Merit Aid and a REcent History of College Admissions
There are a few things that colleges could do that would make those things which we all like to rail against (need-aware admissions, gapping, merit aid, financial aid leveraging, preferential packaging, etc.):
1) Honesty and transparency: Do what you say you are going to do and say what you are going to do.
2) Predictability: Put on the table how you award financial aid. If you use formulas for aid, put a financial aid calculator on your web site. If you use the federal formula or a CSS formula or some formula of your own, state what it is. If you have some degree of need aware admissions, articulate your policy.
I think there is this mind set that when you are not proud of what you do, the reaction is to obsfucate. I see this certainly with isues of the admission of legacies and athletes and development cases but even more so in the awarding of financial aid.
The most common response when I suggest this is that there are variables that may affect financial aid that make this unrealistic. But is someone like me, who has been in the business 25 years and who is pretty well versed in financial aid has no idea what level of financial aid my children might get, think how the average family must feel. And the slide into need award admissions has the average family believing that simply applying for aid will hurt their child's chance of admission. Thus many families with need do not apply for it or families that would qualify for aid at private colleges do not apply there. Maybe this is what more people should be talking about, i.e. that this is exactly the purpose fo this obsfucation: more full pay kids and lower financial aid budgets. For a more detailed analysis of this, see below:
A Recent History of College Admissions
Up until the early 1980’s, the college admissions process was fairly straightforward. Almost all colleges promoted themselves through their publications primarily the “view book”, sent to students who had expressed interest in the college and through direct mail. Colleges would buy lists of names from the College Board of those students who took the PSAT or SAT and met some demographic or test score criteria. Admissions selection was usually based on academic factors with preference often given to children of alumni, athletes or those with other special talents, and, to a much more limited degree than today, to those from under-represented minority groups.
Financial aid was given to help families in need meet the cost of education. There was a single form that almost all colleges and the federal government used to analyze financial need and award financial aid, the FAF (Financial Aid Form). There was a standard formula that took into account a number of factors (income, cost of living, age of the parents, savings, equity, etc.) and that used a series of standard tables to determine what a family could afford to pay for college. This formula, the Standard Methodology, produced a figure, the Family Contribution, which was the same for every college to which a student applied. Financial Need was the cost of the college minus the Family Contribution. Most colleges, and virtually all highly selective colleges, agreed to meet 100% of financial need, meaning that they would, through a series of grants and loans, meet the full Financial Need of all applicants.
Thus if the FAF determined that a family could pay $5,000 for college and the college cost $15,000, almost all selective colleges would give students a financial aid package totaling $10,000. Colleges would use preferential packaging, giving financial aid packages with higher grants, which did not have to be repaid, and fewer loans to those students they most wanted.
The National Association of College Admissions Counselors (NACAC), the organization governing most of college admissions, prohibited colleges from using financial need to determine whether a student would be admitted. This policy, accepted by virtually all colleges, was called need-blind admissions. And the cost of college had risen less than the cost of living for the previous two decades and was affordable to the average upper middle class family.
A demographic shift occurred in the early 80’s with a marketable drop in the number of students graduating from high school. Even the most selective colleges began to scramble to maintain the quality and quantity of applications they received. A new beast emerged on the admissions front, the Enrollment Manager. Prior to that, Admissions Directors controlled the marketing of the colleges and the selection of students. Financial Aid Directors determined what financial aid was given to students, generally based on the figures from the FAF. Both generally reported to the College President or someone else not directly involved in admissions. In the most common Enrollment Management model to emerge, the Admissions Director and Director of Financial Aid reported to the Vice President of Enrollment Management.
At this point, you might be asking yourself how these demographic, financial and internal managerial and admissions practices might have any meaning to you. The decisions made by the colleges, the federal government, NACAC and the media over the last 25 years have increased the hype, manipulation, uncertainty and, in the end, the mania surrounding college [delete s] admissions and costs.
Colleges made a number of decisions that had a significant impact on students and parents. Several publications, most notably the US News and World Report, were starting to rank colleges, leading Enrollment Managers to put pressures on to get high rankings. These rankings usually were highly affected by the percentage of students accepted, the standardized test scores of those admitted and the numbers of students who accepted offers of admissions.
Thus colleges began aggressively seeking as many applicants as they could merely to seem more selective by rejecting more and more students. The harder it became to get into college, the more students wanted to apply. And as the number of applicants increased in the 90’s, the strategy to maintain the status quo became a frenzy of scarcity. The most selective colleges were beginning to have admissions in the teens, and the media jumped on the trends. The Grouch Marx phenomenon became the rule of college admissions. It seemed that no one wanted to apply to a college that would admit them. Students and parents began to hire their version of the colleges’ Enrollment Managers. SAT preparation has become a rite of passage for many communities and the growth of the use of private college counselors has grown exponentially. One consultant now charges over $30,000 for her college counseling services. Recently, Michelle Hernandez, a former admissions counselor at Dartmouth, has offered a three-day college admissions boot camp for $10,000.
It was on the financial front that even greater changes were taking place. As financial aid budgets continued to increase, college Presidents and Boards were putting increasing pressure to increase revenues and decrease costs. Beginning in the 80’s, college officials began to realize that there was a much greater elasticity of demand for college than they had assumed, i.e. that costs could continue to rise without causing parents to abandon attending prestigious colleges.
Thus years of increases below the cost of living were followed in the past two decades by tuition increases well beyond inflation. Colleges needed more and more money to be competitive: to build state-of- the- art science buildings, dorms, libraries and athletic complexes, to stay on the cutting edge of technology, to stay in the market for the best professors, to meet the needs of those on financial aid and to attract the best students with merit scholarships not tied to financial need. College tuition at the most expensive colleges (almost all college tuitions at these schools rose at nearly the same cost and rate) passed the $20,000 mark, then the $30,000 mark, and the then the $40,000 mark, with seemingly no end in sight. The cost of college every year was outpacing income year after year.
To increase revenue, every selective college began to market themselves aggressively both nationally and internationally. Colleges began to travel and directly market to areas where they had never previously sought students and started actively seeking international students, to whom they rarely offered any financial aid.
Then a shock wave went through the admissions world. One of the most selective colleges announced that though they were still need blind, they could not guarantee to continue to be so. This was soon followed by a pronouncement by one of the most prestigious women’s colleges of a specific policy to abandon need blind admissions: students who had very high need and were marginal in the pool would be denied. NACAC backed off, after a huge internal fight, from requiring colleges to be need blind in their admissions policies.
The colleges thought they had a fair solution to the problem of escalating financial aid budgets: promulgate a policy that only affected a very small number of applicants. The problem for parents was one of definition. What was a “marginal applicant?” Wasn’t admissions an inexact process where, at the most selective colleges, almost no one had a high assurance of admission? And what was “high need”? Parents began to become more and more anxious about not only whether they could afford college but also whether simply applying for aid would jeopardize admissions for their child. Need Blind Admissions was replaced by the cynically named Need Aware Admissions.
A decision by the federal government at around the same time had an equally negative effect on the ability of parents to predict college costs. The government has given special consideration in its tax code to those who own houses. Interest on mortgages and real estate taxes on one’s residence are deductions from one’s income. The government decided to make the same decision about housing equity in the awarding of federal financial aid: housing equity no longer was in the formula for determining financial need. A new form, the FAFSA, the Free Application for Federal Financial Aid, was developed to reflect this new policy.
Unfortunately, high cost and high tuition colleges wanted housing equity data. Thus the College Board’s CSS Profile was born, where each college would have its own formula for determining need. Fewer and fewer colleges were meeting, with financial aid, even their own computations of what a family could afford to pay. The previous standard of meeting 100% of financial need was replaced with a policy of “gapping” where 90%, 80% or even 70% of financial need was met. In addition, more and more colleges were offering no-need merit scholarships to vie for the most talented students, often at the expense of need-based aid.
Thus we went from a relatively predictable system of admissions and financial aid to one of almost total unpredictability. At the most selective colleges, admission rates are in the single digits. In 2005, for instance, Stanford admitted less than 16% of students with straight A’s in high school or who were in the top 10% of their high school class and admitted only 20% with a perfect 800 math SAT score and 28% of those with a perfect 800 verbal score. Colleges have continued the aggressive marketing begun in a time of decreasing enrollment when the children of baby boomers have been swelling the number of students applying to college to record numbers.
Now one system with total uncertainty replaced a fully predictable one. Financial aid awards to the same students applying to similarly priced and endowed colleges began to differ by tens of thousands of dollars. More and more poor students were being denied simply because they were poor. Enrollment Management firms began to advise colleges on how to use financial aid to get students to enroll. “Financial aid leveraging” used complex demographic analysis to target financial aid. If it were discovered, for instance, that Asian students would more likely enroll if they were given automatic scholarships of $2000 that became policy.
Prior to the 90’s, a parent with a given income and assets could almost totally predict what level of financial aid they would receive. There were publicly available tables that determined the parental contribution from the FAF. Since most high priced colleges agreed
to use this figure to determine financial aid and agreed to meet 100% of need. Thus a student applying to five colleges could reasonably expect to get the same level of financial aid with only a small variation among them in the ratio of grants to loans. With the introduction of the CSS Profile, the abandoning of need blind admissions and meeting of 100% of financial need and the proliferation of merit scholarships and financial aid leveraging, all predictability of financial aid was lost.
At the same time, the cost increases at public colleges were far outstripping the increase in the financial aid from the federal and state governments for poor students. Except for public community colleges, even public colleges have become no longer affordable for the poor and middle class parents.
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