Aid plays growing role in recruitment

by Rachel Osterman | 5/6/02 5:00am

Jamaican-born high school senior Shamara Beckford, like many of the members of next year's freshman class, informed Dartmouth last week that she will accept its admissions offer. She chose Dartmouth, she said, because she was impressed by the admissions office's constant support and because she had a "wonderful time" during prospective weekend.

But like many high school seniors across the country, even those who apply to schools like Dartmouth that say finances shouldn't factor into enrollment decisions, money was also part of Beckford's decision-making calculus.

"They gave me a very generous financial aid package, and that was certainly part of why I chose," Beckford said, noting that Dartmouth's offer -- in which she and her parents will jointly contribute $2,500 to her tuition next year -- was higher than any other school's.

As high school seniors across the country decided last week where they would accept admissions offers, the financial aid framework continued to be reshaped by a growing decentralization that is bringing money back into the equation, affecting even the wealthiest colleges that seek to eliminate income status from a student's college choice process.

For some students, like Beckford, the decentralization in financial-aid policy has made it possible for them to attend elite schools where they now enjoy more generous aid packages. For others, a growing wave of aid that is based on merit, not need, has encouraged them to turn down offers at highly selective schools, instead enrolling at a set of colleges that use financial aid as a recruitment tool.

Student aid policies were fundamentally altered a decade ago, and families and colleges are still feeling the effects.

In 1994, the Ivy League and many of the schools it competes with settled an antitrust lawsuit that from then on prohibited them from comparing financial aid packages for the same student.

Under the old system, called "overlap," financial aid directors from the participating schools sat around the same table to discuss admitted students' financial aid packages before the students learned how much assistance they would receive.

The Justice Department said this was price collusion. Supporters of the old system -- and there are many still in higher education -- say the colleges were merely pooling their expertise so that students and families were not shortchanged by gaps of knowledge at any one institution's financial aid office.

With the end of overlap, financial aid became a source of bitter rivalry for colleges that compete for many of the same top students.

The problem of decentralization has begun to draw the attention of administrators across the country, and next year financial aid offices at 28 selective schools will coordinate how they calculate need. (Dartmouth opted out of this program.)

In the meantime, the admissions process has been deeply influenced by the competition and differences between how selective institutions determine how much assistance families require.

Wealthy institutions like Dartmouth and, most notably, Princeton -- which last year took the major step of eliminating loans in favor of grants -- have responded by adding to their financial aid budgets, while continuing to be need-blind in the admissions process by not considering student finances.

These schools, which include the entire Ivy League, also have need-based financial aid policies -- meaning that they award economic assistance only to those families whom they calculate need it.

But at less generously endowed institutions, both private and public, the corrosion of consensus on how to award financial aid has led to the rise of merit-based scholarships.

This kind of financial assistance -- which is awarded on the basis of achievement irrespective of a student's financial background, and often goes to middle and upper-middle class students -- is increasingly common at such Ivy League competitors as Emory, Rice and a growing number of public university systems.

Not only has merit-based aid affected low-income students at schools that offer it because it shifts institutions' limited aid dollars from need to merit funds, but it has seeped into the admissions process of staunchly need-based institutions like Dartmouth.

At the Dartmouth financial aid office, director Virginia Hazen said families' most common frustration comes when they are accepted to Dartmouth without aid but receive merit offers from other institutions. Dartmouth refuses to match such merit offers in order to direct its resources to those who are eligible for need-based aid, often annoying families, Hazen said.

"There's much more competition, and much more merit-based aid," Hazen said of the changes she has witnessed as a result of the end of overlap.

At highly selective need-based colleges beyond Dartmouth the growing availability of merit aid has had noticeable, if unequally distributed, effects on the admissions process.

Harvard economist Caryline Hoxby conducted a survey of 5,000 students who were very likely to attend selective colleges, looked at which schools they applied to, the schools to which they were admitted, all the financial aid packages they received and how they made their decisions.

"The merit-based packages are making a difference. They are moving students from more selective schools to less selective schools," Hoxby said. "But it's not typically your most sophisticated student. It's typically that they are moving from a private institution to a public one. Most of the students come from families where the parents are less affluent and did not go to a good college."

Hoxby said merit-based aid has caused little movement in the top private institutions because these schools charge roughly the same tuition and often match each other's aid packages. But lower-income students who are accepted at schools like Harvard and Dartmouth are increasingly choosing places like the University of Florida that might waive all tuition costs.

Even when merit-based aid isn't part of the picture, schools have reason to worry when their competitors raise their financial aid funds -- it boosts that school's enrollment patterns.

Princeton professor Cecilia Rouse studied a northeastern university that changed its financial aid policy by replacing loans with grants, discovering that changes to aid policy can increase the acceptance rate at colleges. But it differently affects various groups of students, she found.

"What we found was that overall the effect was not outside the margin of error. But we did find that it increased the likelihood that minority students might enroll at the school," Rouse said.

The end of overlap has also meant wide disparities in even the need-based financial aid offers families receive, experts say.

Whereas 10 years ago the most selective colleges used the same basic methodology to calculate need, now each institution uses its own formula. The new framework also leaves room for the personal discretion of financial aid office employees.

"Schools are offering packages that are much different from one another. In an earlier era, there was sort of an agreement as to what need was," said Tony Broh of the Consortium on Financing Higher Education. "You have people in the same income group receiving different financial aid packages."

Broh worries that at any given school there are now new inequities as well. "Within institutions the awareness of a person to have a conversation with a financial aid officer is going to make a difference," he said.

In response to these criticisms, 28 need-blind private colleges have jointly decided to use the same methodology in determining student need beginning next year. The group, named the 568 Presidents' Working Group after the section in federal law that allows colleges to coordinate such efforts, has been meeting for more than two years to forge a consensus.

The 568 group includes such institutions as Duke, Columbia, and Yale. Though Dartmouth participated in the negotiations, it chose not to adopt the new methodology because the College remains unsure that the revised formula will benefit students, according to Hazen.

Princeton, in a financial category of its own, neither participated in the negotiations nor adopted the new methodology.

In any case, it is significant that 28 elite private colleges agreed to a single methodology, especially given the competitiveness of college admissions.

Participants, while optimistic that their efforts will reintroduce collegiality and move towards equity, do not claim they are returning to a system comparable to overlap.

For one, they say, merit-based aid is already a mainstay. Second, individual financial aid offices still have room to insert their professional discretion in each student's case.

"We, like most of the participating schools, have some time worried about need-based aid and the fact that it was on the verge of having the public lose confidence in it," said Jim A. Belvin Jr., Director of Financial Aid at Duke and chair of the 568 committee.

"The schools that have started to participate feel that, like with overlap, it will increase the amount of aid students get," Belvin added.