Study: Many Colleges’ Financial Outreach Coming at Pell Grant Recipients’ Expense

Stephen Burd’s report shows that many institutions are increasingly charging low-income students a greater net price.Stephen Burd’s report shows that many institutions are increasingly charging low-income students a greater net price.

More colleges and universities are using their institutional aid to woo wealthy students who can pay instead of using it to help low-income students to make up the difference between what their federal Pell Grants cover and what it costs to go to college.

That’s one of the key findings of a new report released this week titled “Undermining Pell: The News Keeps Getting Worse for Low-Income Students.”

The report—authored by Stephen Burd, a senior policy analyst at the New America Foundation—found that “hundreds of colleges expect the neediest to pay an amount that equals more than half of their families’ yearly earnings.”

“Overall, too many four-year colleges, both public and private, are failing to help the government achieve national college access goals,” the report states. “They are, instead, adding hurdles that could stymie the educational progress of needy students or leave these students with mountains of debt after they graduate.”

The report drew mixed reactions among those who specialize in higher education policy.

Sarah Flanagan, vice president for government relations and policy development at the National Association of Independent Colleges and Universities, or NAICU, said that, while the report “captures the multitude of interrelated factors that affect the way in which each college sets its financial aid policies,” it also blows things out of proportion.

“Behind his somewhat sensationalist labels is the simple conclusion that there are a number of factors at work and those factors make each institution’s definition of fair pricing unique,” Flanagan said.

However, Barmak Nassirian, director of federal relations and policy analysis at the American Association of State Colleges and Universities, said Burd’s analysis is on point.

“Sadly, this observation on institutional behavior is true in too many instances,” Nassirian said.

“Most privates, and the small subset of public institutions with significant amounts of institutional aid (i.e., the flagships), are increasingly using their aid dollars as a strategic recruitment tool to entice wealthier, better prepared students,” Nassirian said in an e-mail to Diverse. “To them, this is a matter of economic and institutional necessity, but whatever good it may do certainly comes at the cost of low-income students.”

Burd’s report examines how both the private and public college sectors are increasingly charging low-income students a greater net price.

For instance, the report found that “many private colleges that have the means to enroll a substantial share of Pell Grant recipients and charge them a low price choose not to do so.”

“These include some of the country’s most exclusive colleges, which tend to have generous financial aid policies but few low-income students,” the report states. “They also include a large number of colleges that use their institutional aid as a competitive weapon to attract the students they desire, rather than to meet the financial need of their students.”

The report found that:

           • 775 private colleges, or 94 percent of those examined, charged freshmen with family incomes of $30,000 or less an average net price of over $10,000.

          • 596, or 72 percent, charged over $15,000.

          • 246, or 30 percent, charged over $20,000.

          • 85, or 10 percent, required these students to come up with an average of more than $25,000 each year.

The report states that the proportion of Pell Grant recipients that colleges enroll and the net price these students are charged “is closely tied to the schools’ wealth.”

For instance, at 590 private colleges—or 72 percent of those examined—Pell Grant recipients made up 25 percent or more of the student body. “The median endowment for these schools was $31 million, and the median net price they charged the lowest-income freshmen was $17,189,” the report states.

In contrast, the report states, at 62 private colleges, or 8 percent of those examined, Pell Grant recipients made up less than 15 percent of the institutions’ student bodies. “The median endowment for these schools was $662 million, and the median net price they charged the neediest freshmen was $11,894,” the report states.

“This is not, however, just a question of wealth,” Burd wrote. “There were 102 private colleges with endowments of more than $250 million that charged low-income freshmen an average net price over $10,000; 72 that charged over $15,000; 41 that charged over $20,000; and 20 that charged over $25,000.”

Overall, when looking at the average net price differences from 2010-11 to 2013-14, after adjusting for inflation, 489—or about 60 percent of the 775 private colleges examined—have increased the average net price they charge the lowest-income freshmen.

On a more detailed level, of those schools:

          • 364, or 44 percent, had their average net price increase by at least $1,000.

          • 227, or 28 percent, had their average net price increase by at least $2,500.

