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Merit Versus Need

October 21st, 2013 by dfarish

The New York Times published an article by Catherine Rampell on Sept. 24 titled “Freebies for the Rich.” (Another version of the same article was published in the Times Sunday magazine on Sept. 29.)

In the article, Ms. Rampell points out that, at public universities, the share of aid devoted to “merit” has tripled, to 29 percent, over the past two decades. She also points out that metrics used to determine merit, such as SAT scores, are closely correlated with family income: whereas only one student in 10 receives merit aid in families earning less than $30,000, one student in five receives merit aid in families earning over $250,000.

One of the consequences of the use of aid for purposes other than need is that college completion rates have diverged over the past 40 years as regards students in the top quintile of family income compared to students in the bottom quintile. By 2011, 70 percent of young adults from families in the top quintile had a college degree. In contrast, only 10 percent of young adults from families in the bottom quintile had a college degree.

To the extent that a college degree is a prerequisite to social mobility, we are a more highly stratified society today than we were 40 years ago.

The New York Times published a follow-up story in its Sunday magazine on Oct. 13. The Times received almost 450 comments from readers of the original story. Here’s how recommendations in the responses were grouped:

  • End school rankings:  3%
  • Make public universities free:  4%
  • Lower tuition:  11%
  • Focus on need-based scholarships:  32%
  • Focus on merit-based scholarships:  50%

These results in no way represent a scientific survey. They are simply the compilation of comments made by people who chose to respond. Nevertheless, I find the results troubling. It would seem that 97 percent of the respondents want someone else to pay for part of the cost of their college degree.

Public colleges and universities in virtually all the states now rely more on revenue from tuition than on state appropriations. For public universities to be made free, taxes would have to be increased substantially, to allow state appropriations to be increased by a factor of two to as much as five, depending on the particular state. The result would presumably be well received by families with children in college, but almost everyone else would be bitterly opposed to this solution.

What about respondents who recommended “lower tuition?” Readers of this blog know that I am sympathetic to the dilemma facing families who wish their children to receive an excellent college education, but who simply cannot afford the exorbitant prices of most colleges today. But merely lowering tuition, without first ensuring that sufficient resources exist to continue to provide excellent education, is potentially trading one problem (lower prices) for another (lower quality). Nevertheless, this is the solution (lowering tuition while maintaining quality) toward which I am most favorably inclined.

The large majority of respondents recommended focusing on scholarships, with half as many again supporting merit aid over need-based aid. Is it more important for a college to recognize merit than it is for the college to respond to need?

Need-based aid is certainly in keeping with the long-standing American tradition of rooting for the underdog. Students from economically disadvantaged backgrounds who have nevertheless worked hard in high school deserve an opportunity to attend college at a price they can afford. Colleges and universities should use the drawdown from their endowments to support such students financially.

But where does that leave high achieving students who do not have demonstrated need? Do we just ignore them?

“Merit versus need” represents an unnecessary dichotomy. As I have written in previous blog posts, over the past 20 years colleges and universities have raised their prices dramatically faster than the rate of inflation in order to generate revenue that they can use to offer discounts for both merit and need. Having a sticker price that significantly exceeds the institution’s actual cost to provide for a student’s education means that students (and families) who pay anything close to the sticker price are contributing to a fund that the college is using to provide discounts to students deemed more worthy (whether because of need or merit).

Parents have gradually tumbled to this reality, and are expecting (even demanding) substantial discounts in the sticker price. They would prefer the discount to be called a “scholarship,” and they would prefer the scholarship to be for merit and not need. But the bottom line is that, one way or the other, they want a “sale” price.

Until colleges and universities start pricing themselves reasonably (that is, by having sticker prices that reflect the school’s actual cost, rather than some inflated number), we will see growing expectations by parents of a significant “scholarship” from the college of their choice.

Meanwhile, until that day happens (don’t hold your breath), we will continue to see the unpleasant scrum forced upon parents who want more money placed in the pile that best meets their interests, be that merit or need. The larger question of what is in the best interests of society gets crushed in the middle.