[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 third in a series of posts related to the report's findings. Read earlier parts of the series here and here.]
Some private nonprofit colleges are making extraordinary efforts to recruit, enroll, and financially assist low-income students. Unfortunately, they are few and far between. Only 53 private colleges, or 11 percent of the schools examined in Undermining Pell charged students with family incomes of $30,000 or less an average net price under $10,000 in the 2010-11 school year. In contrast, nearly two thirds of the private institutions analyzed charged the lowest income an average net price of over $15,000 a year.
Certainly, a substantial number of private colleges have small endowments, making it extremely difficult for them to provide adequate support to those students with the greatest need. Indeed, many of these schools provide deep discounts because they believe they must do so as a matter of survival.
However, there are plenty of private colleges that have the means to enroll a substantial share of Pell Grant recipients and charge them a low price but choose not to do so. These include some fairly prosperous colleges that use their institutional aid as a competitive weapon to attract the students they desire, rather than to meet the financial need of their students.
Many of these colleges follow the same playbook: using so-called merit aid to bring in students that will help them build their prestige and propel themselves up the rankings. And while a number of these generally second-tier schools strive to compete with the most-elite institutions for top students, their endowments, while substantial, tend to pale in comparison. As a result, these colleges often have to rely heavily on tuition dollars to finance their operations, giving them a significant incentive to use their institutional aid to attract full-pay students as well. Meanwhile low-income students who enroll in these schools are generally left with a hefty gap between what the government says they should be expected to pay and what they are being charged.
A Change of Direction at GW
One such “striving” school is George Washington University (GW). For most of its history, the university was a commuter school that primarily served a diverse group of working adults seeking credentials that would help them advance in their careers.
That all changed in 1988 with the arrival of the university’s new president, Stephen Joel Trachtenberg. The former president of the University of Hartford immediately set an ambitious course for the institution: to be the destination of choice for students who didn’t make the cut at the nation’s most selective colleges.To accomplish this, Trachtenberg knew that he would have to make the school much more appealing to an upscale crowd.
Over 19 years, he turned what was a relatively low-cost institution into one of the most expensive colleges in the country and went on a building spree to provide the kind of amenities that wealthier students crave, such as state-of-the-art dormitories and a fancy new student union that won the American Institute of Architects’ highest award. And Trachtenberg opened up the university’s financial aid coffers for the sole purpose of “buying talent,” as he himself has acknowledged. According to a recent profile of the former GW president in The Atlantic, Trachtenberg operated under the philosophy “that students were more interested in attending a $40,000 school with a $20,000 discount than they were in attending a $20,000 school.”
Since Trachtenberg’s retirement in 2007, the university’s leadership has scaled back a bit (there are now nearly two dozen colleges that are higher-priced than GW, after all). But the school remains among the 30 least socioeconomically diverse private colleges in the nation. While 20 percent of GW freshmen receive merit aid, averaging about $18,500 each, only 13 percent of its students receive Pell Grants. GW’s lowest-income students pay an average net price of nearly $15,000, and student loan borrowers at the school graduate with an average debt of about $33,000.
Rising Up the Ranks at Miami
Another school that has had a remarkable rise up the ranks over the past several decades is the University of Miami, which pioneered many of the enrollment management practices that have become commonplace today.
In the late 1980s, the fortunes of the 60-year-old school were flagging. Most people outside the state had not heard of it, or thought of it as a party school that excelled only in college football.Many mistakenly believed it was a giant state school. At the time, the school was admitting about three-quarters of the students who applied.
What was needed, university officials decided, was to bring together all of the separate offices involved in enrollment to make a concerted effort to ramp up the marketing of the school and to do all they could “to improve student quality while maximizing tuition revenue.” This involved recruiting high-achieving students and rewarding them with generous scholarships. It also meant copying the trappings of more-prestigious institutions. “To be considered a top private university, the University of Miami needed to act more like a highly selective private college,” Paul M. Orehovec, the school’s former vice president of enrollment management, wrote in a history he has compiled of the university’s efforts in this area. For example, the school introduced a wait list to make it appear more exclusive than it was, and started a legacy program to give the children of alumni a leg up in the admissions process.
These efforts bore fruit as the University of Miami started to rise through the ranks. But this process accelerated considerably after Donna Shalala, the former Secretary of Health and Human Services, came on board in 2001. Under her leadership, the university became much more aggressive in recruiting top students.
The school, for example, started inviting several hundred prospective students to the campus each spring to compete for the new Isaac Bashevis Singer Scholarships — which cover four years of full tuition, totaling more than $150,000 for those who demonstrate “superior academic achievement and abilities for success.”This “one-of-a-kind weekend” gives these students the chance to “get firsthand information about life as a high-achieving student at the University of Miami.” All they have to do is have a meeting with a faculty member and try to convince that professor they are deserving of the school’s most “prestigious merit award.”
In 2011, the university awarded 67 Singer scholarships. But those who missed out had no need to worry, as they still had a very good shot at winning one of the school’s other merit awards. Overall, around a quarter of University of Miami freshmen receive non-need-based aid, averaging about $23,000 per student.
By the standards that colleges use to judge their performance these days, Shalala’s efforts have paid off big time. The University of Miami has catapulted up the U.S. News rankings — breaking the top 50 for the first time in 2009 — making it a top-tier university in the magazine’s estimation. The average SAT scores of incoming freshmen have risen over 100 points, to nearly 1300. And the university now admits fewer than two out of every five students that apply.
But not everyone has benefited from the University of Miami’s generous merit aid policies. While Pell Grant recipients make up 22 percent of the school’s student body, the school’s lowest-income students pay a hefty average net price of $21,415.
Besides the very richest colleges and some exceptional schools, nearly all private colleges provide generous amounts of merit aid, often to the detriment of the low-income students they enroll. But 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 the top -- and wealthiest -- students as well. Stay tuned to see how the merit aid game is being playing out at our country’s public universities.