Higher Education

With the economy stuck in neutral, tuition prices and student loan debt skyrocketing, and parents and students increasingly questioning the value of a college degree, our public institutions urgently need a different approach to the challenge or educating an increasingly diverse mix of students at a reasonable cost. Today, New America's Education Policy Program released The Next Generation University, a policy report about the future of public higher education. The report comes at a time when too many public universities are failing to respond to the nation's higher education crisis. Rather than expanding enrollment and focusing limited dollars on the neediest of students, many institutions are instead restricting enrollments and encouraging the use of student-aid dollars on merit awards. But, according to the report, some schools are breaking the mold by boldly restructuring operating costs and creating clear, accelerated pathways for students.

The report focuses on six public research universities: Arizona State University, University at Buffalo, University of California at Riverside, University of Central Florida, Georgia State University, and the University of Texas at Arlington. These universities are continuing their commitment to world class research while increasing enrollment and graduation rates, even as the investments from their states have declined. 

The report includes case studies on each of the six universities, which were selected after an analysis of federal education data, site visits, and interviews. Based on similarities in their approaches to reform, the report's recommendations include:  

At the Institutional Level

1. Increase size to ensure broad access, test new ideas from pedagogy to student services, and serve growing populations.
2. Create direct connections between two- and four-year colleges to ease access for transfer students.

At the State Level

1. Guarantee a low net-price for low-income students.
2. Adopt performance-based funding.
3. Create transfer policies that encourage completion.
4. Ensure students in the K-12 pipeline are prepared.

At the National Level

1. Develop Next Generation Leaders for Next Generation Universities.
2. Acknowledge that external recognition remains important in higher education, and provide recognition for increasing access and student success.
3. Create a demonstration program that challenges four-year public higher education institutions to innovate.

These recommendation and lessons will be featured at an event held at the New America Foundation from 10am to 3pm. You can learn more about the event and watch a livestream here. Follow the conversation on twitter using #NextGenU.

Download the full report here.

In addition to the report, New America has released two related issue briefs:

In "Technology and the Next Generation University," New America's Rachel Fishman explores the barriers to technology-enhanced education and presents promising practices Next Generation Universities employ to overcome them.

In "Formation of the Next Generation University: Role of State and System Policy," HCM Strategists' Iris Palmer, Kristin Conklin, and Nate Johnson explore how transfer policy, financial aid, net price, performance funding and the K-12 pipeline affect Next Generation Universities within their state context. It makes recommendations for state and higher-education system policymakers on how to ensure public institutions are meeting the needs of the state.

HCM Strategists, in conjunction with the release of The Next Generation University has developed a new interactive tool:

Next Generation Universities: Select Dimensions of Research University Output, Productivity and Efficiency 2006-2011

This dashboard, created by HCM Strategists and Postsecondary Analytics, includes a selection of measures of public research university performance through the great recession, showing how they have fared over time and in comparison to the sector as a whole. It helps illustrate the very different ways research universities have experienced and responded to the challenges of the last several years, and which institutions have been able to sustain or grow the number of students served in spite of the financial challenges they faced.

Please note that the dashboard is a large file (2.5 mb) and may take up to a minute to load. It requires Adobe Flash, which is already installed in most browsers.

Also released at the event are two conference papers from the Edunomics Lab at Georgetown University: 1) More Students, More Degrees, More Dollars: How Universities Can Close Budget Gaps while Benefiting Students; and 2) The High Price of Excess Credits: How New Approaches Could Help Students and Schools.

As the nation struggles to find new ways to increase college access and completion rates while lowering costs, a handful of "Next Generation Universities" are embracing key strategies that make them models for national reform.

Be sure to check out this op-ed on Yahoo Finance regarding Senator Warren's proposal to cut interest rates on federal student loans.

This Ed Money Watch post has a rundown of all of the pending proposals, including the one sponsored by House Republicans that will be up for a vote next week.

A clear divide has emerged in the debate over the interest rates on federal student loans. In one camp are House and Senate Republicans, along with President Obama; in the other are the congressional Democrats. But before explaining what makes those camps different, a quick refresher on the interest rate issue is in order.

