Wrong Sort of Student Aid

Imagine the scene. An upper-middle-class family, the mother a doctor, the father a lawyer, sitting at the kitchen table with their college-bound daughter. A fat envelope lies before them. They do not yet know that it conceals more than their daughter had hoped for. She has been awarded a $4,500 merit scholarship, $18,000 over four years. Wow! They didn't even apply for aid. They don't need it. Their daughter is just getting the recognition she deserves.

This scene is being repeated across the nation. A small proportion of these families are African-American; most are white. What is really happening here, and why is it wrong?

Unlike past merit aid - which was awarded for extraordinary prowess in academics, the arts, or athletics - the new "merit" aid is simply a discount to entice parents of means to enroll a son or daughter at a particular college.

For many decades, tax-deductible gifts for need-based scholarships enabled the nation's most selective colleges and universities to create opportunities for the percolation of merit throughout our society. Students of all races and ethnicities - from lower and mid-level income families - achieved the elite education that positioned them for leadership. Opera star Jessye Norman and scholars Henry Louis Gates Jr. and Cornel West were scholarship students, among thousands of other African-Americans successful in business and the professions. Society has benefited from the contributions of scholarship students' achievements, and from the witness each student is to American ideals of justice and opportunity made real.

Through the 1980s, two trends appeared. The cost of higher education continued to climb, and a generalized resistance to income redistribution grew. Many expensive colleges found fewer families willing or able to pay tuition. Colleges had to meet budgetary, enrollment, diversity, and cost-reduction goals. Part of the solution was turning need-based financial aid into so-called "merit" awards.

The $540,000 dividend

Simple mathematics shows these awards are smart business. An investment of $27,000 a year pulls in $135,000 a year or $540,000 over four years. Here's how:

* The same $27,000 that used to meet a year's tuition, room, and board for one full-need student now becomes six $4,500 "merit" scholarships. These flatter and bring in six students who can afford to pay the remaining cost of $22,500 each, totaling $135,000.

* By contrast, a $27,000 full-need scholarship to one full-need student costs the college $27,000 a year or $108,000 over four years.

* In dollar terms, the no-need students given "merit" aid turn what would have been a loss into a productive investment.

The merit approach helps the college meet (a) budget goals, (b) enrollment goals, filling six beds instead of one, (c) diversity goals if it selects students of color for merit aid, and (d) cost reduction goals, since no-need students are statistically less likely to drop out, more likely than high-need students to graduate on time, and less likely to cost the college's budget the counseling services needed to help students adjust to college.

Some parents in the merit-gaining families not only have achieved professional salaries and lifestyles but have come from homes that sent them to elite schools on scholarships 25 or 30 years ago. Today, instead of being expected to pay their own way and bear witness to the strength of their success, they are being offered money - this time not for their benefit so much as for the college's. If they are African-Americans, they are losing an opportunity to push back the stereotype that wrongly equates black students with scholarship students.

Why well-off parents should care

Why should parents of means care?

First, most schools cannot afford to expand financial aid budgets, so they move dollars they would have given to need-based aid at all levels and put them toward merit-based aid. Some schools are giving as much as one-third of their financial aid dollars to merit awards.

For years, less prestigious schools have used aid money to draw students who do not need it. Now the list is expanding to the more selective colleges. When families take "merit" awards, they help colleges achieve their goals. But they make it harder for financially disadvantaged students to achieve their goal of a selective higher education.

The merit award process risks pitting successful and not-yet-successful families of color against each other, competing for limited resources. It leaves behind larger numbers of needy students of all races.

The practice may be good business for colleges. But is it in the best interests of our society?

Colleges are nonprofits and should use their assets wisely but for social transformation, not their own bottom line.

Back to the kitchen table: What should any family do? Call the college. Ask what percent of freshmen got merit awards and the range of dollars in them. Ask if all the merit award money is newly donated as such or if any funding has been moved from need-based aid to give merit awards. Ask whether families with incomes of less than $25,000 are expected to take loans.

These answers will tell the family if they are receiving funds that should have gone to a student from the projects or from a low-income working family whose son or daughter did not get in trouble, who took tough courses, did homework, and was told that he or she would have a place in one of the great colleges because they give need-based scholarship aid.

It will take tough, clear questions and courageous decisions to refuse colleges that deprive the needy for this kind of merit scholarships, but that is how to ensure that higher education keeps the dream alive.

* Claire L. Gaudiani is president of Connecticut College in New London, Conn., which gives need-based financial aid.