Some Rich Students 'Merit' Financial Aid

Although college tuition prices are at an all-time high, colleges are, on average, issuing stingier financial aid packages this year, say counselors who've been helping families with their college finances.

Counselors who have examined awards from many colleges say that only a few dozen extremely generous schools are making sure that every student who needs financial help gets enough scholarships to attend. Meanwhile, a growing number of schools and states are awarding scholarships to students from wealthy families. Some of the wealthy students are receiving "merit" awards because of their top grades or test scores, but counselors say they are increasingly seeing run-of-the-mill but wealthy students receive "merit" awards, too. Meanwhile, the vast majority of low- and middle-income students are receiving far less aid than they need.

"This has been an awful year for students who do need money," says Cristiana Quinn, who has worked as a private admissions counselor in Providence, R.I., for eight years. But her wealthy clients have gotten a surprising number of generous merit awards, she says. "If these were 'A' students, I would understand it." But some of the awards she has seen went to B-minus students whose families have six- or seven-figure trust funds. Although these clients are delighted, Quinn says she finds the trend "sad...disturbing."

Dozens of other advisers around the country are reporting similar trends.

In an informal March survey of members of the National Institute of Certified College Planners, 60 percent of 33 private consultants who responded said the typical amount of grants or scholarships awarded this year was the same or less than the past year's average. The same percentage said that clients were planning to borrow, on average, at least $2,500 more this year.

High school counselors say that unfortunately, recent pledges by Harvard, Yale, and at least 40 other schools to provide full aid to low- and middle-income students have not spread to the majority of schools that educate the vast majority of students. As a result, many good students are facing heartbreaking situations this spring. Roland Allen, a counselor at a private high school in San Juan Capistrano, Calif., says good students from families earning less than $50,000 are getting awards from the 23 campuses of the California State University system containing only about $4,000 in federal and state grants to cover those schools' total cost of attendance of almost $18,000. Incoming freshmen can borrow $3,500 in federal Stafford loans and can probably earn an additional $3,000 to $4,000 with summer and on-campus jobs. But that's leaving an annual gap of at least $6,000 that many low- and middle-income families simply can't raise.

Such gapping isn't new, unfortunately. More than 90 percent of colleges surveyed by U.S. News reported in the past several years that they did not provide enough grants and scholarships to meet the federally calculated need of every student who qualified as needy. Department of Education statistics from 2004, the most recent available, show that students from families earning up to $62,240 received, on average, almost $3,000 less in grants than the federal government determined they would require to pay their college bills. The average gap for those who earned more than that year's median income: $98.

But veteran counselors say that this year, the gaps for the poor have been bigger than ever—and the rich are feeling more entitled to financial aid than before. "Something different is happening this year," says Dave Schindel, a counselor at the Sandia Preparatory School in Albuquerque, N.M. Of course, there is the rise in tuition costs: While the federal Pell grant maximum has been raised by $681 in the past two years, the average cost of a year at a public university has jumped more than $1,000. And many of the wealthy parents of his students are asking for aid because of downturns in their real estate values and other investments.

College officials say they are trying to meet the need with their limited aid funds. Dean Kulju, director of Student Financial Aid Services and Programs for the California State University system, says CSU officials try to make sure that every student who has an income low enough to qualify for a federal Pell grant (which usually means less than $50,000 a year) gets enough grants to cover the CSU system's standard tuition and fees of about $3,500. Those low-income students have to borrow, work, or otherwise raise the rest of the $18,000 or so for the full cost of attendance, which includes books, rent, and food. Kulju says that isn't as hard as it sounds, since many students attend a CSU near their home and can thus continue living and eating at home. Hardest hit, he says, are students from families making, say, $60,000 to $80,000, which he describes as "pretty modest" in a state with some of the highest rents in the nation. Those students typically get no need-based aid at all. A small percentage of them manage to win merit scholarships from the school or from outside charities. But, Kulju says, budget constraints simply don't allow the CSUs to provide enough grants to cover room and board for low-income students or offer any assistance to middle-income students.

The scarcity of the aid dollars colleges have to give students makes the increasing share of the pie that goes to "merit" grants even more notable. Arizona State University, for example, handed out $35 million in need-based aid to next year's freshmen this spring. But it handed out $75 million in merit grants. Much of that money went to needy students, says Craig Fennell, Arizona State's director of student financial assistance. But at least some, he concedes, went to students who didn't financially need it. Fennell said he didn't know how many needy students were going without needed aid this year. But last year, ASU reported that about 2,200 freshmen who were found to require aid to pay for college didn't receive enough, while more than 1,700 freshmen who didn't qualify as needy received an average of $6,317 in merit grants.