To attract middle-income students, colleges add scholarships and tuition discounts

To attract middle-income students, colleges add scholarships and tuition discounts

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Skyrocketing tuition prices are forcing middle-income students and their families to make a tough choice: shell out more of their earnings to pay for the cost of attendance, take out loans or forgo attending a four-year college altogether.

More students are picking one of the latter two options. Middle-income students borrow money for college at a rate similar to that of low-income students (39% and 38%, respectively, for undergraduates), according to the Pew Research Center. And their share of the undergraduate student body has decreased at both private and public universities during the last two decades.

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The University of California, Los Angeles (UCLA) has a solution. Last month, the elite public college announced it landed a $10 million gift to help students from middle-income families afford to attend.

Half of the donation, which was given by film producer Steve Tisch, will support 24 scholarships of about $10,000 each annually for students with demonstrated need over the next five years. Recipients are expected to have family incomes between $60,000 and $120,000, a university spokesperson said.

The remaining money will be used to set up an endowed fund to continue the awards indefinitely.

With the new program, UCLA becomes one of the latest universities to either offer new scholarships or slash tuition specifically for middle-income students.

Colleges with such programs define middle-income in different ways, with some including students with family incomes as high as $200,000. But many share the goal of supporting students who don’t qualify for the Pell Grant but struggle to afford their expected family contribution.

A college education has become more out of reach for middle-income families, especially in some states and at certain institution types.

For example, families earning between $48,001 and $75,000 would be expected to pay 31% of their income to enroll a full-time student at a public research university in Alabama, according to a 2016 report from the University of Pennsylvania’s Institute for Research on Higher Education. For a private nonprofit college in Rhode Island, that expected contribution could be 45% of the family’s income.

As enrollment continues to decline and public support for higher education wavers, some institutions are offering more financial support to attract and retain this critical demographic, who may be put off by high sticker prices.

“(What) some of these programs really do is they basically make clear what the colleges were more or less already doing,” said Robert Kelchen, a higher education professor at Seton Hall University. “The price tags for some of these programs end up being pretty low.”

Several universities have added benefits for middle-income students in the past year.

Last November, for example, Liberty University announced it was freezing its costs for tuition and room and board for the first time in a decade, and it rolled out a new scholarship for students whose families earn between $35,000 and $95,000 per year.

Around the same time, the University of Virginia said it would waive tuition for in-state students whose families earned less than $80,000 annually, while Stanford University dropped home equity from its financial aid calculations in recognition that home values have risen faster than median incomes.

Such policies are meant to assure middle-income students that they can afford to attend. Their share of enrollment has declined at both selective institutions and flagship universities during the last two decades, while high-income students’ share has increased slightly, according to a July 2018 report from the American Enterprise Institute, a right-leaning think thank.

Although these policies are touted as new, in some cases they may not be much of a financial stretch for colleges, higher education experts said.

For schools that already offer aid packages to middle-income students, it can be “a smart PR strategy” to create a program that guarantees those benefits to all qualifying students, Colleen Campbell, director for postsecondary education at the Center for American Progress, a left-leaning think tank, told Education Dive in an interview.

Such programs can also be used as a fundraising tool, Kelchen said. “Donors like giving to particular projects, and financial aid for middle-income students is pretty popular.”

Colleges that are expanding scholarships or discounting tuition for middle-income students, such as UCLA, usually can make up the cost by raising money or by being more selective about who they admit, Campbell said.

Not all colleges can afford to do that, however. Open-access institutions may lack the means to offer these types of benefits. Increased state and federal funding could provide low- and middle-income students with more aid, however, Campbell noted.

At the University of North Carolina at Chapel Hill, a $5 million donation set up its new Blue Sky Scholars program, which is designed to financially assist students who qualify for financial aid but not for the institution’s program for low-income students. The Blue Sky program includes $2,500 yearly in work-study employment and a one-time grant of $2,500 to help students afford experiences such as internships and study abroad.

“This is sending and will send a signal to middle-income North Carolinians that their university is on their side, and we’re here to help them,” Stephen Farmer, the university’s vice provost for enrollment and undergraduate admissions, told Education Dive in an interview.

The program’s first cohort has 20 students — a number officials hope to increase to 100 during the next five years, with the help of more donations.

So far, donors have been receptive to the program’s goals, Farmer said. “Others who’ve been attracted to the fund really have a heart for the low-income students here as well, but they wanted to make sure that we weren’t leaving anyone else out.”

Other college leaders have seen interest in their institutions surge among prospective students after rolling out new benefits for middle-income students. For example, Rice University — which has posted tuition and fees of about $49,000 — saw a 29% year-over-year increase in applications after it offered free tuition to families earning up to $130,000 and scholarships covering at least half of tuition to students whose families earn up to $200,000.

The private institution spent an additional $7 million on need-based aid for undergraduates this year to cover the cost of the program, called the Rice Investment, and it is planning to create an endowed fund to pay for the program going forward.

The program helps bring clarity to what students and their families can expect to pay, Yvonne Romero da Silva, the university’s vice president for enrollment, told Education Dive in an interview.

“For many institutions, financial aid was a black box,” she said. “You had to first apply for admission and then wait to find out if you’re admitted — and only if admitted and all your forms were complete did you find out what your financial aid package was. That’s a lot of unknown for families.”

November 9, 2019