          • 75, or 9 percent, had their average net price increase by at least $5,000.

          And during that same time period, the report found that:

          • The number of private colleges that charged the most financially needy an average net price over $15,000 grew to 594—or 72 percent of those examined—from 563, or 69 percent.

          • The number of private colleges that charged the lowest-income an average net price over $20,000 rose to 245—or 30 percent of those examined—from 224, or 27 percent.

But a handful of colleges are bucking the trend.

To wit, there are 25 private nonprofit colleges where Pell Grant recipients make up more than 15 percent of students but charge average net prices for the lowest-income of less than $10,000.

“Twelve of these colleges are among the wealthiest higher education institutions in the country,” the report states. “Of the 12 wealthy colleges on the list, three have Pell enrollments over 20 percent or more.”

Those three schools—Amherst, Columbia, and Grinnell—“generally have strong leaders who have made a personal commitment to making their campuses, which have long been among the most elite in the country, socioeconomically diverse,” the report states.

“In so doing, they have bucked conventional wisdom and have shown that even the most selective schools can find large numbers of low-income students who can thrive at their institutions,” it continues.

Burd maintains that the news is “somewhat better in the public higher education sector.”

To wit, nearly half of the 591 public four-year colleges and universities examined enroll at least 25 percent low-income students and charge the neediest freshmen a net price of less than $10,000, his paper states.

“But don’t be fooled,” Burd wrote. “Over the past two decades, there has been a fundamental shift in the admissions practices of many public universities.

“Stung by sharp state budget cuts at the same time they are seeking greater prestige, these universities are increasingly pitted against one another, fiercely competing for students that they most desire: the best and the brightest, and those wealthy enough to pay full freight,” the paper states. “And they are using a large share of their institutional aid dollars—money that could be going to students who truly need it—to entice these generally privileged students to their schools.”

In examining 591 public four-year colleges—including all of the public flagship universities and many state regional colleges—Burd found that 279 public colleges, or 47 percent, charged the lowest-income in-state freshmen a net price over $10,000. And 38 of those institutions—or 6 percent of the schools—required these students to come up with $15,000 or more, the report states.

Burd found that, overall, in examining the average net price differences from 2010-11 to 2013-14, after adjusting for inflation, 427, or 72 percent of the public colleges examined, have increased the average net price they charge the lowest-income freshmen.

Of those schools, the paper states:

           • 304, or 52 percent, saw their average net price go up by at least $1,000.

          • 129, or 22 percent, saw their average net price go up by at least $2,500.

          • 17, or 3 percent, saw their average net price go up by at least $5,000.

During the same timeframe, the paper states, the number of public colleges that charged freshmen with family incomes of $30,000 or less an average net price under $10,000 fell from 385, or 65 percent of the schools examined, to 312, or 53 percent.

Burd concludes that a “federal solution is needed to push colleges to become more socioeconomically diverse.

“But any such plan must also hold schools accountable for making college affordable for the low-income students they enroll,” Burd’s report states. “Because if a college enrolls a large number of Pell Grant recipients but doesn’t come close to meeting their remaining financial need, it may be setting these students up for failure.”

Among other things, Burd recommends Pell “bonuses” to financially strapped four-year colleges where 25 percent or more of their students are Pell Grant recipients and at least 50 percent of all students graduate. The idea would be to have the schools use Pell Grant bonuses to “boost their institutional aid budgets and therefore reduce the net prices they charge the most financially needy students.”

Nassirian, of AASCU, agreed with the idea of a federal solution.

“The federal government can certainly create incentives to promote greater effort on the part of institutions,” Nassirian said. “To put it simply, we need to make educating low-income students as high a priority for institutions as their US News rankings.”

But Flanagan, of NAICU, said it’s not that easy. She said any rational federal incentives to support institutions serving the federal access and success agenda would have to be “just as nuanced” as the various factors captured in Burd’s report, while at the same time recognizing that “there is also a national interest and benefit from exactly the diversity of institutions in this nation his report describes.”

Jamaal Abdul-Alim can be reached at dcwriter360@yahoo.com. Or follow him on Twitter @dcwriter360.