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What’s Missing From the Merit-Aid Debate

Nashville — Merit aid has a bad reputation: Critics say that when colleges use it, they reduce the need-based aid available to low-income students.

Jon Boeckenstedt disagrees. For many colleges, merit-based aid is a necessity, he said during a presentation here on Tuesday at the National Association of Student Financial Aid Administrators’ annual meeting. What’s really hurting need-based aid is price increases and imprecise definitions of need, said Mr. Boeckenstedt, associate vice president for enrollment management and marketing at DePaul University.

Sure, some colleges design merit-aid strategies primarily to enhance their prestige, and colleges in a strong market position can shape their classes without it. But for a university like DePaul, he said, merit and need-based aid work together to support low-income and first-generation students while bringing in enough revenue to provide them with a quality college experience.

During his presentation, Mr. Boeckenstedt described six realities he thinks are often missing from the merit-aid debate:

  • Terminology: “Expected family contribution,” “need-blind,” “meets full need,” “merit,” and other terms mean different things to admissions and financial-aid professionals than they do to families.
  • Accounting: Very few colleges pay for financial aid out of their endowments. That means, Mr. Boeckenstedt said, “there’s no pot of gold sitting at the end of the rainbow” that a college can spend on either form of aid.
  • Goodhart’s Law: The principle—“When a measure becomes a target, it ceases to be a good measure”—was originally devised by the British economist Charles Goodhart in reference to government regulation, but it applies equally to enrollment management. When colleges make managing the discount rate their goal, they may make decisions that end up lowering both enrollment and net tuition revenue.
  • Demographic Change: American children—the college students of tomorrow—increasingly come from families that don’t resemble colleges’ traditional customers.
  • Diversity of Colleges: In a purely need-based system, what a student can afford is the sole driver of what that student would pay for a college education. But colleges operate on very different models and rely on tuition revenue to varying degrees. So “does it make any sense we expect students to pay the same net cost at all those institutions?,” Mr. Boeckenstedt asked.
  • The Problem of Class: If not all low-income students are low performers and not all low-performers are low-income students, why do very selective colleges enroll so few needy students?

Not everyone will agree with that analysis, a point that was not lost on Mr. Boeckenstedt, who titled his presentation “A Contrarian’s View.”

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