Mon 2 May 2005
This Washington Post article mentions former Professor of Economics Mike McPherson.
But such good feelings do not justify the financial damage from the merit-aid arms race, some educators have said. Michael McPherson, president of the Spencer Foundation in Minneapolis, has a slide-show scenario, based on research, in which four colleges battle for the same students. At the end, the schools have lost a total of $1.6 million that might have been used to improve teaching and learning and instead have improved their average verbal freshman SAT scores by one point — from 597 to 598.
We covered similar topics during our wildly successful experiment in creating a cross generational community of learning during Winter Study. Special thanks to Richard Dunn ‘02 for leading our discussion on the day that we read a paper by McPherson and Morty Schapiro on a related topic.
But to really see the thickness of many writers (not McPherson!) on the issue of merit aid, you need only read the beginning and end of the article.
A father recently wrote to Dickinson College complaining that although the school admitted his daughter, it did not offer her any scholarship money, which two of its competitors had. The family’s income was $250,000 a year, but the father figured that the Carlisle, Pa., college would kick in some financial aid rather than risk losing a student with excellent grades and test scores.
Robert J. Massa, Dickinson’s vice president for enrollment and college relations, said the father’s request did not surprise him. It was typical of the rising tide of “merit” or “non-need-based” scholarships — a zero-sum game, Massa said, that is hurting the quality of undergraduate education.
…
Still, the competition continues. Massa admitted that he gave a $6,000 merit scholarship to the student whose affluent father suggested Dickinson might lose her if she didn’t get some money. That leveled the playing field in the still-not-settled contest for that student, he said, but “who really wins here?”
The father, you idiot! Every time a student wins an award for merit aid, that student and her family are better off. This may mean that Dickison is worse off, that it can’t pay Mussa as much as he might want to get paid, that it can’t build fancy new offices for its faculty. So it goes.
As Economics Professors at Williams like David Zimmerman and Mort Schapiro and Cappy Hill and Gordon Winston never tire of pointing out, students are both consumers of the higher education product and inputs to it. If Dickison or Williams want better students (read: better inputs), then they need to pay up. Otherwise, those students/inputs will go elsewhere. Such is life in a free society with tough anti-trust laws.
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March 3rd, 2008 at 9:40 pm[...] more slap-dash mockery from me on financial aid policy/politics? This is the post for you! US News [...]
May 2nd, 2005 at 2:32 pm
Tuiton discounting to attract upper-income students and raise the average SATs of a school is an effective pricing strategy. However, we as a society need to understand that “merit-aid discounts” come directly out of the aid money previously reserved for need-based aid.
Right now, there are only about a dozen super-wealthy schools (Williams among them) still committed to need-based aid philosophy. These schools are under intense pressure in the marketplace to start replacing their need-based aid with merit aid discounting of their own. I expect that, ten years from now, Harvard, Yale, Princeton, and MIT will be the only true need-based aid schools left in the United States and that elite education will shift more and more exclusively to high-income students. It’s the inevitable result of replacing need-based aid with merit-aid discounting.
So, while merit-aid discounting is attractive to upper class students, it may not be great social policy. What is really frightening is that virtually all public state universities now play the merit discount game with their “honors colleges”, again jettisoning high-need applicants right and left to pay for these programs. It’s one thing for a Williams or a Swarthmore to be a rich-kids school. After all, that’s what they’ve always been. But, when you start turning the state university into a rich kids school, I think we’ve got some serious questions to deal with.
Interesting reading from Shapiro and McPherson here and from Williams Trustee, Paul Neeley, here.
BTW, the whole website has some of the best essays by movers and shakers on liberal arts colleges you’ll find. For example, Eugene Lang is a major education philanthropist both with his “I Have a Dream Foundation” for inner city schools and as a major donor to several colleges. Thomas Cech is a nobel-prize winning chemist and now head of the Howard Hughes Institute that funds most undergrad science research at LACs. Well worth bookmarking and reading through the essays.
May 2nd, 2005 at 3:54 pm
I think describing the Howard Hughes Institute as an “[institution] that funds most undergrad science research at LACs” is kinda like describing the Federal Government as the “[government] that is responsible for upkeep of a simple highway system”: entirely inadequate.
While the Howard Hughes Institute happens to fund undergraduate science research with some extra dollars it has lying around, it is more in the business of funding RO1 Investigators with full support. Yeah, they’re called “Howard Hughes Medical Investigators,” and they have more money than God. Then again, when the Howard Hughes Medical Insitute has a multi-billion dollar endowment, that’s the kind of stuff you can hook up.
Just a thought.
May 2nd, 2005 at 5:52 pm
Aidan:
Agreed on HHMI. However, since this is a liberal arts college blog and since the specific essay by Dr. Cech is on the topic of science education at LACs, I thought it was worth pointing out that all of the top LACs get the lion’s share of their undergrad research funding from HHMI.
Here’s the list: HHMI grants
Believe me, $1.6 million funds a lot of summer research internships at Williams!
Cech’s essay (written while he was a Professor at the University of Colorado) may be the single best statement of what makes LAC’s special I’ve read. If you guys have kids trying to decide among different types of colleges and universities, I would strongly recommend it.
May 2nd, 2005 at 7:49 pm
Dave, you neglect that Williams and Dickenson concomitantly provide a social good. If rent-seeking behavior on the part of “inputs” distorts the institutional decision-making of such places, then outcomes will not be efficient. As hwc correctly points out, and as I alluded to in an earlier post, the institutions most affected by this trend are those who educate the majority of our country’s middle and working class students. Resources are shifted from those who qualify because of need to those who qualify because of parental resources. The point isnt that Williams or Dickenson want better inputs, its that society as a whole wants as many students as possible having the value added that a university education supposedly supplies. This is a case where monopsonistic behavior has real public benefits, and is therby exempt from the anti-trust laws you mention.
