With college tuition ever-increasing, it’s no wonder financial aid—and access to it – is growing in importance. Student loans get a lot of (deserved) attention, but grants are important too. The three graphs below show average grant aid broken down by type: federal, state and local, and institutional (funded by the college, e.g. tuition discounts) at public four year, public two year, and private non-profit four year universities. Note that these are averages in aid across all students, not just grant recipients.
A few points are worth emphasizing:
First, after stagnating for much of the 2000s, average federal grant aid has grown enormously in the last couple of years. This is particularly evident in the second chart.
Second, while the average federal grant at four-year public and four year private nonprofit universities is only $30 apart, the average grant award for two-year publics is around $900 greater than that of four-year colleges. This isn’t all that surprising since low-income students are concentrated at community colleges meaning more of their students are receiving need-based federal aid like the Pell grant.
Third, state and local grant aid is generally not growing, and is almost always overshadowed by federal and institutional grants.
Fourth, institutional grants have been growing in importance at four-year universities. These are grants funded by the colleges themselves. While this sounds very generous of them, to a large extent, these grants are more of a marketing gimmick than real student aid. For example, a few years ago Miami University in Ohio raised tuition for all in-state students, but then gave a grant to all in-state students to offset the increase. Technically, this increased their average institutional aid, but in reality, it did not provide a single dollar more in aid to students. Its purpose, rather, was to send a signal to applicants that Miami was expensive and by implication, worth attending. Similarly, Stephen Trachtenberg discovered while revamping George Washington University that “students were more interested in attending a $40,000 school with a $20,000 discount than they were in attending a $20,000 school.”
Institutional aid is also used in the competition among schools to recruit top students. As Kevin Carey described, merit scholarships (most of which show up as institutional aid) are often given not for actual merit but to lure students away from competing schools. Unlike some others, I don’t have a philosophical problem with this practice (after all, it is one of the few dimensions colleges actually compete on, and it results in students having to pay less, both of which I regard as good things). But what I do object to is misclassifying it as institutional aid. It is a marketing gimmick, not financial aid.