have dealt with dwindling state support has been to take a “high tuition, high aid” approach — raising tuition and the amount of financial aid they provide. However, this analysis finds the “high tuition, high aid” approach has been a failure for low-income students: in states such as Pennsylvania, the neediest students are being charged more than double what they are in low-tuition states.

Among the report’s findings:

• Nearly two-thirds of private nonprofit institutions charge students from the lowest income families a net price of more than $15,000. Only 11 percent charge them less than $10,000.
• Roughly one-third of public four year colleges charge the lowest-income students a net price over $10,000 and 5 percent require they come up with $15,000 or more.
• One-quarter of the public schools that charge more than $10,000 to lowest income students are in Ohio and Pennsylvania, two states that follow the high-tuition, high-aid model.
• The most expensive private college for low-income students is Santa Clara University (average net price is $46,347) and the most expensive public college for the neediest students is Rowan University in New Jersey (average net price is $20,384).

The report argues for a federal approach that follows a two-part plan laid out here:

• Offer Pell bonuses to financially strapped public and private four-year colleges that serve a substantial share of Pell Grant recipients (more than 25 percent) and graduate at least half of their students school-wide.
• Require wealthier colleges that have chosen to divert their aid to try to buy the best students so they can rise up the U.S. News rankings to match at least a share of the Pell dollars they receive.