Compare Colleges Find Scholarships Financial Literacy College Pulse

Categorized | Financial Aid

Are Schools Using Aid to Lure Wealthy Students?

moneybagA recent CNBC report highlights a quiet, but growing, concern in the higher-education community: schools may be offering more scholarship money to wealthy students and less to students from lower-income backgrounds.

While the study shows that schools—most especially private institutions—must operate as businesses, it also highlights the importance of scholarships and grants for higher education.

The Study

The 2013 Sally Mae study, titled “How America Pays for College,” surveyed undergraduate students (aged 18-24) and found a couple changes in payment methods for students and their families over the last several years. Based on their observations and interviews, the researchers found that:

  • Parent spending has declined post-recession (27 percent in 2013 compared to 37 percent in 2010) and the average parent contribution has declined by 15 percent since 2010.
  • More students depend on scholarships and financial aid.
  • A greater number of families take out additional actions to make college affordable (e.g., taking out a second job, seeking out grants, etc.)
  • Despite a recent recession and growing costs, the majority of American families surveyed still believe in the value of college.

The increasing significance of grants and scholarships for student expenses is highlighted by the study, which proclaims that “the post-recession reality appears to be that grants and scholarships have replaced parent income and savings as the major contributor to paying for college.” The majority of scholarships come from colleges themselves (61 percent of families surveyed received scholarships this way).

The most interesting finding of the study, though, focused on the distribution of scholarship money from institutions. As noted by CNBC, “36 percent of students from wealthy families received scholarships averaging $10,213 for the school year, while 35 percent of students from families earning less than $35,000 a year received scholarships worth an average of $7,237.”

Granted, this data may be affected by a number of different factors—merit-based scholarships do not typically take family income into account, for instance—but the research is upsetting enough to leave some educators and families wondering whether universities are targeting and enticing wealthy students with scholarship aid, while not offering as much funding to students in need.

Are Lower-Income Students Being Left Behind?

Despite the findings of the study, lower-income students still receive a large amount of financial aid from schools. In this past year, 19 percent of high income families (those making more than $100,000 per year) received federal grants that averaged $5,757. On the other side of the spectrum, a whopping 63 percent of low income families (those making less than $35,000 per year) received federal grants that averaged $6,170.

Scholarship amounts offered by schools are painting a different picture, however. Because scholarships can be granted by the institution—not by the government—the school is not obligated to take financial considerations into account. As such, most schools offer myriad “merit based” scholarships (presumably to students most deserving based on their academic, and not their financial, standing). When these scholarships are taken into account, it would appear as though colleges are granting more aid to those who least need it.

Schools as Businesses

While this makes matters more difficult for students from low income families, it’s hard to fault the academic institutions too heavily. Universities are simply trying to continue a successful cycle. This is especially in the case with private schools.

Private universities rely on donations from alumni and families, so “investing” in high-income families is a smart move. In an exploration of this concept, the New America Foundation issued a study titled “Undermining Pell: How Colleges Compete for Wealthy Students and Leave the Low-Income Behind,” which asserted that scholarships for the wealthy are part of an institution’s “relentless pursuit of prestige and value.” According to CNBC, schools may also be using these scholarships to entice “highly-qualified” students (or, students with outstanding scores, competitive academic honors, etc.) who may even be from higher-income families and who may not qualify for need-based grants.

The New America Foundation also makes the point that it is more profitable for a school to provide four $5,000 scholarships to affluent students than one $20,000 scholarship to a single low income student. This places universities in a tricky situation as they try to balance future resources with current academic integrity and rewards.

Finding Support

So are students from lower- and middle-income families left facing a future without aid from competitive or private universities? Probably not. This general lean towards the affluent is only with regards to scholarships. Low income families still have pole position—as well they should—when it comes to federally issued student loans and grants. While policy makers and educators may need to refocus their efforts on finding ways to make higher education possible for people from all backgrounds, students should take from this new research a newfound reliance on performing a wide search when it comes to scholarships and aid.

About The Author:

Today’s guest article comes from Candice Mahoney. She is an engineering student and freelance blogger, currently residing in Houston, Texas. With help from a variety of scholarships, she has been able to pursue her dream education in the field of engineering project management, and is eager to apply her skills towards large-scale construction projects.

RSS Subscribe Did you like this article? You can get all the latest articles sent to you by entering your email address in the box below and clicking "Subscribe." Your email will only be used for this subscription and you can unsubscribe at any time. You can also Follow Us on Twitter!

One Response to “Are Schools Using Aid to Lure Wealthy Students?”

  1. Steph says:

    …”the school is not obligated to take financial considerations into account. As such, most schools offer myriad “merit based” scholarships (presumably to students most deserving based on their academic, and not their financial, standing). When these scholarships are taken into account, it would appear as though colleges are granting more aid to those who least need it.”

    I am both extremely low-income (mother is homeless, I make less than $10,000/year living on my own) and have strong academic performance, so I do get aid from both ends of the spectrum. The aid I get from low income is enough to cover regular attendance costs; the scholarships from my academic achievements are funding a study abroad trip I am taking during the final semester of my BA.

    I know that students’ pre-college lives are complicated, so not every student enters college with a decent grade point average or polished essay writing skills. In order to allow more low-income students both access to more merit-based scholarships as well as granting them a smoother transition into college life, I think we need to focus on better preparing students for post-secondary education. Instead of saying, “These students weren’t stellar students in school before but they come from low income households so they need scholarships”, how about we say, “These students deserve the opportunity to do well in school, regardless of income.” If the institution can review these students’ documents and say, “this student will likely survive college”, they will be more willing to hand out aid. I think we should work from the ground-up, and try to fix the primary and secondary education systems so that more students can get both the financial and scholarly aid they need to pursue college.