Undergraduates are currently charged two different fixed interest rates: 3.4 percent on Subsidized Stafford loans and 6.8 percent on Unsubsidized Stafford loans. Loans issued on or after July 1, 2013, though, will carry the 6.8 percent rate. (That policy has its roots in a 2006 Democratic congressional campaign and you can read the history here.) The rates are different for graduate students and parents of undergraduates, and were never subject to the expiring policy. The two-rate policy on undergraduate loans was originally set to expire last year, but President Obama called for extending it for one year. Congress went along with that at a $6 billion cost.

Unfortunately, the interest rates on federal student loans are just numbers Congress made up (seriously). And in debating the expiring two-rate policy last year, lawmakers never tried to come up with a more rational approach. Instead, they just extended the made-up numbers. We criticized that approach and offered an alternative last year.

What a difference a year makes.

A real debate about student loan policy is now underway in Congress. House Republicans (Kline), Senate Republicans (Coburn), and President Obama have all put forth proposals to peg student loan interest rates to the rates on U.S. Treasury notes. While their proposals are all slightly different, these lawmakers have put forth proposal that would be permanent, fiscally sustainable, keep rates well below market rates for all borrowers, and ensure that those interest rates reflect economic conditions.

So here is where the divide in the debate emerges. Other lawmakers – House and Senate Democrats mainly – have proposed either gimmicky solutions, wildly expensive ideas, or a two-year extension of the made-up rates. A side-by-side table is available here. 

• Rep. Courtney suggests a two-year extension of current policy.

• Senator Warren would set the rate at 0.75 percent, but only for undergraduates and only for Subsidized Stafford loans, and only for one year. The cost would be close to $12 billion, by our estimates.  Senator Warren claims her proposal has something to do with an emergency lending program at the Federal Reserve, which is really just a rhetorical gimmick that has no practical effect.

• Senator Reed introduced a bill that requires the Department of Education to set the rates at the “cost” of the program, and let borrowers with outstanding loans refinance to those rates. That would drop rates to about 2% by our estimates (official cost estimates understate the cost of the program, so the rates would be artificially low).  Even though the program would operate at “cost,” the reduced interest payments compared to current law would actually show up in the budget as increasing the deficit (i.e. as a cost) of about $175 billion over the next 10 years according to numbers released by the Congressional Budget Office yesterday. That is before factoring in the refinancing component, which could easily top $50 billion in costs.

We’ve received a lot of inquiries about the merits of all of these proposals. Obviously, the shortcomings of the congressional Democrats’ proposals need no further explanation. The president’s and the House and Senate Republicans’ proposals, on the other hand, are all a huge improvement over current policy – and a huge improvement over what lawmakers were discussing last year. None would be a step backwards.

That said, the House proposal gives borrowers the most options and protections – floating interest rates with the option to take a fixed rate and an interest rate cap – but those options and protections mean the proposal has a lot of moving pieces that will require a lot of explaining. It will also confuse borrowers, some of whom will inevitably make a bad choice on when to lock in their interest rate. The president’s proposal needlessly charges undergraduates two different interest rates just to score political points. The Senate Republican bill, on the other hand, has no complicated options and no moving pieces, or gimmicks to score political points.

Those should be guiding principles as Congress and the president work to finalize a bill by July 1.

For more on this issue, check out this post from Clare McCann on our sister blog, Ed Money Watch.

For those who care about increased higher education transparency, the last few days have been a trip through the Congressional looking glass, culminating with yesterday’s introduction of a bill to “study” higher education transparency. On Thursday a bipartisan group of senators and representatives introduced the Student Right to Know Before You Go Act, which would help provide students, families, and taxpayers with answers to critical questions like whether students at particular institutions graduate, whether they get jobs, and whether they can comfortably pay back their loans. A televised discussion among Senators Wyden (D-OR), Rubio (R-FL), and Warner (D-VA), Representatives Hunter (R-CA) and Andrews (D-NJ), students, and guidance counselors underscored the urgent need for better information about higher education outcomes and value.  

It seems pretty straightforward. Students, families, and policymakers have questions. And this legislation would provide answers. But the day after the legislation was introduced, an unnamed senior Congressional education staffer said of the effort, “But a federal unit record system is only designed to answer questions no one is asking, namely: how do we bring No Child Left Behind and its command and control mentality to higher education.”

Let’s ignore the intentionally distracting NCLB reference and instead focus on this doozy: “designed to answer questions no one is asking.” Perhaps the staffer has fallen through the looking glass, because from this side it seems like everyone is asking these questions.