May 2nd, 2005 at 8:13 pm
If in a given admissions year Williams loses the most preferred prospective student on its list of 5000 applicants (whether due to failure to offer financial aid or otherwise) and in substitution accepts and ends up with the 2000th in terms of Williams’ preference (whom Williams would not have accepted but for such loss), how much is Williams diminished? My quess is that the answer at the time of the loss would be probably vague and certainly imprecise and not susceptible to being measured. Perhaps in retrospect four years later - “lost nothing” or “not very much”. Possibly even “gained”.
May 2nd, 2005 at 9:00 pm
Losing a few high SAT well-to-do white kids won’t hurt places like Williams and Swarthmore. There are plenty more who will gladly pay full-fare. However, where these schools are starting to lose the merit aid battle is in their affirmative action recruiting: relatively high-stat middle and upper-middle class URMs. They are caught in a squeeze play. The best of these students go to Havard. The best of the rest are starting to be lured away from the remaining need-blind schools by lucrative discount offers.
We’ll see how long the commitment to “need-blind” financial aid last when it starts hitting them where it hurts: diversity stats.
Anyway, the big problem is not with the dozen or so super-wealthy schools in terms of per student endowment. It’s with the schools that are essentially eliminating need-based aid in favor of merit aid discount fares — the state universities being the most troubling.
May 2nd, 2005 at 9:53 pm
Richard claims that Williams and Dickison produce a “social good.” I would like to see evidence for this claim. Many people — college professors, news reporters, textbook writers, artists — believe that what they do produces wealth above and beyond what consumers in the marketplace are willing to pay and that, therefore, they and the firms they work for are “special” in some way. I don’t believe it. Although I am ready to grant the existence of social goods in theory — primary education, for example — there is no evidence that elite education produces a social good, a good above and beyond that enjoyed by the students pursuing it.
Richard writes:
Says who? Anytime US society “wants” to do something, state/federal governments are standing by. The existence of governmental subsidies to higher education does suggest that society “wants” to see more of it provided than the free market might provide on its own. (I actually I don’t believe this, but will grant it for the sake of argument.)
But the fact that the federal government ended college collusion on financial aid suggests that society does not “want” to see more of it provided than what we currently have.
Moreover, it is naive to imagine that every dollar that Dickison saves by not using more merit aid goes to financial aid for some other student. Money is fungible. Massa still needs to get paid. The Dickison faculty wants raises. Is there any evidence that the rise of merit awards has decreased the total dollars going to student aid? The money obviously comes from somewhere but, in the absence of data, I like to believe that it comes out of the hide of various rent-seekers in the college community.
By the way, does anyone in this thread want to see Williams, Dickison et al provided with a waiver so that they can start to collude again on financial aid?
May 2nd, 2005 at 10:11 pm
HWC wonders how “long the commitment to ‘need-blind’ financial aid lasts when it starts hitting them where it hurts: diversity stats.”
Hurt it will and hurt it should. Consider the QuestBridge program that Jeff Zeeman and many others are so fond of. Everyone agrees that these students — as smart and smarter than the rich kids but bringing a useful diversity perspective since they come from poor families — should be admitted to Williams and given full aid. In the old days, such students would have been expected to take out a non-trivial amount in loans. The College considered itself “need blind” because it ensured that the necessary loans were available, not that they were small.
Today, Questbridge-type applicants take out few if any loans. Regardless of the morality here, Williams has no choice but to offer such deals, otherwise poor but smart kids would go elsewhere.
But why will (or should!) the deals stop at that? Why don’t these applicants get paid a stipend or honorarium or something in order to attend Williams? (The Tyng “promise” of graduate school aid is already a step in this direction.) Giving $10,000 to these students and/or their families would make a huge difference in their lives.
Now, as a matter of policy, Williams is in no rush to pay people to come here, however desirable those applicants are. But Williams is not the trendsetter in this dimension. Places like Princeton and, even more, Duke have a history of doing whatever it takes to get the students they want to attend.
My answer to HWC’s question is: Not very long.
May 2nd, 2005 at 11:07 pm
David:
The bidding for middle and upper class Af-Am and Latino kids this year has taken my breath away. Colleges, including several of our favorites, have no shame in courting these kids. It’s really quite embarrassing as the top schools fall all over themselves chasing the same 1000 students. College admissions is sweet for prep school URMs these days.
Of the top 3 LACs, Amherst appears to be the most..ahem…”creative” when it comes to ciphering a “need-based” aid package (aka hidden merit aid), but even that pales to the offers being thrown around by places like U Chicago to URM applicants.
I don’t have enough facts to comment much, but I suspect the Questbridge folk have a sweet little deal going for themselves, charging a pretty penny in exchange for turn-key diversity stats. I know that Harvard was one of the first schools to sign on after Questbridge was started at Stanford. But, Harvard dumped ‘em a couple of years later.
May 2nd, 2005 at 11:18 pm
I don’t think Dickinson is part of the group, but the group of super-elite “need-blind” schools was recently granted a waiver by the FTC and/or the anti-trust court. The waiver allowed them to get together and come up with a set of consistent definitions for how things like home equity, alimony, and a range of other details would be treated in need-based aid calculations. In theory, if you present any of these schools with the same set of financial “facts”, you should get the same expected family contribution in return. The schools aren’t allowed to share data as they once did. It was purely to agree on consistent definitions and methods.
I actually think a little collusion is probably the only hope of preserving need-based aid at the few schools that still practice it. Otherwise need-based aid will simply cease to exist, even as those dozen or so schools still profess a philosophy of need-based aid.