Less selective schools offer more merit money but less need-based money. But if you qualify for need-based aid, your chances are generally better at the more selective schools. [UPDATE: Tables revised to show corrected admission rates]
If you do not qualify for need-based aid, your chances for merit aid are generally better at less selective schools. In the first chart above, moving down one step from the most selective private colleges more than doubles the average merit aid amount. The standard advice is to apply to colleges where your test scores and grades would put you well within the top 25% of the student body to improve your odds for receiving aid. Your statistics are viewed as a way to boost the school’s prestige.
“Schools compete with each other to attract talented students… “If you want to recruit some of those kids, one way to do it is through merit aid.”
… “Universities compete based on prestige, so if they want to increase their rankings in U.S. News & World Report, an easy way to do that is to bribe high-scoring students to come to your university with non-need-based aid,”…
In addition to boosting prestige, colleges know that relatively small tuition discounts that attract higher-income talented students often yield them more net revenue than the more generous scholarships they offer to lower-income students.
“That’s a fairly significant percentage of what’s happening, especially for universities and colleges that operate on a tight margin and where tuition revenue is an important part of keeping the lights on,” said Jonathan Burdick, dean of financial aid and admissions at the University of Rochester. “In those circumstances, 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.”
The Harvard Effect is a factor, causing some colleges to feel compelled to follow Harvard and Yale’s lead in price-discounting to affluent families.
Universities say they also have been forced to pay out more aid to people who don’t need it thanks to widely publicized changes in financial-aid policies introduced in recent years by highly selective universities including Harvard, Yale and Stanford, which raced one another to give grants to families with income as high as $200,000.
* Merit aid is defined as grants “awarded to students without financial need or awarded in excess of need”.
Source data is from College Board Trends in Student Aid 2011: