In 1992, following high-profile anti-trust suits against several Ivy League schools, Congress passed legislation that permits schools that use need-blind admissions to develop common financial aid practices and guidelines and creating a special exemption from regular anti-trust laws. In January, the Council of Independent Colleges' 2013 Presidents Institute held a special session to develop strategies to expand this legal exemption to cover more institutions, and now the U.S. Justice Department has opened an investigation into whether the session's proceedings violated anti-trust regulations.
Controversial Discussion
As the Chronicle of Higher Education reported last week, The Justice Department issued a letter to those in attendance about a possible agreement among colleges to restrict tuition discounting and prevent colleges from changing or improving financial aid awards to individual students.┬" Attendees say the session--Collaborative Efforts on Student Aid and Admissions Policies: A Report on Progress, Prospects, and Possibilities┬"--was a discussion on how to influence the legislative process when the Higher Education Act comes up for reauthorization, specifically regarding how need and non-need based awards are handled”and did not run afoul of anti-trust legislation.
The distinction between need and non-need aid types is important. While both help to finance a student's education, merit-based aid relies on non-need factors to determine the amount awarded. A prospective student with stellar credentials and financial resources sufficient to meet the majority of education costs may still be awarded some institutional grants as an incentive to enroll. Opponents to this practice argue that by siphoning monies to students who do not need it, colleges and universities could be limiting the opportunities of students who cannot afford to attend without such aid.
The Merits of Merit Awards
When decisions on award types and amounts are issued to students, financial aid administrators and enrollment managers must consider ethical concerns about access, the student's own needs, and the institution's bottom line, according to Roberta Johnson, Director of Financial Aid at Iowa State University.
Some institutions look at merit awards to fill their classes,┬" Johnson said. By offering a tuition discount--say $5,000 off of $30,000--the school still gets $25,000. [But] If you don't attract that student, how much money do you get?┬"
If you don't meet enrollment goals, then you must start making cuts,┬" Johnson added. And those are always difficult decisions.┬"
Financial aid leveraging policies differ significantly by institutional size and control. According to the 2012 report, College Board Trends in Student Aid, private non-profits met 73% of student need at the least selective institutions, and 92% at the most selective. The average award was $7,570 and $14,440, respectively. Public institutions indicated a similar but more restrained trend; the least selective met 59% of need and the most selective met 80%, with the average award being $990 and $1,250, respectively. The remaining percentage of institutional aid for all controls was for merit awards; for example, the average non-need aid at the most selective private institutions was about $2,900.
Private universities can more adequately address the financial concerns of their incoming students because they can use tuition dollars or dip into endowment to fund aid. Public institutions typically have more limitations “ for example, an Iowa state law passed earlier this year allows only non-resident tuition funds to be used to subsidize need-based aid. In addition, the sheer volume of students at most public schools can affect the amount issued. They must strike a balance within existing budgets to fund high-quality educational units while maintaining a degree of access for those who are not well-off, and merit awards play a critical role in that process.
Colleges are often ranked based on the overall profile of their incoming freshman class by outlets such as the U.S. News and World Report. It behooves an institution to attract the brightest students they can in whatever way they can. However, as Johnson points out, one thing that often gets lost in the equation is that merit and need are not mutually exclusive. You might have an exceptional student from a poorer background who qualifies for both types of aid. The issue is often about the quality of the student, and how he or she might fit into your student profile.┬"
The Justice Department's investigation, if nothing else, has forced college administrators to step back and carefully examine how aid affects both student opportunity and the school budget. If and when legal exemptions are permitted, the development of common guidelines should reflect the complexity of the issues at play.