Traditional Higher Education’s Best Kept Secret

One of traditional higher education’s best kept secrets is the extent to which colleges are undermining the goals of the federal Pell Grant program.

When Congress created Pell Grants in 1972, it expected that the federal government would work hand-in-hand with colleges (as well as states) to eliminate the financial barriers that all too often keep low-income students from attending college. But as we have seen, both public and private four-year colleges are increasingly working at cross purposes with the government by using their institutional aid dollars to try and lure in the students they desire, rather than to meet the full financial need of their students. As a result, Pell Grant recipients who choose to enroll in these institutions often have little choice but to go deeply into debt to do so.

This is not a practice that colleges generally like to advertise. In fact, higher education lobbyists have gone to great lengths to fight efforts by policymakers to lift the veil on colleges’ financial aid packaging policies.

But last winter, Ursinus College, a private college in Pennsylvania, provided an editor at Kiplinger’s Personal Finance magazine with an inside look at how the institution leverages its financial aid budget to try to attract “outstanding applicants from every economic strata, including the wealthiest.”

According to the Kiplinger article, which also ran in The Washington Post, Ursinus had traditionally awarded its aid according to financial need. But in the mid-1990’s, the college’s new president set out to strengthen the institution’s academic stature and its finances. At that point, the primary purpose of the admissions and financial aid offices became to enroll “stronger students who could also pay a higher portion of costs.”

To carry out these goals, the enrollment manager at Ursinus devised a system that ranks applicants primarily “according to their grades, standardized-test scores and accomplishments.” Admissions officers then use those rankings “not only to decide which students to admit but also to determine how much merit aid, along with need-based aid, they will receive.” Students in the first tier (those in the top 10 percent of their high school classes and score more than 1300 on their SATs) get the most generous scholarships.

How does this play out for individual students? The article gives examples of the aid packages offered to two prospective students who have been accepted through early decision — one from an affluent family and the other low-income one — and received the top ranking. The first comes from a family with an annual income exceeding $200,000 and with “investments and cash accounts” that “add up to about $150,000”:

Even before factoring in home equity, [the student and his parents] do not qualify for need-based aid. But the student has been rated a one by the admissions office and is awarded a merit scholarship of $20,000.

The second comes from a family with annual earnings of about $26,000 and has “no assets to speak of”:

Rated a one, this student is the kind colleges fight over, both to fulfill their educational mission and to strengthen their incoming class. In addition to federal grants [i.e. Pell Grants], Ursinus offers him a $13,000 scholarship, a $19,000 grant and subsidized Staffords [federal student loans], plus a job through the federal work-study program.

But [Suzanne Sparrow, the financial aid director at Ursinus] cannot come up with a package that meets the family’s full need. Along with most colleges, the school often leaves a gap between award and cost, the better to spread its resources. The award falls short by $8,000. Nonetheless, Sparrow said, “with $32,000 in grants and scholarships, it’s a nice package.”

It may be a “nice” package, but it’s not nice enough. This disadvantaged student is not only $8,000 in the hole but will need to come up with at least an additional $10,000 if he wants to live on campus, as our colleagues at The Quick and the Ed blog have pointed out. Where will this Pell Grant recipient come up with this money? Most likely by taking out high-cost private student loans he’ll be paying off for years to come.

Ursinus is hardly the only campus to lavish rich rewards on affluent students while under-funding students with the greatest financial need. A 2008 study by the Institute for College Access & Success found that about 49 percent of all institutional aid provided by public four-year colleges and 25 percent provided by private colleges was awarded “in excess of need.” Meanwhile, the  average unmet need of low-income students continues to grow. Is it any wonder that our higher education system is becoming so stratified?

If colleges like Ursinus are no longer committed to devoting their financial aid resources to helping low-income students attend their campuses, why should the federal government? At Higher Ed Watch, we think this is an especially pertinent question to ask at a time when the government is having so much trouble keeping up with the ever-growing cost of the Pell Grant program.