College Pete


Who Gets Merit Aid Grants & How To Get Your Fair Share

Who Gets Merit Aid Grants & How To Get Your Fair Share

I’ve been writing and speaking about college tuition discounts — and more specifically, how to ensure that you get one for your family — for years. Since my first book Never Pay Retail For College was published in 2009 – the average discount rate on tuition has risen from about 40% to 56% (as in, on average today’s colleges cut their ‘gross’ prices by more than half).

I realize that this may cause some anxiety about the absurd college sticker prices.  Here’s some good new for you.

You shouldn’t expect to pay sticker! In fact 2/3 of college students are getting a ‘tuition discount’. And if you think that these discounts are only for ‘poor people’, you’d be mistaken. Even families with incomes well in excess of $200,000 can enjoy five-figure discounts if their children apply to schools where they are eligible for institutional merit-based scholarships. 

We think you should be one of them, and here’s what you need to know to make sure that you are.

First, Colleges have two main instruments when it comes to their discounting strategies: 1) need-based aid and 2) merit-based (or non-need based) aid.

Schools utilize both tools to induce students to attend their institution, but not necessarily in equal measure. If you earn $200,000 or less and you properly position your savings/investments…and your children apply to the right schools (see also University Generosity), you will likely qualify for need based grants. But, regardless of income or circumstance, the largest source of free money for most of us forgotten Middle Class folks is in both institutional need-based grants and merit-based scholarships (not government financial aid).


The opportunities to pay the net price for college and save significantly do exist, both for families who will qualify for need-based financial aid AND for those who won’t. But many students fail to maximize their opportunities in college because they start off making the wrong college list in high school. They wind up applying to the wrong colleges (meaning, the ones that are less likely to offer a discount to them), or to too many colleges, or to the same 15 colleges everybody else in their school is and they needlessly leave money on the table.

Typically, private colleges and universities have been more likely to offer the largest (five-figure) non-need based discounts, or enrollment incentives, to students. These offers were often reflected as Institutional Merit Grants and doled out by the Admissions office. John Lieber, in his book The Price You Pay for College, points to the private colleges in Ohio (specifically Ohio Wesleyan) as the early adopters of using merit aid to compete with other, often more ‘popular’ schools for top students. The idea has since spread well beyond Ohio to includes schools nationwide.

What’s interesting is that more recently, and especially since the 2007-08 economic downturn that led to state budget cuts of higher ed, there has been an uptick in public universities adopting a similar strategy. We’ve seen the use of scholarships as an increasingly important tool utilized to lure out of state applicants whose out of state tuition rate helps subsidize the lower tuition paid by in state students.

The University of Alabama was one of the earliest, and today remains one of the most active, practitioners of awarding merit aid to lure out of state applicants. There are many others using similar strategies including: University of Delaware, University of Colorado, Indiana University and University of Arizona to name just a few.

Much has been written about merit aid and, well, it’s merits. And despite the terminology, ‘merit aid’ incentives typically go to students who tend to be more affluent. This can be intentional. These awards are often based on specific enrollment strategies that have little to do with high school achievement. Merit aid has thus been criticized by some who view it as a substitute for the distribution of need-based alternatives to those students who truly need financial aid to enroll.

Regardless of your (or my) opinion on the matter, what’s of note is that this type of discounting practice is growing at both public and private universities.  Enrollment Management, the term by which it is known in academia, is something we’ve been tracking for more than 15 years. Today, in fact, several colleges and universities have Deans or Directors who bear the title “Enrollment Management”. This job title did not exist when I started my practice 17 years ago.

For years I’ve been explaining to parents that colleges are, indeed, businesses. They are trying to extract the highest price possible from as many students as possible. Most businesses operate this way, by trying to maximize ARPU, or average revenue per user (or unit). Colleges operate in a similar way. Our job is to help your child find the best fit at the lowest price point offered.

Some students we work with pay very little to attend – either because they receive generous, need-based packages or because they are granted substantial merit awards for outstanding high school achievement. Very few of our kids pay full price. Most of our students fall in the large, gray area where they stay within budget or pay a little bit more than what they would like, but also enjoy a big scholarship/discount/enrollment incentive that makes completing school without onerous debt possible… and makes mom and dad very happy and proud.

When it comes to planning for college, there are three important strategies that we use with our families. For some families, all three will apply, for others, it might be only one or two of the three.

  1. We make sure that we get an accurate projection of the true net cost (lowest cost possible) at each school under consideration. We understand the financial aid rules so that we can work within those rules to maximize your opportunity for need-based awards. This strategy certainly applies to low income families, but also to most middle and even upper middle class families earning up to $200,000 per year.
  2. We help each child build a strategic list of colleges that not only offer need-based awards but also includes schools that are likely to offer merit/enrollment incentives or discounts. This strategy should not be overlooked, as it could yield significant, five figure awards that are renewable each year your child is enrolled. For lower income families, the assembly of the right list can be critical to minimizing your out of pocket expense. Applying to the wrong schools who don’t have any money to award can be fatal to your chances at any discount (either need- or merit-based).
  3. And for the most affluent families, we show them how to plan early and save big. If you’re not likely to qualify for any need-based incentives, it’s important that you fund other savings instruments, such as a 529 college savings plan which offers tax-free incentives (to clarify, we do NOT offer 529 plans. For that you should see a financial advisor). And, for these families it is critical to assemble the right list of schools. 

In plain English, to lower the cost of college you need to know where you stand, financially-speaking; you need to know what to do to ‘improve’ your standing; and finally, you need to know where to look to find the handful of colleges that can meet both your child’s academic needs and your financial ones.

The time to do this is before your student is in the second half of 11th grade. It’s not your fault if you feel confused by college pricing, the various grant and scholarship options and the financial aid formulas that help determine what you’ll actually pay for college. The more you understand, the better your options will be. I hope this helps you get started on the right path. If you have questions or if you think I can help alleviate some of the pressure for you, please reach out to me and we can set aside some time to discuss your family’s needs and circumstances.

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