Playing the Merit Aid Game at Public Universities

[Last week the New America Foundation’s Education Policy Program released “Undermining Pell: How Colleges Compete for Wealthy Students and Leave the Low-Income Behind,” a report that presents a new analysis of little-examined U.S. Department of Education data showing the “net price” – the amount students pay after all grant aid has been exhausted – for low-income students at individual colleges. This is the fourth in a series of posts related to the report’s findings. Read earlier parts of the series here, here, and here.]

As Higher Ed Watch reported this week, only a small number of private colleges are using their financial aid resources to make college more accessible and affordable for the neediest students. Instead, most are charging students with family incomes of $30,000 or less a net price exceeding $10,000.

The news is much better in the public higher education sector. Two-thirds of public four-year colleges continue to enroll a substantial share of low-income students and charge them a manageable net price.

However, the data also raise some major red flags. As more and more states divest from their higher education systems, public universities are increasingly adopting the enrollment tactics of their private college counterparts — using their institutional aid strategically, for instance, to compete for “the best and brightest” students and to increase their revenue. In a number of states, the growing privatization of public higher education systems is threatening to shut down what has long been a pathway to the middle class for low-income and working-class students.

Of 480 public four-year colleges examined in Undermining Pell, 164, or 34 percent, charge the lowest-income students a net price over $10,000; and 22, or 5 percent, require these students to come up with $15,000 or more.

Embracing Enrollment Management at the U. of Alabama

Many of the 164 public institutions are active participants in the institutional financial aid arms race. But few have embraced the competition with as much gusto as the University of Alabama.

It wasn’t always so. By the late 1990s, the University of Alabama’s admissions office had become complacent, according to a paper that several school officials wrote on the subject for the American Association of Collegiate Registrars and Admissions Officers (AACRAO) in 2010. While the admissions staff did some recruiting, the staff generally expected students to be interested in the school because of its long history and status as a flagship university. Heading into the new century, the university, which marketed itself mainly on its athletic programs and social traditions, was having trouble attracting top students.

Enter Robert E. Witt, the former business school dean at the University of Texas at Austin and president of the University of Texas at Arlington. Upon taking the presidency of the University of Alabama in 2003, he laid down a challenge to the admissions office: to “recruit top student scholars with the same fervor as top athletic prospects, and look beyond the state’s borders to find them.” The admissions staff, which was also charged with expanding the school’s enrollment from 19,000 to 28,000 over a 10-year period, met the challenge head on. According to the AACRAO paper:

The president’s message spread rapidly; with a clear and universally shared vision, a team mentality developed among the major players in enrollment management. The pervasive attitude became one of considerable pride and ambition. And because the vision became so pervasive throughout the institution, enrollment management targets were reached ahead of schedule.

To carry out its mission, the university set up full-time regional recruiters in several nearby states, including Florida, Georgia, Tennessee, and Texas. And the school put its money where its mouth was — establishing automatic scholarships for both in-state and out-of-state students who achieve high standardized test scores and good grades.

For example, at the University of Alabama, out-of state students with 1400 to 1600 SAT scores in critical reading and math who have earned a cumulative grade point average of at least a 3.5 are automatically eligible for a full-tuition scholarship for four years. Those with slightly lower test scores are eligible for scholarships covering up to two-thirds of their tuition. Meanwhile, the school goes all out for National Merit Scholars, covering their full tuition for four years as well as providing them with a reduced rate on campus housing, an additional $1,000 scholarship each year for four years, a onetime $2,000 stipend for summer research or international study, and a free iPad.

Seeking “Full-Pay” Students

But the University of Alabama is not just targeting high-achieving students. As Matthew Quirk of The Atlantic wrote in 2005 on enrollment management, the school is working hard to reel in those who can pay full freight as well:

At the AACRAO conference two members of the University of Alabama’s enrollment management team demonstrated how, in their campaign for out-of-state prospects, they overlaid income data from the U.S. Census on maps of high schools in Texas to target wealthy students.

Overall, nearly 30 percent of University of Alabama freshmen receive merit scholarships, averaging about $9,000 each. The university’s effort appears to have paid off — as it has seen its U.S. News ranking surge in recent years. Considered a second-tier institution in the late 1990s, the school now ranks 77th among all national universities and 32nd among public universities.

But with all the money the University of Alabama spends recruiting the best and the brightest and the wealthiest, the university appears to have little left over for those with the greatest financial need. While Pell Grant recipients make up 23 percent of the school’s student body, the lowest-income students pay an average net price of $13,815 — 37^th highest among all of the public colleges examined.

As the University of Alabama shows, private colleges are not the only ones preoccupied with prestige and rankings. Public college leaders are also driven to move up the pecking order, and they too have found that the most expedient way to achieve this goal is to chase after top students.

Looking for the Big Bucks

The use of strategic enrollment management by public colleges is not just being driven by the quest for prestige. Schools are also using these techniques to try to increase their revenue in the face of large-scale state budget cuts.

Such is the case at the University of Nevada at Reno, which has sustained major reductions in state funding in recent years. In an interview with the university’s alumni magazine, the school’s president, Marc Johnson, said the institution was pursuing an “enrollment management strategy so that we can purposely grow our student body, especially among students who will have a high probability of graduating.” By doing this, he said, “we’ll grow, make more revenue, and add back more faculty and staff positions and still increase our graduation rates.”

The key to the strategy is to attract full-pay students. But university financial aid officials acknowledge that “affluent students (and their parents) expect to be rewarded with academic merit aid.” As a result, “the university has set up a new scholarship award process” that “permits the university to remain competitive in that expectation.”

Under the process, students are automatically considered for a merit scholarship upon admission to the university. The size of the award that students receive depends on their academic record. University officials fully recognize that the shift away from need-based aid has been harmful to low-income students, but they don’t see any way around it.

These policies have certainly taken a toll. While 34 percent of freshmen at the school received merit awards in 2010-11, averaging $2,917 each, the lowest-income students paid an average net price of $11,230.

As these cases show, state disinvestment and institutional status seeking are working together, hand-in-hand, to encourage public universities to follow the lead of their private college competitors – to the detriment of low-income and working class students alike.