NACUBO’s Misleading Spin on Merit Aid

With its annual reports on tuition discounting, the National
Association of College and University Business Officers (NACUBO) does a great
job showing the harm that private colleges are inflicting on themselves through
their high tuition, high aid strategies. The organization, however, doesn’t
provide an honest picture of how these policies are harming low-income
students.

There is a red-hot arms race occurring among selective
private and public colleges for the best students they can get, as well as the
wealthiest. The richest private colleges and universities — with billion
dollar and even multi-billion dollar endowments — can afford these practices.
However, the vast majority of private colleges have small endowments. As a
result, their heavy discounting is putting a lot of these schools at risk, as
their net tuition revenue is barely rising. Plus, with so many colleges
engaging in the same practices, it’s unclear whether schools are deriving much
benefit from discounting. As this year’s survey shows, more than half of the
schools that provided enrollment data to NACUBO saw their enrollments drop
despite their heavy discounting. Ken Redd, NACUBO’s director of research and
policy analysis, wrote a great paper 17 years ago predicting the damage these
practices would do. The paper was appropriately entitled “Discounting Toward Disaster.”

But while NACUBO does a great job showing how these policies
are hurting schools, the group is a bit disingenuous in describing how these
policies are affecting students, particularly those from low-income families
who can’t afford to go to college without substantial amounts of financial aid.

NACUBO goes out of its way to try to put the best spin on private
colleges’ financial aid practices, by counting “merit aid” that goes
to financially needy students as need-based aid. It’s important to point out
that at expensive private colleges, fairly well-to-do students can have some
financial need because the prices are so high. So applauding colleges for their
commitment to need-based aid because they are giving some of their merit aid
money to students with financial need is misleading. Students who come from
families making well over $100,000 annually may have some financial need when
attending colleges that have a total yearly cost of attendance of $70,000.
Colleges should not be praised for using their precious institutional aid
dollars to recruit affluent students, while leaving low-income and working
class students with large amounts of unmet need – which may make it much harder
for them to persist and graduate.

Here, in my opinion, are
the three most important numbers in the report that belie NACUBO’s positive
spin:

• Only about 41
  percent of institutional aid dollars at these schools are solely being used for
  true need-based aid (where merit is not a factor). That seems like a pretty
  small share to me, and may explain why so many of these schools (outside the
  Ivy League and a select group of elite private liberal arts colleges) are
  “gapping” students, leaving them with large amounts of unmet need. As
  I reported in my latest Undermining Pell paper, 94 percent of the 824 private colleges I examined charged the lowest
  income students an average net price over $10,000; 72 percent had an average
  net price over $15,000; and just about a third of the schools left the lowest
  income students on the hook for more than $20,000. The average net price is the amount of money students and their families are on the hook for after all grant and scholarship aid is taken into account.
• More than
  one-fifth of the institutional aid dollars these colleges are giving out go to
  students with absolutely no financial need. Despite NACUBO’s spin, that’s not
  an insignificant sum. That’s billions of dollars that could be used to help students
  who truly need it to be able to afford to attend. Less gapping would very
  likely mean that fewer of these students would end up dropping out.
• Nearly
  two-thirds of
  private college chief business officers NACUBO surveyed reported that they are using
  “financial aid strategies” as part of their recruiting. That is
  financial aid leveraging — meaning that they are using their institutional aid
  primarily to bring students in, instead of providing aid to those who need it
  most.

NACUBO
does a great service by putting these tuition discounting numbers out and
showing the harm that institutions are doing by sticking with their high
tuition, high aid strategies. But it’s disappointing that the organization
continues to go out of its way to put such a positive spin on how these
policies affect students. What is needed is less spin and more straight talk to
their members about how damaging their financial aid “gapping” practices are
doing to the students who need the most financial help.