Enrollment Management

Merit aid and the impact on tuition price

Eric Hoover wrote an article on January 17th, “Want to Define Merit?  Good luck.”  He accounted for a discussion among higher education enrollment officials at a conference focused on merit aid, specifically how colleges assess and reward merit aid to shape the socioeconomic and racial diversity of students at selective colleges.  I enjoyed the article but it got me thinking.  Shape socioeconomic and racial diversity?  I wish!

The term “merit aid” has grown in relevance exponentially over the last ten years for private, independent colleges.  But, merit aid is an enrollment tool used for very different reasons depending on the college.   Hoover’s article is focused on the discussion of officials from more selective colleges.  He discussed need-blind admissions, the influence of social class on students’ test scores, and the important debate surrounding the way in which colleges leverage aid to solidify diversity in enrollment.

Now, allow me the opportunity to share the world that many enrollment managers and college administrators live in related to this merit aid.  Our institutions are not considered highly selective.  We would love to shape our classes with more diversity and better test scores which typically translate into higher retention rates and ultimately stronger ratings in US News & World Report.  We thoroughly enjoy those conversations and get excited whenever the opportunity arises to participate in that discussion.  Unfortunately, our real-world, day-to-day challenges often push the discussion of shaping a class to the periphery.  Focus on that and we don’t have the enrollment to shape!  Fair to say, our issues with merit aid are different.

When colleges began offering merit, they opened Pandora’s Box.  On one hand, it was genius because it made private college attractive to many students who may have seen it as out of reach due to cost; college only for the wealthy.  On the other hand, it started a financial war which continues today.  Schools are pitted against each other fighting for the same student often not based on value of the education, but instead based on the value of a scholarship.  And, make no mistake; as the pressure to offer more merit has increased, schools have had to recoup their financial investment (net tuition revenue) in the form of tuition increases.

Because colleges offer merit with slightly different criteria, comparisons can be challenging.  There are different qualifications for different scholarship amounts.  Some scholarships are competitive whereas others are given based solely on arbitrary criteria.  Moreover, the arbitrary criteria are different at each school as is the amount attributed to the criteria.  Easy example is Doane College and Hastings College.  Very similar schools but different academic qualifications for different scholarship amounts.

As tuition-driven colleges increase merit to attract more students, it puts other similar colleges in a position to increase merit as well to be competitive in very price/cost-sensitive markets.  One college can significantly increase merit aid forcing other similar schools to do the same to stay competitive or lose enrollment.  In the private college environment, I believe this tactic erodes the value of the product we sell.  And not only that, but as I mentioned before, tuition will increase in order to recoup some of the net revenue lost by increasing aid.  I don’t expect students/parents to appreciate this or feel any remorse for colleges.  Nevertheless, merit aid war games are significantly effecting decisions made with respect to tuition and other costs at colleges today.

I’m not suggesting that merit aid is bad.  I don’t think I can make that argument.  But, it complicates an already challenging college decision.  If instead of merit, a college chose to provide financial aid based solely on need, it’s not likely that the college would meet enrollment targets, nor would it likely meet net tuition revenue targets for operational budgets.  But, some would argue that’s the “right thing to do.”  I don’t see an easy answer here but I do anticipate a change coming in higher education.  The path of more aid and increased tuition is a very rocky road at best.

I’m not minimizing the importance of the merit conversation related to Mr. Hoover’s article.  However, I think it’s important to understand that there is another merit issue unrelated to and (to me) equally important for many colleges today.  We can’t begin to shape our enrollment if we don’t have enrollment to shape.

What do you believe the role of merit aid should be in college enrollment?   

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2 thoughts on “Merit aid and the impact on tuition price

  1. Omar Correa says:

    Joel, So great to see your title and email!

    Although the notion of a need base only approach is noble and would truly end the unsustainable game that we are playing with financial aid leveraging, it also begs the question of performance. We live in a meritocratic society where many students seek good grades because will lead to more and better scholarships. If that incentive is gone, would students be as prone to seek best grades possible.

    I truly wonder how this leveraging game will end and how many losers will claim, beside the many students that may not have the choice of many of our institutions, because they no longer exist?

    On the other hand, who among us could afford to be the first one to stop “the game” without jeopardizing the financial future of the institution in one single cohort?

    Let me get back to preparing for financial aid time…

    • Omar, thank you for the comment and hope you are doing well. I too fear the long-term results of the leveraging game. The last three years have proven to me that it’s only going to get more challenging. Happy depositors! Joel

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