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Colleges Shifting Aid From Poor to Rich

By Alan Farnham, ABC

A new analysis of colleges' financial aid policies indicts American higher education not just for having turned its back on poor students, but for robbing them in order to woo rich students.

The report, "Undermining Pell: How Colleges Compete for Wealthy Students and Leave the Low-Income Behind," was produced by the New American Foundation, whose chairman is Eric Schmidt, executive chairman of Google. "Pell" refers to Pell Grants--the federal program created to help poor students gain access to, and pay for, college.

The report concludes that America's four-year colleges--both private and public--are "in danger of shutting down what has long been a pathway to the middle class for low-income and working-class students" by making financial aid less available to them. Why have colleges done so? Because, says author Stephen Burd, they are engaged in "a relentless pursuit of prestige and revenue."

The biggest change over the past 20 years, Burd tells ABC News, has been the shift from need-based aid to merit-based. That's been driven, he says, by a variety of factors, including colleges' desire to score higher in U.S. News's annual ranking of the nation's best colleges, which is calculated in part on students' academic excellence.

Burd makes his case by examining the "net price" students pay for college: the amount paid after all grant aid has been exhausted. Hundreds of colleges, he writes, "now expect the neediest students to pay an amount that is equal to or even more than their families' yearly earnings. As a result, these students are left with little choice but to take on heavy debt loads or to engage in activities that lessen their likelihood of earning their degrees, such as working full-time while enrolled or dropping out until they can afford to return."

When ranked by "net price," the colleges most generous to poor students are Amherst, Vassar, Grinnell and Williams--all of who accept a relatively high percentage of Pell Grant students (20 percent or more) and also provide generous financial aid. Amherst really stands out: The net price paid by Pell Grant students at Amherst is $448--by far the lowest in the study's ranking. Amherst's net price compares, for example, with more than $46,000 paid by students at Santa Clara University.

ABC News asked Burd to draw a distinction between the change in aid for poor students with high grades and test scores--the "smart poor"--and the change in aid available for poor students with inferior grades and scores.

If you're poor and smart, says Burd, "you're probably in fairly good shape." The problem for the smart poor, he says, isn't so much that aid for them has been reduced, it's that they may not know that aid is available for them at all. They may not think they are eligible to attend elite colleges.

In other words, colleges are continuing to make aid available to high-achievers, whether rich or poor. It's poor students with lower grades who are being offered less financial help.

The group that has benefitted most, according to Burd's analysis, are rich students with poor grades and scores--the "dumb rich."

"There's a premium, now, on being wealthy," Burd tells ABC, "because a student's being able to pay full tuition is good for the bottom line of schools. Studies have found that the wealthy who are low achievers sometimes do better [in terms of getting aid] than high-achieving, low-income students, though I don't go into that in my paper."

It's especially true, he says, in public colleges now looking for alternative sources of funding--e.g., students from out of state whose grades may be lower than in-state students, but who can pay higher tuition.

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