Both political parties spent much of last year’s election cycle talking about the need for better college information for students and families. The GOP platform called for greater transparency around “completion rates, repayment rates, future earnings, and other factors that may affect their (college) decisions.” House Majority Leader Eric Cantor (R-VA) put “making it easier for parents and students to make informed decisions about what type of post-high school education is right for them” on his short legislative to-do list. Representative Virginia Foxx (R-NC), chair of the House Subcommittee on Higher Education and Workforce Training, said at a hearing on college data, “We have so much data, and we seem to know so little. What a tragedy for all the money that we’re spending in this country.” President Obama used his State of the Union to unveil a college scorecardthat provides comparable, easy-to-understand indicators of college value. Organizations that represent business and students, including the Chamber of Commerce and Young Invincibles, have been calling for better information for students and employers.

All of this was just in the past year. But the bipartisan drumbeat for transparency started much earlier. Three years ago, the National Governors Association launched its Complete to Compete initiative, which called for answers to a basic set of higher education outcomes questions. And long before that a commission appointed by former Secretary of Education Spellings “urge[d] the creation of a robust culture of accountability and transparency throughout higher education” in the form of a searchable database.

Congress itself has asked these questions. In 2008 it created a federal advisory committee to recommend changes in how graduation rates and other measures of success are calculated for two-year institutions. The Committee on Measures of Student Success issued its recommendations in 2011, which included broadening whose success “counts” to include part-time, transfer, and other students who don’t fit the antiquated first-time, full-time model. Since we currently have no idea how the students who receive hundreds of billions of dollars in federal financial aid are faring (either in or after college), the Committee recommended counting them, too. The success measures weren’t limited to two-year institutions, and they included post-college outcomes like employment. This Congressionally established committee not only identified the questions, it provided specific recommendations on how to answer the questions.

But despite this rare bipartisan agreement on the need for better data, and on the already-identified ways to get the data, Representative Messer (R-IN) introduced a bill yesterday that would require the formation of yet another commission to conduct yet another study on what college information is needed, or whether anyone needs it.

Where have these folks been for the last seven years? Students, families, taxpayers, and policymakers don’t need another study. They need better information. And they need it now.

Student loan debt has been in the news a lot these days. In the last week, a number of news outlets wrote about mounting student loan debt and the delaying of life events by their borrowers (see ABC News, the Chronicle of Higher Education, CNN Money, the NY Times [here and here], and the Wall Street Journal, to name a few). The article in the NY Times provides a great example of this, "Consider Shane Gill, a 33-year-old high-school teacher in New York City. He does not have a car. He does not own a home. He is not married. And he is no anomaly: like hundreds of thousands of others in his generation, he has put off such major purchases or decisions in part because of his debts."

[Last week the New America Foundation's Education Policy Program released "Undermining Pell: How Colleges Compete for Wealthy Students and Leave the Low-Income Behind," a report that presents a new analysis of little-examined U.S. Department of Education data showing the "net price" – the amount students pay after all grant aid has been exhausted – for low-income students at individual colleges. This is the fourth in a series of posts related to the report's findings. Read earlier parts of the series here, here, and here.]

As Higher Ed Watch reported this week, only a small number of private colleges are using their financial aid resources to make college more accessible and affordable for the neediest students. Instead, most are charging students with family incomes of $30,000 or less a net price exceeding $10,000.

The news is much better in the public higher education sector. Two-thirds of public four-year colleges continue to enroll a substantial share of low-income students and charge them a manageable net price.

However, the data also raise some major red flags. As more and more states divest from their higher education systems, public universities are increasingly adopting the enrollment tactics of their private college counterparts — using their institutional aid strategically, for instance, to compete for “the best and brightest” students and to increase their revenue. In a number of states, the growing privatization of public higher education systems is threatening to shut down what has long been a pathway to the middle class for low-income and working-class students.

Of 480 public four-year colleges examined in Undermining Pell, 164, or 34 percent, charge the lowest-income students a net price over $10,000; and 22, or 5 percent, require these students to come up with $15,000 or more.

Embracing Enrollment Management at the U. of Alabama

Many of the 164 public institutions are active participants in the institutional financial aid arms race. But few have embraced the competition with as much gusto as the University of Alabama.

