Monthly Archives: July 2013

July 23, 2013

The Slippery Slope of Merit Aid

Amidst the rise of merit aid and the decline of need-based aid, some college presidents have decided to take a stand and advocate for low-income students who are being squeezed out of the picture.

Merit aid might not seem like a problem at first glance, but the implications are deeper than many people realize. Here is a hypothetical scenario that often plays out during the admissions process: A talented student applies to several colleges and receives financial aid offers from several schools, but the student’s top choice didn’t offer the best aid package. So, the accepted student approaches the financial aid department armed with the other offers as evidence that he/she is worthy of more aid. The school makes a counter offer, and the student takes that offer to another school as evidence that he/she is worthy of more aid. A bidding war has begun, and it is a great situation for the student, but where is the money for these competing offers coming from?

The money for these ever-increasing merit scholarships comes from the pockets of other students because in order to cover the costs, schools will often end up increasing tuition. It is an unsustainable model that has partially contributed to the skyrocketing costs of education in this country. With so many schools directly competing for top applicants, everyone suffers. Shown below are the top 10 schools that receive the most non-need based aid according to U.S. News.

Students Receiving Non-need Based Merit

Over the winter, S. Georgia Nugent, president of Kenyon College, partnered with several other small private schools and drafted a proposal entitled “High Tuition, High Discount Has No Future.” In this proposal, they outlined the problems with merit aid and offered solutions in moving forward. For example, they call upon other schools to make their financial aid offers final as an effort to stop the bidding wars between schools. They envision eliminating the phrase “merit aid” from school marketing and replacing it with “non-need financial aid.” Nugent also suggests that schools should use restraint in setting tuition and to prioritize providing full aid to needy students.

The proposal was widely lauded and praised after its release, but putting words to action has proven difficult. “It’s the prisoner’s dilemma,” Nugent says. “Typically in conversations presidents will says ‘Yes, I agree. I don’t want to provide financial aid to families that don’t need it. But I can’t afford not to do this. If I don’t do this, the state university down the road will eat my lunch because they are doing it.”

Even though she spearheaded this effort, Nugent is having problems in de-emphasizing merit aid at her own school. Just last year, Kenyon announced several new merit scholarships funded from funds that had previously been allocated for need-based aid. In the last month, another merit scholarship was recently introduced – The S. Georgia Nugent Award in Creative Writing. The name was not Nugent’s decision, but the choice of one of the financial backers of the award. “It would not have been my choice [to create these scholarships], but this is a result of the competitive admission landscape,” Nugent says. “You look at what is happening in your admission pool and you have to be responsive.”

How does your school handle merit scholarships and aid?

 

July 11, 2013

ROI of a College Education

Amidst a sluggish economy and steadily rising tuition, Return on Investment (ROI) has become an increasingly popular tool for analyzing the effectiveness of schools and programs of study.

Return on InvestmentForbes magazine, using data collected by Payscale, recently released a list of 25 Colleges with the best ROI. Topping their list is Harvey Mudd College, a small California school with a focus on science and engineering. Payscale reports that Harvey Mudd College boasts a 30-year ROI of $2.3 million. Perhaps unsurprisingly, this list is dominated by schools with a strong focus on science, engineering, and other technical degrees; the list includes the California Institute of Technology, Polytechnic Institute of NYU, Massachusetts Institute of Technology, and Stevens Institute of Technology. On the flip side, Salary.com released a report of the 8 degrees with the worst ROI. The list includes sociology, fine arts, education, religious studies, hospitality, nutrition, psychology, and communications.

Ostensibly, these types of reports are intended to be sources of information for parents of prospective college students and the students themselves. However, it is difficult to trust these types of reports. In order to calculate a long-term ROI, researchers need to delve into the past for data. It is near impossible to build an accurate ROI estimate to reflect the ever-changing job market, especially when taking into consideration the proliferation of new technologies and the careers that support them.

As an example, historically, a law degree was thought to be a solid option for securing a steady job with high pay. This perception has been shattered in recent years. In 2008, the economic collapse prompted many firms to downsize their staff and to pull back on recruiting efforts. Unfortunately, law school attendance was at a historic high in 2006-07. Those students didn’t feel the sting of the sour economy until after their graduation in 2009-2010. The resulting glut of unemployed and indebted lawyers has lead to widespread reports of dismal job prospects and ballooning debt for law students, turning many would-be lawyers to other paths. As a result, the 2013 academic year may usher in the smallest law applicant pool since 1983.

Some pundits claim that the problem with law school – too many graduates, not enough jobs – is not unique. They are of the opinion that there is a widespread issue of supply and demand in higher education, that there are simply too many degrees being awarded. Financial columnist Robert J. Samuelson says, “The college-for-all crusade has outlived its usefulness. Time to ditch it. Like the crusade to make all Americans homeowners, it’s now doing more harm than good.”

While some politicians and pundits argue against widely accessible higher education, a 2011 study by the Pew Research Center showed that college graduates are still out-earning their less educated peers, even though most Americans reported that they feel that their college degree was not a “good value” and too expensive for most. The study found that college graduates earn an estimated $20,000 more per year than they would without a degree.

And while ROI can be an indicator of the financial implications on an individual, this doesn’t take into account the ‘big picture.’ In the end, passion drives progress, and a successful education system is not measured with the Return on Investment of individuals. It is reflected in a balanced society with citizens contributing to the economy by utilizing their own unique talents, regardless of profitability.