Jumping Off the Merit Aid Merry-Go-Round

Besides the most elite schools, nearly all private nonprofit colleges provide merit aid or tuition discounts — often to the detriment of the low-income students they enroll. But as I wrote in Undermining Pell Volume II, some private colleges have jumped off the merit aid merry-go-round and redirected their resources to need-based aid.

In 2007, Hamilton College in Clinton, NY, for example, announced that it was phasing out its merit aid program. The school had previously offered half-tuition merit scholarships to several dozen top students it hoped to lure away from the country’s most elite liberal arts colleges, such as Amherst and Williams.

But with more and more of today’s students coming from families with significant amounts of financial need, Hamilton officials decided that the policy no longer made sense. “We’re going to need more financial aid in our budget over time, but before I ask the college for additional resources, I think the responsible thing to do is look at allocating the funds we have now,” Monica Inzer, the school’s dean of admissions and financial aid, said at the time. “It’s right for us to walk away from this now, ethically and morally. It doesn’t feel right for us to discount the price for families that can afford to pay, and maybe not to have enough for others.”

Since the policy change, Hamilton has increased its need-based aid budget by 85 percent, to $32 million. The college has also become “need blind” in admissions and continues to meet the full financial need of its students. These policies are a stretch for an institution that has an endowment that is half the size of those of its most elite competitors. But both Inzer and the college’s president, Joan Hinde Stewart, are personally committed to making the college more socioeconomically diverse. After all, both were the first in their families to go to college. “To me this is personal,” Stewart told Inside Higher Ed. “This is something that matters because of my history and background. I needed inspiration and aid to go to college.”

Hamilton is not alone. Franklin & Marshall College has also abandoned its merit aid program. In 2008, the school was spending about a quarter of its institutional aid budget chasing after students from upper-middle-income and wealthy families in the Northeast. Nearly two-thirds of its freshmen were “full pay” students. Meanwhile, only 5 percent of first-year students received Pell Grants.

But the college was struggling to get the students it wanted. Despite its substantial investment in merit aid, Franklin & Marshall often lost top applicants to competitors offering steeper discounts. So the college decided to change gears, phase out its merit aid program, and target high-achieving students from low-income families.

Over the last five years, Franklin & Marshall has increased the amount of financial aid it provides to its freshmen by 95 percent, from $5.8 million to $11.3 million. The college has also forged key partnerships with high-quality charter schools and college-outreach organizations like the Posse Foundation to strengthen its recruitment of low-income students. And it has instituted innovative support programs to ease the transition to college for financially needy students.

These policy changes have produced results. The proportion of Pell Grant recipients at Franklin & Marshall has more than doubled since the college phased out its merit aid program. And those numbers are expected to grow further – as Pell Grant recipients now make up 17 percent of the incoming freshman class.

According to Daniel R. Porterfield, Franklin & Marshall’s president, the school’s change of focus has been a boon for the institution. Enrolling a larger share of Pell Grant recipients “has actually improved the long-term health of the college,” he told The New York Times. “We have enhanced our reputation as a national institution. We have deepened the bench of academically strong students and at the same time, we are more diverse than ever before.”