Bloomberg News

Colleges Soak Poor Students to Funnel Aid to Rich

May 08, 2013

Colleges Soak Poor U.S. Students While Funneling Aid to Rich

The entrance to Boston University. Photographer: Stan Honda/AFP via Getty Images

(Corrects status of New America president in fifth paragraph.)

U.S. colleges such as Boston University are using financial aid to lure rich students while shortchanging the poor, forcing those most in need to take on heavy debt, a report found.

Almost two-thirds of private institutions require students from families making $30,000 or less annually to pay more than $15,000 a year, according to the report released today by the Washington-based New America Foundation.

The research analyzing U.S. Education Department data for the 2010-2011 school year undercuts the claims of many wealthy colleges that financial-aid practices make their institutions affordable, said Stephen Burd, the report’s author. He singled out schools -- including Boston University and George Washington University -- that appear especially pricey for poor families.

“Colleges are always saying how committed they are to admitting low-income students -- that they are all about equality,” Burd said in a phone interview. “This data shows there’s been a dramatic shift. The pursuit of prestige and revenue has led them to focus more on high-income students.”

The New America Foundation is a nonprofit, nonpartisan public policy institute. Until the end of March, its president was Steve Coll, a former Washington Post managing editor who will become dean of the Columbia University Graduate School of Journalism in July. Its chairman is Eric Schmidt, executive chairman of Google Inc. (GOOG), the Mountain View, California-based search-engine company.

‘Merit Aid’

To increase their standing on college rankings, more private colleges are giving “merit aid” to top students, who are often affluent, while charging unaffordable prices to the needy, according to the report. The percentage of students receiving merit aid jumped to 44 percent in 2007-2008 from 24 percent in 1995-1996, the report found. To a lesser extent, public universities are using some of the same practices, Burd said.

Many of the most selective and wealthiest colleges, including the eight members of the Ivy League, Williams College in Williamstown, Massachusetts, and Cambridge-based Massachusetts Institute of Technology, award aid based only on financial need. Less selective nonprofit colleges often offer tuition reductions and merit aid to lure students to fill their seats.

Needy Students

Boston University charges students whose families earn $30,000 or less an average “net price” -- or costs after scholarships -- of $23,932 and George Washington University, $14,670, the report said. Both offer merit scholarships, which aren’t based on need, according to their websites.

Opinion From Michael Petrilli: Pell Grants Shouldn’t Pay for Remedial College

The figures for Boston University represent averages, and needy students with strong academic backgrounds often get more aid, up to the full cost of attendance, said spokesman Colin Riley. Many of those receiving merit awards would also be eligible for need-based aid, he said.

“We are very concerned about being affordable,” Riley said in a phone interview. “We’re extremely generous with financial assistance, but we do not have unlimited financial resources.”

About 60 percent of George Washington undergraduates receive financial aid, Michelle Sherrard, a spokeswoman, said in an e-mail. The school has also recruited more low-income students.

“We are committed to ensuring the affordability and accessibility of a George Washington education,” Sherrard said.

Harvard, Yale

Schools such as Harvard University and Yale University have received considerable attention for giving a free ride to the lowest-income families. Yet, they have relatively few of those students, the report said. In the 2010-2011 school year, 11 percent of students at Harvard, based in Cambridge, Massachusetts, received Pell grants, scholarships for needy students, the report said. At Yale, the figure was 14 percent.

The 11 percent figure at Harvard includes students at its extension school, which offers continuing education classes, said Jeff Neal, a Harvard spokesman. Most aren’t eligible for Pell grants because they aren’t pursuing degrees. In 2010-2011, the number of undergraduates at Harvard College receiving Pell Grants was 17 percent, he said.

Yale’s financial-aid program “ensures that every student who is admitted to Yale can afford to attend, no matter what their financial circumstances,” spokesman Tom Conroy said in an e-mail.

Most Generous

The report praised Amherst College in Massachusetts; Vassar College in Poughkeepsie, New York; and Grinnell College (78077MF) in Grinnell, Iowa, which all reported that more than 20 percent of their students had Pell grants and required low tuition payments from students whose families earn $30,000 or less a year. At Amherst, those students pay almost nothing, while Vassar seeks an average of $5,706, according to the report.

Colleges use merit aid for talented middle- and upper-income students because it is less costly than pursuing similar prospects from poor families, said Catharine Hill, Vassar’s president. Enrolling low-income students costs schools money because they are giving up a spot for those who can pay full freight -- or close to it.

“Unfortunately this kind of choice further contributes to the income inequality that has increased significantly in the United States over the last three or four decades,” Hill said in an e-mail. “Our nation’s commitment to equal opportunity and social mobility is at risk.”

Along with subsidizing tuition, Amherst gives funding for costs such as bedding and interview clothes for seniors’ job interviews, said Tom Parker, dean of admissions.

“If you want to be diverse, you can’t be diverse on the cheap,” Parker said in a phone interview.

To contact the reporters on this story: John Hechinger in Boston at jhechinger@bloomberg.net; Janet Lorin in New York jlorin@bloomberg.net

To contact the editor responsible for this story: Lisa Wolfson at lwolfson@bloomberg.net


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