Nov 26, 2011 4:35 PM GMT
Universities and colleges are giving $5.3 billion in aid this year to students who the federal government says don't need financial help, according to figures from the College Board.
An additional $4 billion in federal tuition tax credits went to families making $100,000 to $180,000 — at least double the median income for U.S. households.
The schools use the money — more than 20% of all U.S. financial aid — to compete for applicants who have high grade-point averages and SAT scores. Some discounts serve another purpose: They lure high-income families that can write a check for the rest of the tuition.
The strategy is not unlike department stores that use discounts to encourage customers to spend. "Giving $5,000 against a $25,000 tuition charge is just like the discounting you'd see in a retail operation to bring traffic to the door," says Jonathan Burdick, dean of financial aid and admissions at the University of Rochester.
Elite universities such as Harvard, Yale and Stanford give aid to families earning as much as $200,000, which less-selective schools say puts pressure on them to also offer grants to higher-income families. Education experts say such subsidies mean less help for lower- and middle-income students, who fall deeper into debt to pay tuition.
The share of financial aid going to low-income students has declined steadily over the past 10 years, and two-thirds of students borrow to pay for college. The Project on Student Debt, a research group that tracks borrowing for college, reports that students graduate owing an average of $25,250. "We've raised tuition tremendously, and we are giving a lot of the money to people who could be fine without it," says Sandy Baum, a higher-education analyst who collected the statistics for the College Board, an association of colleges that administers the SAT.
Baum found that colleges and universities awarded $5.3 billion worth of grants to families beyond what they qualified for under the federal government's definition of financial need, which is based on income, assets and the cost of the institution a student chooses to attend.