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US: “Merit aid” on the rise

Around the world, it seems that all major stakeholders are concerned about the financial support available to enable qualified students to participate in higher education. A fundamental debate in this discussion is whether such support should be based on financial need or other factors. The National Center for Education Statistics in the United States has just released a report under the title Merit Aid for Undergraduates. Trends from 1995-96 to 2007-08, which provides a window on the evolution of financial aid for students based on non-financial criteria. In the American context, all such financial support is considered “merit aid”. Amongst other things, the findings show that both merit aid and need-based aid became more prevalent during the period under study. However, the proportion of students receiving merit aid grew at a more robust rate. Specifically, in 1995/96, 6% of all undergraduates received merit aid and 32% received need-based aid, while in 2007/08 14% were recipients of merit support and 37% received support as a result of their financial profiles.

In the US, merit awards come principally from state-level sources and individual institutions, given that all federal financial aid is essentially need-based. Accordingly, the report takes pains to examine regional trends related to the behavior of states/regions, as well as the evolution of merit aid by institutional type. Several interesting findings emerge here, particularly with regard to the institutional data. Amongst public four-year institutions, for example, the percentage of full-time undergraduate students receiving merit aid grew in the period 1995/96 - 2007/08 from 8% to 18%, while the proportion of students receiving need-based aid grew from 13% to just 16%. Even more dramatic is the evolution seen at private four-year institutions. Here, the population of students receiving need-based aid shrank from 43% to 42%, but the proportion of merit aid recipients grew from 24% of the student body to 44%.  Amongst other motivations, it appears likely that middle and lower-tier institutions may be using merit aid as a tool to compete against more competitive institutions.

The report specifically avoids analysing the “potential positive or negative impacts of merit aid”, in favour of simply describing the trends observed. However, the authors do note that research on aid has found that there can be positive and negative effects of its implementation. On the positive side, merit aid may boost postsecondary enrolment and attract students who are more likely to persist in higher education. Possible negative consequences include the diversion of resources from a core objective of financial aid policy, which is to increase access amongst students who might otherwise be unable to participate. As the US increasingly articulates a keen interest in expanding access to higher education, moving from raw data to an examination of what these aid trends mean is an important next step.

National Center for Education Statistics