It wasn’t always so. By the late 1990s, the University of Alabama’s admissions office had become complacent, according to a paper that several school officials wrote on the subject for the American Association of Collegiate Registrars and Admissions Officers (AACRAO) in 2010. While the admissions staff did some recruiting, the staff generally expected students to be interested in the school because of its long history and status as a flagship university. Heading into the new century, the university, which marketed itself mainly on its athletic programs and social traditions, was having trouble attracting top students.

Enter Robert E. Witt, the former business school dean at the University of Texas at Austin and president of the University of Texas at Arlington. Upon taking the presidency of the University of Alabama in 2003, he laid down a challenge to the admissions office: to “recruit top student scholars with the same fervor as top athletic prospects, and look beyond the state’s borders to find them.” The admissions staff, which was also charged with expanding the school’s enrollment from 19,000 to 28,000 over a 10-year period, met the challenge head on. According to the AACRAO paper:

The president’s message spread rapidly; with a clear and universally shared vision, a team mentality developed among the major players in enrollment management. The pervasive attitude became one of considerable pride and ambition. And because the vision became so pervasive throughout the institution, enrollment management targets were reached ahead of schedule.

To carry out its mission, the university set up full-time regional recruiters in several nearby states, including Florida, Georgia, Tennessee, and Texas. And the school put its money where its mouth was — establishing automatic scholarships for both in-state and out-of-state students who achieve high standardized test scores and good grades.

For example, at the University of Alabama, out-of state students with 1400 to 1600 SAT scores in critical reading and math who have earned a cumulative grade point average of at least a 3.5 are automatically eligible for a full-tuition scholarship for four years. Those with slightly lower test scores are eligible for scholarships covering up to two-thirds of their tuition. Meanwhile, the school goes all out for National Merit Scholars, covering their full tuition for four years as well as providing them with a reduced rate on campus housing, an additional $1,000 scholarship each year for four years, a onetime $2,000 stipend for summer research or international study, and a free iPad.

Seeking "Full-Pay" Students

But the University of Alabama is not just targeting high-achieving students. As Matthew Quirk of The Atlantic wrote in 2005 on enrollment management, the school is working hard to reel in those who can pay full freight as well:

At the AACRAO conference two members of the University of Alabama’s enrollment management team demonstrated how, in their campaign for out-of-state prospects, they overlaid income data from the U.S. Census on maps of high schools in Texas to target wealthy students.

Overall, nearly 30 percent of University of Alabama freshmen receive merit scholarships, averaging about $9,000 each. The university’s effort appears to have paid off — as it has seen its U.S. News ranking surge in recent years. Considered a second-tier institution in the late 1990s, the school now ranks 77th among all national universities and 32nd among public universities.

But with all the money the University of Alabama spends recruiting the best and the brightest and the wealthiest, the university appears to have little left over for those with the greatest financial need. While Pell Grant recipients make up 23 percent of the school’s student body, the lowest-income students pay an average net price of $13,815 — 37^th highest among all of the public colleges examined.

As the University of Alabama shows, private colleges are not the only ones preoccupied with prestige and rankings. Public college leaders are also driven to move up the pecking order, and they too have found that the most expedient way to achieve this goal is to chase after top students.

Looking for the Big Bucks

The use of strategic enrollment management by public colleges is not just being driven by the quest for prestige. Schools are also using these techniques to try to increase their revenue in the face of large-scale state budget cuts.

Such is the case at the University of Nevada at Reno, which has sustained major reductions in state funding in recent years. In an interview with the university’s alumni magazine, the school’s president, Marc Johnson, said the institution was pursuing an “enrollment management strategy so that we can purposely grow our student body, especially among students who will have a high probability of graduating.” By doing this, he said, “we’ll grow, make more revenue, and add back more faculty and staff positions and still increase our graduation rates.”

The key to the strategy is to attract full-pay students. But university financial aid officials acknowledge that “affluent students (and their parents) expect to be rewarded with academic merit aid.” As a result, “the university has set up a new scholarship award process” that “permits the university to remain competitive in that expectation.”

Under the process, students are automatically considered for a merit scholarship upon admission to the university. The size of the award that students receive depends on their academic record. University officials fully recognize that the shift away from need-based aid has been harmful to low-income students, but they don’t see any way around it.

These policies have certainly taken a toll. While 34 percent of freshmen at the school received merit awards in 2010-11, averaging $2,917 each, the lowest-income students paid an average net price of $11,230.

As these cases show, state disinvestment and institutional status seeking are working together, hand-in-hand, to encourage public universities to follow the lead of their private college competitors – to the detriment of low-income and working class students alike.

