NCES Report Documents Decline in Need-Based Aid, Increase in Merit Aid
The number of undergraduates receiving institutional merit aid exceeded the number receiving institutional need-based aid at public four-year institutions in 2007-08, according to a new report by the National Center for Education Statistics (NCES).
The NCES report, Merit Aid for Undergraduates: Trends from 1995–96 to 2007–08, examines the amount of merit aid distributed to undergraduates compared to the amount of need-based grant aid distributed.
In 1995–96, more students received need-based institutional grants from private nonprofit (43% need-based vs. 24% merit) and public four-year institutions (13% need-based vs. 8% merit), according to the report.
By 2007-08, there was an increase in the prevalence of merit based aid. More students received merit-based institutional grants at four-year public institutions (18% merit vs. 16% need-based). At private nonprofit four-year institutions 42 percent received institutional merit aid and 44 percent received institutional need-based aid.
Researchers have found that merit aid attracts high achievers to help maintain or improve the academic quality and competitiveness of an institution.
Some, argue that merit aid diverts resources from the financial aid policy goal of increasing access to college. In this view, merit aid supports many students who would attend college without aid. Since merit aid recipients generally come from more advantaged backgrounds, they would also likely succeed without it.
The NCES report shows that a larger percentage of dependent students from high-income backgrounds are receiving merit aid, from 13 percent in 1995–96 to 18 percent in 2007–08.
Over time, undergraduates have seen the distribution of merit aid increase from 6 to 14 percent from 1995–96 to 2007–08, according to the report. The percentage of undergraduates receiving need-based aid also increased, but by much less. In 2007-08, 37 percent of undergraduates received need-based aid, compared to 32 percent in 1995-96.
Community Colleges and Proprietary Institutions
At public two-year colleges, approximately 28 percent of student received need-based aid, while 6 percent received merit aid in 2007-08. Private for-profit institutions on the other hand that the highest rate of receipt of need-based aid, 65 percent, and the lowest rate of receipt of merit-based aid, 4 percent. Because 2-year colleges and private for-profits play a small role in the distribution of merit aid, the report focuses mainly on four-year public and private non-profit institutions.
Increased Merit Aid Amounts
While need-based aid still constitutes a larger share of undergraduate financial aid across institutions than merit aid, the average amount of merit aid is higher than that of need-based aid. Undergraduates received, on average, $700 more in merit aid in 2007-08, at $4,700, than they did in 1995-96, at $4,000 in constant 2007 dollars. The average amount of need-based increased, but again by less, from $3,600 in 1995-96 to $4,000 in 2007-08, in constant 2007 dollars.
Regional Trends
Across all states, among 2007-08 full-time undergraduates at public and private nonprofit four-year institutions, 22 percent received state need-based grants and 10 percent received state merit aid.
The Southeast had the highest proportion of state merit scholarships, at 24 percent, of any region in the United States. In 2007-08, there were 10 states with substantial merit scholarship programs and six of these states were located in the Southeast region.
Georgia, for example, is one of these states. According to the report, 45 percent of full-time students at public or private nonprofit four-year institutions in Georgia received state merit grants in 2007–08. The average amount of these grants was $4,400. In contrast, 9 percent of full-time students at these institutions received state need-based grants, with an average grant of $970.
This gradual shift from need-based aid to merit aid is a troubling trend that NASFAA advocates against. With enrollment and tuition rates climbing, the demand for financial aid has increased, particularly as many states make cuts to their need-based grant programs.
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