How Much Do I Hear For This Student?

(2 of 3)
This is the second time in three years Princeton has stolen a march in the tuition wars. In 1998 the university announced it would no longer count the value of an applicant family's home as part of the formula it uses to determine financial need. That change allowed many applicants to qualify for a few thousand dollars more in aid.

For most of the past half-century, financial-aid officers at selective colleges--including M.I.T. and the eight Ivies--agreed among themselves on a single method of calculating a family's ability to pay. Applicants were told what their "expected family contribution" would be. But in 1990 the U.S. Justice Department charged these colleges with price fixing. The case was settled in 1993 when the colleges agreed to stop swapping financial information about their applicants. Still, they insisted they would strive to confine aid to those who were in need.

At first, the collapse of the scholarship cartel seemed a good thing. With tuition at private colleges soaring nearly 75% during the 1990s alone, a little price competition among them seemed in order. In fact, market forces had been at work in college admissions for at least a couple of decades among the less competitive institutions, some of which needed to charge lower prices just to fill their classrooms. But since the lawsuit, a growing number of selective colleges--those whose applicants outnumber their available slots--have begun offering financial incentives regardless of need.

Ironically, the most selective colleges, often those that can best afford to give money away, benefit from a kind of Chivas Regal effect, in which buyers are willing to pay for cachet. While Princeton and a few other top colleges continue to limit aid to those in need, their actions are fueling a bidding war among schools eager to win kids away from Princeton--or any other college above them in the perceived pecking order. As a result, observes James Monks of M.I.T.'s Consortium on Financing Higher Education, "financial aid is no longer viewed as a charitable means of admitting a 'poor scholar,' but rather as a price discount to which an applicant is entitled and which is subject to negotiating and bargaining."

Most colleges play the merit-scholarship game with stealth. Many dodge the discount label by proffering merit scholarships that are endowed by private donors and have set qualifications: Emory offers the Scholars Program; Washington University in St. Louis, Mo., has its Honorary Scholars program. The private University of Rochester offers any New York State resident a $5,000 tuition break--one that just happens to make Rochester financially competitive with the better of the campuses of the State University of New York, to which it often loses applicants.

Now the game is getting even more complicated. "Each college kind of has its own stance on the degree to which it's willing to have those conversations" about financial aid, says Amy Grieger, college counselor at Northfield Mount Hermon, a prestigious Massachusetts prep school. What troubles Grieger as well as many college admissions officers is that the latest wave of merit-based scholarships is undermining efforts to promote economic and racial diversity, because it handicaps the lower-income kids, who might not be first in their class. "As a system, we're not serving those students very well," she admits.