MERIT AID: CAN COLLEGES CONTINUE TO ESCALATE DISCOUNTS? By ROBERT J.

MASSA Lets face it colleges do not award scholarships to incoming students to reward th em for superior academic performance or leadership. Sure, colleges want to attr act these top scholars. But the real purpose of this merit aid is to influence a students enrollment decision by lowering the net price they must pay. When I served as an enrollment vice president, a father wrote to me claiming tha t of the five colleges to which his daughter was admitted, only my institution a nd another top liberal arts college neglected to award aid to this $300,000 inco me per year family whose daughter was very good but just slightly above average in our pool. What to do? Say no and likely lose the student or award a small incentive schol arship to secure the enrollment and net revenue? In this highly competitive env ironment, the answer was simple. We showed her the money! And so it goes. Family expectations of price breaks are rampant and my colleagu es and I tend to take the bait rather than risk the loss of net revenue. Once m y school awarded the grant, you can bet the dad wrote to the lone hold-out using our gift as leverage. Critics of the cost of higher education would say that students benefit from thi s price competition. True in the short-term, but in the long run, they are dead wrong. Jockeying for enrollments based on price will eventually result in lowe r revenues for colleges, which means less money for those who truly need it and insufficient funds to invest in the quality of academic programs and facilities. Much of the escalation of competitive price discounting took place ten to fiftee n years ago and continues on today. A 2003 Lumina Foundation study found that f rom 1995-2000 in 1999 dollarsscholarship aid to students from incomes of $40,000 or less jumped 22 percent. But for families with incomes above $100,000, scholar ship aid shot up by 145 percent! The rush to leverage dollars to assure enrollm ents and net revenues is trumping a commitment to access. Admittedly, as the story relayed earlier demonstrates, I have participated in th is practice because, again, it produces good short-term results. But colleges d o not have to lessen their commitment to access, nor do they have to threaten th e long-term viability of their financial models. To make progress on all front s (including student academic quality and net revenue) colleges must demonstrate the value of their product and must allocate financial aid resources strategicall y. There is some hope on the national front. Conversations about aid discounting c ontinue in such venues and the College Board, the Education Conservancy and USCs Center for Enrollment Research, Policy and Practice. Here, top professionals di scuss impacts and alternatives in a general sense. Federal anti-trust laws as a pplied to higher education in the early 1990s under good intentions (but sparkin g a rapid growth in competitive discounting) prevent specific sharing of agreedupon financial aid practices. It is important to note that while competition lo wers cost (and therefore price) for private sector goods and services, it has th e exact opposite effect on college costs loss of revenue from non-need discounti ng means prices have to rise faster to make up the difference. Of course, for c olleges that are under-enrolled, discounting actually increases revenue and ther efore could have a positive impact on list price. The goal, perhaps elusive, is to understand that as a system, higher education j eopardizes its future by increasingly discounting price to those well able to af

ford full tuition or at least a large part of the total price. A long-term visi on, rather than a short-term gain, must be paramount. But try telling that to a n enrollment manager who must get next years class and revenue! The challenge lies ahead. Will hungry colleagues jump at the chance to steal stud ents from those concerned about how todays practices will affect the future? Or will they join others on the road to equity, access and quality programs that a decrease in non-need-based aid will allow? Time will tell, but as prices rise a nd incomes do not, time is running out. Robert J. Massa is vice president for communications at Lafayette College in Eas ton, PA. Opinions expressed are those of the author and do not necessarily ref lect those of the institution.