Higher education is both a needed lever for socioeconomic opportunity and a daunting proposition for low-income students. While higher education is increasingly necessary for economic opportunity, colleges and universities face mounting financial pressures of their own. Many colleges and universities have long used merit-based aid awards as a strategy to attract and enroll academically competitive students and out-of-state students who often pay higher tuition rates – a boon for institutions that, in some cases, are struggling to survive. With shrinking federal support, higher education institutions are often under great pressure to use financial aid as an enrollment management tool, rather than a college-access lever for students with the greatest need.
This research examines the distribution of institutional need and merit-based grants by income and race/ethnicity in both public and private institutions. It also analyzes the change in institutional aid patterns over time, as well as the remaining need left for families to cover through loans and work earnings.
The research found:
- Over the last 20 years, students receiving merit-based aid increased by almost 20 percent at private and public institutions. Students who received need-based aid increased by just 10 percent at public institutions and declined slightly at private institutions.
- In both public and private four-year institutions, higher income students received larger merit-based grants than lower-income students.
- White students were more likely than other groups to receive merit-based grants in both sectors.
