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American Colleges Rob Poor Students, Pay the Rich

NEW YORK (MainStreet)—America's colleges aren't looking for just the "best and the brightest" – they're looking for the wealthiest. In an effort to boost revenue, universities are playing "an elaborate shell game" using Pell Grants to replace institutional aid they would have otherwise provided to financially disadvantaged students and shifting these funds to help "buy" wealthier students, according to a report issued by the New America Foundation, a nonprofit, nonpartisan public policy institute in Washington, D.C.

Also see: Obama's New Student Financial Tool--Does It Matter?

Stephen Burd, a senior policy analyst for the Education Policy Program for the New America Foundation studied "little-examined" 2010-2011 U.S. Department of Education data showing the "net price" — the amount students pay after all grant aid is exhausted — for low-income students at thousands of colleges. According to Burd, the analysis shows that hundreds of colleges expect the neediest students to pay an amount that is equal to or even more than their families' total annual earnings.

In an effort to lure "full-pay" students – whose families can afford full tuition – schools offer generous financial awards, diverted from the funds targeted for the most-needy of college applicants. "After all, it's more profitable for schools to provide four scholarships of $5,000 each to induce affluent students who will be able to pay the balance than it is to provide a single $20,000 grant to one low-income student," Burd says in the study.

Also see: Student Debt Becoming More of a Family Problem

The report also says that some of the country's most prosperous private colleges are the stingiest with need-based aid. These institutions tend to divert financial aid to gain sought-after students, as well as the most affluent, in order to help the institutions score better in national university rankings, as well as to maximize revenue.

And universities aren't just tipping the financial scales in favor of deep-pocketed students.

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"The competition for the wealthy is so strong that 10% of college admissions directors at four-year colleges (and nearly 20% of those at private liberal arts colleges) reported that they give affluent students a significant leg up in the admissions process — meaning that they are admitting full-pay students with lower grades and test scores than other applicants," Burd says. "These colleges are, in other words, providing affirmative action for the wealthy, despite all of the extraordinary advantages that these students have over their less-fortunate peers."

Also see: Does College Add Up? Try This Formula

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