Clearing up the confusion about financial aid - college costs

USA Today (Society for the Advancement of Education), Sept, 1994 by Michael A. MacDowell

In an article in the Brookings Review (Winter, 1993), William G. Bowen, president of the Andrew W. Mellon Foundation, and David W. Breneman, a visiting professor at Harvard's Graduate School of Education, took the Justice Department and the court decision to task. They argued, effectively, that the decision against MIT actually may lead to less financial aid being given to highly qualified, low-income students. The reason is that most prestigious colleges and universities must treat financial aid as an operating loss, rather than a discount on price. The difference may seem nebulous, but it is important. Because prestigious schools need not necessarily discount price in order to assure a full freshman class, their meeting to set financial aid packages is a rational approach to avoiding a price war for the top students, which, while assuming significant financial aid for them, would mean less money for others.

(Recently, the Appeals Court held that the Federal trial court should have considered MIT's claim that the overlap meetings actually furthered competition and served vital public policy goals.)

Unlike airline tickets, where travelers can purchase any discounted ticket meeting their needs, the amount of financial aid (discount) a student receives usually is dependent upon family income. Every year, tens of thousands of students submit a Free Application for Federal Student Aid form (FAFSA). This is evaluated to determine how much a family should contribute to a student's education based on income, assets, expected summer earnings of students, and other family circumstances. Financial aid is calculated on the difference in the total cost of attending a college or university and the amount of money expected from the family. Financial aid "packages" then are developed by each college to which a student has applied. The packages consist of scholarships and grants, and self-help programs such as loans and work-study.

Today, most selective colleges say that they make "need-blind" admission decisions. That means that a student is admitted to an institution regardless of his or her financial aid needs. Many colleges pledge not to "gap." That is, they will make up the difference between what the family can afford to pay and what the school costs. As state and Federal funds for financial aid declines, the commitment not to gap is becoming a luxury that few institutions can afford. Already, Smith College, Brown University, and others explicitly have said that ability to pay will play some role in admission decisions. Many other colleges and universities, while still saying that they do not gap, are allocating relatively scarce scholarship and grant monies to students with the highest academic profiles, while giving more self-help loans and work-study to less capable ones.

This trend is particularly harmful to members of minority groups. Their progress in the past 25 years is due, in no small part, to the availability of Federal, state, and other financial aid. Minority students historically are more dependent on financial aid. Further, the decision of the Department of Education under Pres. George Bush to declare special financial aid for minority students as discriminatory only can exacerbate the situation, though there are signs that the Clinton Administration is reversing this policy. Primarily because of the potential adverse affect upon minority group members, the National Association of College Admissions Counselors reaffirmed their group's belief in need-blind admissions by a resounding 113-41 vote in 1993.