According to State U Online, a new report from the New America Foundation and Education Sector, although 32 percent of all postsecondary students in the U.S. took at least one online course in 2010, public institutions of higher education have been slow to embrace the potential of online learning. The report suggests ways state systems of higher education can build and sustain an online public university and profiles several states that are addressing common challenges such as faculty buy-in, quality control, and financing.

Among the report’s findings:

• States that have had the most success building a “state u online” have:
  • made it easy for students to access available online learning opportunities through such means as a centralized clearinghouse of courses and degrees offered;
  • provided student services support such as e-tutoring and advising;
  • spread costs among institutions through shared contracts for resources such as learning management systems;
  • collaborated within and between states to streamline a student’s path towards completion by making sure credits transfer between institutions and even across state lines.
• Some examples of states that have made steps towards comprehensive online programs include:
  • The University of Wisconsin’s eCampus which provides a catalogue of all online courses available in the system, connected by a single brand.
  • Minnesota State Colleges and Universities which are able to share resources and costs of online learning by way of an inter-institutional online university.
  • The Florida Virtual Campus which provides access to tutoring, advising, and library support services in one place for students in the Florida College System and the State University System of Florida.
  • The University System of Georgia which has created an online core curriculum, subject to approval by each institution that offers general education courses fulfilling requirements at institutions within the system.
  • The Great Plains Interactive Distance Education Alliance (IDEA) which has developed a consortium of 20 regional public distance-education programs in states with a common interest in providing education to rural professionals in fields such as  human services and agriculture.
• The report concluded that for a “state u online” to be successful, systems should consider the following:
  • Sharing costs between institutions, enabling institutions to identify the needs of their own campus, and utilizing existing online education resources (like MOOCs) on a system level.
  • Offering faculty a stipend to teach online courses, giving weight to online instruction in tenure decisions, and providing professional development for course design.
  • Providing a clearinghouse of online courses, so students can learn about various online opportunities in one place.
  • Creating agreements among institutions to allow credits to follow students.
  • Providing detailed information on the policies, procedures, and benefits of online learning to all students before they begin an online program.
  • Designating administrators to follow up with students who did not show signs of activity online.
  • Embracing prior learning assessments and competency- based education to accelerate time to degree for students.

[This post ran first on the Three Capitals blog]

By Jon H. Oberg

The Education Policy Program at the New America Foundation has published an accurate, unblinking look at the sorry state of the country's student financial aid efforts. In "Undermining Pell: How Colleges Compete for Wealthy Students and Leave the Low Income Behind," author Stephen Burd documents that the higher education access gap across income lines is widening as more and more colleges turn their backs on students and families that are struggling financially.

The reaction to this report on Capitol Hill will not be pretty. Congress -- both houses, both parties -- will claim that this not their fault and will congratulate themselves on support for Pell grants; they will then blame colleges for raising tuition and threaten that someday they are going to do something about those greedy colleges.

It will be the rare member or staffer who reads the report and asks whether colleges are simply and rationally responding to federal incentives to move to the so-called High Tuition, High Aid model of student aid finance. There are a lot of advantages to moving to this model, and a whole new profession of enrollment managers has been eager to sell colleges on it. One big advantage is that the model creates enough institutional aid so as to make Pell grants completely fungible in student financial aid packaging. Why allow Pell grant increases to go to the needy when for all intents and purposes the federal funds can be used to recruit the wealthy and thereby raise institutional ranking? So many colleges have done it with impunity and success, it is hard for remaining colleges to hold out.

Congress could eliminate its counterproductive incentives by applying the tools of fiscal federalism that are common in other federal programs and agencies, such as maintenance-of-effort, matching requirements, or performance standards. The New America Foundation, to its credit, advocates changes to the Pell program to lessen tuition increase incentives and to make certain that more of the Pell billions actually wind up helping those Congress intends to help.

The new report cites a 2002 paper I wrote while at the Department of Education. In this paper I found that student loan debt for the low income went up over time regardless of whether Pell grants increased or decreased. Pell increases were actually related to lower borrowing among the non-needy. To my knowledge, no one else has looked at these relationships, although Lesley Turner has admirably put an annual price tag ($6 billion in 2011) on the amount of Pell grants essentially lost to the low-income due to their fungibility with institutional grants.

