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When it Comes to Saving Pell Grants, Colleges May Be Their Own Worst Enemy

Published:  September 22, 2011

Are colleges trying to kill the Pell Grant program? It sounds like an absurd question. But after reading the results of a recent survey that Inside Higher Ed conducted of nearly 500 college admissions directors, we think it's a fair one to ask.

As readers of Higher Ed Watch well know, the Pell Grant program is in the midst of a major budget crisis. The White House and Congress have struggled mightily over the last two years to try to keep the current $5,550 maximum Pell Grant in place. And the program’s funding problems are only going to get  more severe at the end of the 2013 fiscal year, when the supplemental Pell Grant funds that Congress provided in this summer’s budget ceiling legislation run out.

Obama administration officials and the program’s supporters in Congress have been willing to sacrifice many student benefits they have previously supported (with the latest victim expected to be the interest subsidy payments that the government makes on federally subsidized loans during the six-month period after students leave college) because they remain committed to the program’s core mission: eliminating the cost barriers that all too often keep low-income students from attending college.

But do the nation’s public and private four-year college leaders share this commitment? They certainly say they do. The results of the IHE survey, however, suggest that many of them are just paying it lip service.

According to the survey, non-profit colleges are working increasingly hard to bring wealthy students to their schools in order to maximize their revenue. The schools generally try to achieve this goal by offering generous institutional aid awards to these otherwise “full-pay students.” [After all, it’s more profitable for schools to provide four scholarships of $5,000 each for affluent students whose parents who will be able to pay off the balance than it is provide a single $20,000 grant to one low-income student, as the Atlantic Monthly described in a groundbreaking article it ran on financial aid leveraging in 2005.]

This strategy is particularly pervasive at public colleges and universities. Reporting on the survey, IHE noted that:

Recruiting more “full pay” students -- those who don’t need financial aid – is seen as a key goal in public higher education, a sector traditionally known for its commitment to access. At public doctoral and master’s institutions, more admissions directors cited the recruitment of full-pay students as a key strategy than cited providing aid for low-income students (At doctoral institutions, the gap was 47 percent to 40 percent, and at master’s institutions, the gap was 45 percent to 38 percent).

These practices, however, are not exclusive to public institutions. About a third of four-year private liberal arts colleges have also ramped up their recruitment of affluent students. This is particularly true at less selective campuses, which tend to rely more heavily on tuition as a source of revenue than their elite peers.

The competition for the wealthy is so strong that 10 percent of the college admissions directors at four-year colleges (and nearly 20 percent of those at private liberal arts colleges) said that they give affluent students a significant leg up in the admission process -- meaning that “the full pay students they are admitting have lower grades and test scores than do other admitted applicants,” IHE reports.

The fact that colleges are providing affirmative action for the wealthy is, of course, the opposite of what one would expect -- given all of the extraordinary advantages these students have over their less fortunate peers. Few of the admissions directors surveyed, however, appear to have any qualms about these practices.  

Overall, the survey found that 88 percent of the admissions officers believe that “merit scholarships are an appropriate use of institutional financial resources.” But this survey clearly shows that “merit aid” often doesn’t go to the meritorious. Many colleges, in fact, use their institutional aid to recruit students who can afford to pay full freight, regardless of their academic qualifications. That leaves the schools with fewer dollars to spend on the Pell Grant recipients they do enroll. As a result, these low-income students often have little choice but to take on heavy debt loads, look for cheaper alternatives that may not serve them as well, or abandon their college dreams altogether.

At Higher Ed Watch, we believe that colleges that are leveraging their financial aid to reel in wealthier students are putting the Pell Grant program at risk. After all, if colleges aren’t willing to devote their financial aid resources to helping low-income students attend their campuses, why should the federal government?

That's a question policymakers are bound to ask in the coming months as they look for long-term solutions to the Pell Grant's budget problems.

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