Colleges Shifting Aid From Poor to Rich

May 9, 2013 -- A new analysis of colleges' financial aid policies indicts American higher education not just for having turned its back on poor students, but for robbing them in order to woo rich students.

The report, "Undermining Pell: How Colleges Compete for WealthyStudents and Leave the Low-Income Behind," was produced by the NewAmerican Foundation, whose chairman is Eric Schmidt, executivechairman of Google. "Pell" refers to Pell Grants--the federal programcreated to help poor students gain access to, and pay for, college.

The report concludes that America's four-year colleges--both privateand public--are "in danger of shutting down what has long been apathway to the middle class for low-income and working-class students"by making financial aid less available to them. Why have colleges doneso? Because, says author Stephen Burd, they are engaged in "arelentless pursuit of prestige and revenue."

The biggest change over the past 20 years, Burd tells ABC News, has beenthe shift from need-based aid to merit-based. That's been driven, hesays, by a variety of factors, including colleges' desire to scorehigher in U.S. News's annual ranking of the nation's best colleges,which is calculated in part on students' academic excellence.

Burd makes his case by examining the "net price" students pay forcollege: the amount paid after all grant aid has been exhausted.Hundreds of colleges, he writes, "now expect the neediest students topay an amount that is equal to or even more than their families'yearly earnings. As a result, these students are left with littlechoice but to take on heavy debt loads or to engage in activities thatlessen their likelihood of earning their degrees, such as workingfull-time while enrolled or dropping out until they can afford toreturn."

When ranked by "net price," the colleges most generous to poorstudents are Amherst, Vassar, Grinnell and Williams--all of who accepta relatively high percentage of Pell Grant students (20 percent ormore) and also provide generous financial aid. Amherst really standsout: The net price paid by Pell Grant students at Amherst is $448--byfar the lowest in the study's ranking. Amherst's net price compares,for example, with more than $46,000 paid by students at Santa ClaraUniversity.

ABC News asked Burd to draw a distinction between the change in aidfor poor students with high grades and test scores--the "smartpoor"--and the change in aid available for poor students with inferiorgrades and scores.

If you're poor and smart, says Burd, "you're probably in fairly goodshape." The problem for the smart poor, he says, isn't so much thataid for them has been reduced, it's that they may not know that aid isavailable for them at all. They may not think they are eligible toattend elite colleges.

In other words, colleges are continuing to make aid available tohigh-achievers, whether rich or poor. It's poor students with lowergrades who are being offered less financial help.

The group that has benefitted most, according to Burd's analysis, arerich students with poor grades and scores--the "dumb rich."

"There's a premium, now, on being wealthy," Burd tells ABC, "because astudent's being able to pay full tuition is good for the bottom lineof schools. Studies have found that the wealthy who are low achieverssometimes do better [in terms of getting aid] than high-achieving,low-income students, though I don't go into that in my paper."

It's especially true, he says, in public colleges now looking foralternative sources of funding--e.g., students from out of state whosegrades may be lower than in-state students, but who can pay highertuition.