Merit scholarships steal from low-income students

Is college worth the cost?
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Story highlights

  • Levy says more colleges are devoting money to scholarships that reward those who already can afford to pay, reducing assistance for needy students
  • Taking scarce financial aid dollars from low-income students to give to students who don't need it amounts to Robin Hood in reverse, he says

Former New York City Schools Chancellor Harold O. Levy is executive director of the Jack Kent Cooke Foundation, which awards scholarships to high-achieving students from low-income families and grants to organizations that serve such students. The views expressed in this commentary are his.

(CNN)There's a growing competition among colleges and universities to enroll students who can foot the bill for their education with little or no financial aid from the schools. But paradoxically, the colleges are attempting to attract these highly sought-after students by giving them financial aid -- even when the students can pay their bills without it.

The result? Less scholarship funding is available for low-income students who are then unable to attend because they can't afford an expensive college education without a big aid package.
    Harold O. Levy
    More and more colleges are setting aside financial assistance for what are known as "merit scholarships." U.S. News and World Report found that in the 2014-15 academic year, the 100 colleges and universities giving the highest percentages of students merit aid provided the assistance to between 28 and 68% of students, not counting athletic scholarships.
    Merit assistance has nothing to do with financial need. It rewards students with scholarships for a variety of accomplishments, such as getting a high GPA, receiving high scores on standardized tests and earning a high class rank.
    High school students with achievements like these are certainly worthy of recognition, and their accomplishments can help them compete for admission to college. But taking scarce financial aid dollars from low-income students to give to students who don't need it amounts to Robin Hood in reverse -- robbing from the poor to give to the rich.
    It's easy to see why colleges have such a strong attraction to students with wealthy parents. The schools have to make enough money to pay their faculty members, other employees and cover all their operating costs. Wealthy students provide the funds needed to keep colleges in business without depleting their endowments.
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    Merit scholarships are usually smaller than need-based aid packages given to students from poor families. So it makes financial sense for a college to give a wealthy or near-wealthy student a $4,000 merit scholarship in his or her first year to get the student's family to spend far more each year on the student's education. This is no different than a car dealer giving a customer a $4,000 rebate in order to sell a $40,000 car, or a supermarket cutting the price of milk as a loss-leader to lure customers to buy additional items.
    Because wealthier students don't depend on merit aid to stay in school, colleges tend to give the most merit aid to students in the freshman year, cutting the aid in subsequent years once a student is safely on campus and reluctant to transfer. This comes as an unpleasant surprise to many students.
    When a college diverts scarce financial aid dollars from the poor to the rich as merit aid, low-income students suffer -- increasing the enormous gap in attendance that already exists between income groups at America's top colleges and universities.
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    The Jack Kent Cooke Foundation, where I am executive director, reported in a study released earlier this year that at our nation's most selective colleges, a mere 3% of students come from families with the lowest 25% of incomes. In contrast, 72% of students come from families with the highest 25% of incomes. This means that for every low-income student at the elite schools there are 24 wealthy students.
    This huge and disturbing gap is not what you would expect in a nation that calls itself the Land of Opportunity. But the gap does not have to exist. It can be narrowed, and some colleges and universities are leading the way to show just how it can be done.
    To shine a spotlight on colleges that are admitting and graduating more high-achieving students from low-income families, the Cooke Foundation created the $1 million Cooke Prize for Equity in Educational Excellence last year. Vassar College in New York State was our first recipient.
    Vassar has increased the number of its low-income students by 11% since 2008 -- more than any other college ranked "most competitive" by "Barron's Profiles of American Colleges." Roughly 23% of Vassar's freshmen are now eligible to receive a federal Pell grant that benefits low-income students.
    The Cooke Foundation recently announced that five colleges are finalists for the Cooke Prize this year because they have also done an outstanding job of increasing economic diversity on their campuses. They are: Amherst College in Massachusetts; Davidson College in North Carolina; Pomona College in California; Rice University in Texas; and Stanford University in California. The prize will be awarded later this spring.
    Other colleges should learn from these schools and replicate successful programs to open their doors to more students with big brains and small wallets. Unless this happens, a cash ceiling will continue to limit the upward mobility of some extraordinarily brilliant young people born into struggling families. The time to shatter this ceiling is long past.