Merit aid in its targeted form often serves mainly to redistribute students from one college or university to another without having a great deal of effect on overall enrollment rates. Most students who qualify for special scholarships would almost certainly go to some other institution without such inducements-perhaps even to institutions better suited to their educational needs. Need-based aid, on the other hand, can have discernible effects on the enrollment of less privileged students, on where they are able to study, and on their ability to complete their studies in a timely way. There is no need to belabor these obvious points.

Groups of similar private colleges (and sometimes public ones, too) frequently find themselves in a bidding war over the same students. These bidding wars are often egged on by “enrollment management consultants” who predict dire consequences from any attempt to back down from awarding merit aid. These consultants sometimes advise multiple colleges that are competing against one another, and often intimidate local decision-makers with impenetrable mathematical models whose details are proprietary. We suspect that these consultants have been a factor causing many colleges to exaggerate the power of merit aid to solve enrollment problems.

Recent decisions by some well known colleges to step off the merit aid escalator have yielded promising results. Franklin and Marshall College in Pennsylvania is a prominent example. They decided several years ago to cut back substantially on merit scholarships. They have maintained their high admissions standards, shifting aid resources from merit awards to more generous awards to high-quality students with need-investments financed in part by students from well-off families who are now paying full (“sticker”) price.

Unfortunately, current rating systems for colleges such as the US News survey put real pressure on institutions to keep their average SAT scores high, even if this means “buying” students with high test scores and, in some cases, denying admission to high-potential students from lower-income families who simply do not test well. There are problems with this approach. In addition to considerations of equity, there is abundant evidence that grades in secondary schools are a far, far stronger predictor of success in college than are SAT scores; this is hardly surprising when we recognize that actual performance in school reflects valuable coping skills like “grit” and perseverance as well as cognitive ability.” It is at least moderately encouraging to note that the College Board is putting more and more emphasis on achievement tests, which are also better predictors of subsequent educational outcomes than so-called “aptitude tests” such as the SAT.

Still, the rating systems take a toll, and it would be nice to see some kind of concerted action to reduce pernicious incentive and behavioral effects.

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