The Myth of Merit Aid

When we think about marketing, visions of glossy brochures, catchy jingles, clever one-liners and memorable video clips come to mind. What few of us think about is a college scholarship. As an example, consider that well-placed commercial during the morning news you always watch. It shows a delicious-looking breakfast sandwich that comes with a hot cup of coffee for only a couple bucks. You are hungry and were about to make a pot of coffee, but you can get it all at that place on your way to work – no fuss, no muss… It will save time and there are no dirty dishes to wash when you come home, so you feel good about making such a smart decision to start the day. You have just been successfully marketed to.

Now consider a family about to send their oldest child to a college that costs $70,000 per year. They can afford to pay the total cost but would prefer not to. The college offers a $20,000 merit scholarship. The family is delighted. The child enjoys the monetary pat of the back for all their hard work in high school and the parents burst their buttons telling all their friends that little Johnny or Suzy got a nice scholarship to attend one of their top colleges. That family has just been successfully marketed to. The college in question spends $150,000 over four years to educate each student and they will take in $200,000 from this unsuspecting family.

This scenario can be found in a book by Ron Leiber titled The Price You Pay for College. A memorable quote from the book that he wants every family to remember is, “Schools ask families to jump through several application hoops just to put themselves in the running to write some of the biggest checks they’ll ever write.”

As with any system, looking behind the curtain of merit aid provides a surprising view. Things like information surrounding the billion-dollar industry of data analytics used by colleges to understand information from a variety of sources about every applicant. The complicated algorithms also tell colleges what actions are most likely to get applicants to say yes to an acceptance letter. One very interesting point was that for many years, scores of colleges have been funneling most of their merit aid money into need-based financial aid offers. If that is the case, why do we have separate labels for money taken from the same source? There is so much more to tell but it took Ron Leiber an entire book to so. Read it if you get the chance.