How to Pay for a Good College


TOWARD the end of the 1980s, as university budgets tightened, I found myself worrying about how long Stanford University, of which I was then the president, could hold to its stated (some would say actively touted) policy of "need-blind" admissions -- the practice whereby some private institutions admit undergraduate students without considering how much financial aid each will require. It is an expensive policy, supported by endowments that have been shrinking in real terms in many places. Thus a general retreat seemed probable, and that was causing concern among prospective applicants, their parents, and their college counselors. "Need-blind" had taken on symbolic value: it signaled that merit mattered more than means, that ability could guarantee access. Minority students in particular were distressed at the prospect that a trusted commitment might be withdrawn.
I'm glad to say that Stanford still has a need-blind policy. But, as Michael McPherson and Morton Schapiro demonstrate convincingly in The Student Aid Game, the policy looks a lot like an endangered species over most of its range. This timely book appears amid a gathering storm of protest about college costs and how to meet them -- a circumstance that finds admissions and financial-aid officers facing more anger and dismay than they can remember. But the colleges are adding to the problem: students deciding where to go -- and then trying to figure out, with their parents, how to pay for it -- now encounter a bewildering array of "enrollment strategies" and offers of discounted tuition. Elite institution A has a view of the family's financial need different from that of institution B; meanwhile, institution C, slightly less prestigious, is offering a free ride. The resulting confusion and apprehension often drive families into the arms of private counselors, who offer, for a price, to help them master the system. They would be well advised to save their money and consult McPherson and Schapiro instead.

The authors, distinguished economists who have specialized in higher education, clear up the confusion in a remarkably lucid and thorough analysis of an increasingly complicated system. Financial aid, they explain, is best understood as a price discount offered by colleges and universities to fulfill their own particular needs. An increasing number of institutions are just trying to meet enrollment goals: the marginal cost of adding one student is less than it costs the college to educate the average student; thus charging the extra student less makes perfect sense. But the wealthiest and most selective private schools want the very best students; their need-blind admissions policies are attractive to high-merit applicants who can choose among colleges on the basis of quality rather than price.

Need-blind admissions policies are based on another principle, less sharply delineated in the book. It is the value that diversity (not only racial and economic diversity but a range of interests and talents) brings to the university as an educational asset -- just like good laboratories and excellent teachers. This principle rests on the little secret, closely held in elite higher education, that students extract more value from their fellow students than from the faculty. Prestigious institutions offer their students bright, interesting, and diverse companions in learning -- and, not incidentally, valuable networks to carry into the rest of their lives. Financial-aid policies support this asset by allowing the institutions to compose, rather than merely admit, a first-year class. The linchpin of this strategy is to admit students without regard to need, and then to meet the full need of those admitted. Its practitioners argue that the policy supports another important principle: that higher education should be accessible to students of high aptitude and accomplishment without regard to their ability to pay. It reflects both the meritocratic conviction that society needs the best minds and the egalitarian view that the opportunity to be at the top of the merit heap should be open to all.

And yet, as McPherson and Schapiro show, all but a few private colleges and universities have found the need-blind, full-need policy too costly, as the gap between tuitions and family income has widened, and as discretionary institutional resources have shrunk. In the struggle to attract students (the term "game" would not be out of place) financial-aid and admissions strategies are formulated against a background of vital economic necessity: the need to fill classrooms and dormitories. Financial aid may be directed, as "merit aid," to attract good students, while applicants who have indicated an especially intense desire to attend are denied aid on the presumption that they will enroll anyhow.

The authors are understanding about the financial exigencies that lead to such strategies, pointing out sensibly that "there is nothing ethical about keeping a policy that drives the school to financial insolvency, forcing it to sacrifice instruction, basic student services, and other essentials." They are less forgiving, however, toward those institutions whose resources and distinction place them just on the fringe of the need-blind sector. Knowing that it is an important label to keep, these places often practice a kind of technical virginity -- either creating a category at the margin in which students are admitted but denied aid, or "gapping" by offering some students less aid than the standardized federal means tests say they need. Sadly, this hypocrisy is driven in part by the ranking systems employed by certain popular newsmagazines and some college guides. These lists, much criticized but closely watched in the higher-education community, include "selectivity criteria" that allow an institution to improve its ranking if it can show improvements in the proportion of admitted students who actually enroll. Student aid has become a device for manipulating these yield statistics.

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