More Financial Aid Goes to Help Students

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Tuition Discounting: Institutional Aid Patterns at Public and Private Colleges and Universities, 2000-01 to 2008-09
College Board

Colleges are spending slightly more of their financial aid money on actually meeting the financial needs of their students, this new study says.

In looking at aid provided by private and public four-year institutions – as opposed aid from other sources, such as federal grants – the College Board’s Advocacy and Policy Center found that schools spent more of those funds on meeting student needs in 2008-09 than they did in 2000-1.

While colleges provide aid for many reasons – such as attracting specific types of students in order to diversify the student body or to increase rankings among colleges –  this report measures the extent to which the aid “helps to meet recipients’ financial need” regardless of the motive. It does so by calculating the tuition “discount rate” – that is, the average institutional aid per student, divided by the cost of tuition and fees.

Those discounts are crucial, because educational institutions are the largest providers of financial aid. They provided about $24 billion in grants to undergraduate students in 2008-09, the report says, accounting for 39 percent of undergraduate grant aid. The federal government provided 36 percent, state governments 13 percent and other private sources 12 percent, the report says.

When it comes to discounting, private four-year colleges (which are the most expensive) led the way. During the study period, discount rates at those colleges rose from 28.6 percent to 33.1 percent, while the rates declined slightly among public four-year colleges (20.5 percent to 18.3 percent) and public two-year colleges (12 percent to 10.6 percent).

By another measure, however, public institutions are doing more. The percentage of grant aid that actually met student need rose from 69 percent to 71 percent at private four-year colleges, and from 44 percent to 60 percent among public four-year colleges. Similar figures were not provided for two-year colleges.

The authors suggest that colleges and policymakers “give serious consideration to reducing the awarding of characteristic-based aid to students without financial need.”

The nonprofit board reports more than 5,700 member organizations, including schools and other educational associations.

to Free, 28 pages.