Many less well-endowed institutions compete aggressively for good students. As part of the enrollment chase, they offer merit aid as a tool to attract high-achieving students. That practice, which clearly cuts the amount of institutional aid available for needy students, grew exponentially in the 1990s and is now widespread.

According to a 1999 study by Donald Heller and Thomas F. Nelson Laird at the University of Michigan, the average merit aid award more than doubled between 1989 and 1996.

The National Association of State Financial Aid Administrators reports that, while need-based aid on the nation’s campuses increased 41 percent during the 1990s, merit aid jumped more than 200 percent. College officials whose institutions dispense merit awards say that, without such awards, their schools would not attract as many academically talented students; some say they would not be able to fill their classes.

“You cannot compete in the higher education market, especially as a private institution, without offering merit aid, unless you are a school like Harvard,” explains Douglas Bucher, director of financial aid at Drexel University in Philadelphia. But, he acknowledges: “Schools have only a limited number of financial aid dollars, and if they give the money to those who haven’t shown that they need it, it affects those who do need the money. It may mean that they (low-income students) don’t get enough and don’t come.”

David Breneman, dean of the Curry School of Education at the University of Virginia and former president of Kalamazoo College in Michigan, recalls that Kalamazoo had to make some hard choices: Offer merit awards of $3,000 to $4,000 to three or four relatively well-to-do students or give a $12,000 grant to a needy student. The college opted to spread the money around, he says, and “hope that out of the three or four receiving a merit award we would get one or two (to enroll).

You can’t condemn the colleges because they are struggling like crazy to fill up — not enough people are willing (or able) to pay full price.”