Colleges making it harder for poor students to earn a degree

Some colleges and universities are making it harder for poor students to earn a degree by shifting the way they award financial aid, with the worst culprits directing more of their own tuition assistance to wealthier students, whether they need the money or not.

That's one of the latest findings in a new report from New America, a D.C.-based policy think-tank that looked at how much 1,400 colleges and universities – about 800 private, nonprofit schools and about 600 public schools – ask families that make $30,000 or less to pay in tuition.

Turns out, hundreds of colleges expect their neediest students to pay an amount that's equal to more than half of their families' yearly earnings.

The financial hurdles for low-income students are the highest, the analysis notes, among private nonprofit colleges, where only a few dozen mostly exclusive schools meet the financial need of poor students.

Overall, 94 percent of the private colleges examined charge the lowest-income students an average net price of more than $10,000 per school year. But the number of private colleges that charge these students more than $15,000 and even more than $20,000 annually continues to grow.

"Many private colleges have small endowments, making it extremely difficult for them to provide adequate support to students with the greatest need," writes Stephen Burd, senior policy analyst and author of the report. "Indeed, it is often the poorest schools that enroll the largest proportion of federal Pell Grant recipients and charge these students high net prices because of their own limited resources."

Colleges historically have offered breaks on tuition based on merit or need, while the federal Pell Grant helps needy students cover the remaining costs.

But more frequently schools are using their resources to provide significant discounts to students from affluent families – no matter their academic record or actual need – because it's better for their bottom line.

Awarding a few wealthy individuals $5,000 in merit aid, for example, knowing that they can afford to pay the rest of the tuition cost, is more lucrative than awarding one poor student a $25,000 scholarship, Burd explains.

The problem is not as pervasive at public colleges and universities, but it's certainly creeping into the norm, he argues, especially as state funding for higher education continues taking hits.

Related: See the top 10 public colleges in the United States:

Three-quarters of all college students attend public institutions, but states cut per-student spending by an average of 21 percent between fiscal years 2008 and 2014, according to a recent report from Young Invincibles.

Nearly half of public four-year colleges that Burd examined charge their poorest students at least $10,000 per year. But back in the 2010-2011 school year, only about one-third of these public institutions charged the lowest-income students that much.

"These actions fly in the face of national goals to increase access to higher education and help more students earn high-quality degrees," Burd writes.

One particularly worrisome finding Burd highlights in the 40-page analysis includes evidence that some schools are using federal aid, like Pell Grants, to supplant – rather than supplement – aid that they have historically awarded poor students, and are instead using it to recruit wealthier students.

The Pell Grant is a $34 billion federal program that helps approximately 9 million low-income students afford tuition.

"This is one reason why even after the federal government has almost doubled the total amount it spends on Pell Grants each year, low-income students continue to take on heavier debt loads than ever before," Burd wrote. "They are not receiving the full benefits intended."

To be sure, there are some schools going the extra mile by both enrolling large numbers of poor students and meeting their financial need.

Grinnell College in Iowa, for example, is one of three private colleges where 20 percent of students use a Pell Grant. The school, which has a large endowment, is "need blind" in admissions, meaning that it doesn't take financial considerations into account when admitting students. It also pledges to meet the full financial need of students with grants and a relatively small amount of federal loan debt.

In addition, Grinnell specifically seeks out low-income, high-achieving students with the help of several nonprofits.

The New America analysis offers some potential solutions, including a federal approach to hold schools accountable for both enrolling more low-income students and meeting their financial need.

Copyright 2015 U.S. News & World Report

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