When I testified in 2007 on the reauthorization of the Higher Education Act and advocated killing the corrupt Federal Family Education Loan program in favor of putting billions of resulting savings into federal student grants, I did not do so to see low-income borrowing escalate and the access gap widen, but that is unfortunately what has happened. And the blame lies as much on the Hill as it does among the colleges.

Jon H. Oberg is a former state government official, college association president, and U.S. Senate staff member. In retirement from the U.S. Department of Education since 2005, he has worked with the Department of Justice and the Department of Education on public finance issues to settle false claims and return funds to the U.S. Treasury. He previously wrote in Higher Ed Watch about fixing federal higher education research. His views are his own and do not necessarily reflect those of Higher Ed Watch or the New America Foundation.

Yesterday, the New America Foundation's Education Policy Program released "Undermining Pell: How Colleges Compete for Wealthy Students and Leave the Low-Income Behind." Author Stephen Burd reveals a full-fledged "financial aid arms-race" between private colleges and universities, and a burgeoning one among publics as well. Schools adopt a "high-tuition, high-aid” model that allows them to attract wealthy and high-achieving students to boost their rankings with significant amounts of merit aid – money that could have instead been directed to need-based aid for low-income students. That means that the neediest students are left with an impossibly high tuition bill.

Burd uses data, many of which are available through our Federal Education Budget Project database, on Pell Grant enrollment and net price for the lowest-income students at thousands of individual colleges. The analysis shows that hundreds of public and private non-profit colleges expect the neediest students to pay an annual amount that is equal to or even more than their families' entire yearly earnings. As a result, these students are left with little choice but to take on heavy debt loads or to behave in ways that are demonstrated to reduce the likelihood of earning their degrees, such as working full-time while enrolled or dropping out until they can afford to return. Only a few dozen exclusive colleges meet the full financial need of the lowest-income students they enroll. Nearly two-thirds of the private institutions analyzed charge students from the lowest-income families, those making $30,000 or less annually, a net price of over $15,000 a year.

Many private colleges have small endowments, making it extremely difficult for them to provide adequate support to those students with the greatest need. According to the report, the poorest schools are often the ones that enroll the largest share of federal Pell Grant recipients, but they charge these students high net prices because of their own limited resources. At the same time, many of these institutions provide deep tuition discounts to wealthier students to attract those high-achieving students to the school.

This is not just a question of institutional wealth, though. Some of the country's most prosperous private colleges are, in fact, the stingiest with need-based aid. These institutions tend to use their institutional financial aid as a competitive tool to reel in the top – and the most affluent – students to help them climb the U.S. News & World Report rankings and maximize their revenue.

We created an interactive graphic that groups institutions into four categories based on whether they charge low-income students a high or low tuition and whether they enroll a high or low percentage of Pell recipients. We also used data from the Department of Education, FEBP, and The Chronicle of Higher Education to determine the number of endowment dollars available per student.

We can see from this graphic, for instance, that Washington & Lee University enrolls a very low proportion of Pell students (eight percent) and charges the lowest-income students over $14,000 a year in tuition after Pell Grants and financial aid. That’s an average tuition bill of over half of a family’s total income. What's worse is that Washington & Lee has a relatively large endowment of around $450,000 per student. 

While the problem is not as extreme among public universities, it is rapidly getting worse. As more states cut funding for their higher education systems, public colleges are increasingly adopting the enrollment management tactics of their private college counterparts - to the detriment of low-income and working-class students alike.

In many states, public institutions are following the same high-tuition, high-aid model – and in some cases, including in Pennsylvania and South Carolina, the neediest students are facing net prices more than double what they are charged in low-tuition states such as North Carolina. At Penn State University, for example, in-state students attending the university's flagship campus in University Park pay about $16,000 in tuition and fees annually, which is double the average tuition charged at all national public four-year colleges and universities examined in his paper. Despite the fact that Penn State spends nearly $14 million a year on institutional aid, its lowest-income in-state students pay an average net price of nearly $17,000, the fifth-highest of any public institution this report examines. In other words, Penn State's neediest students do not appear to be getting any discount relative to other students at all. At the same time, about 6 percent of the school's first-time freshmen received an average of $3,800 in so-called "merit aid" in 2010-11.

Schools like Penn State seem to be using their pricing autonomy to gain an advantage as they fiercely compete for the students they most desire: the "best and brightest" students - and the wealthiest. These actions fly in the face of national goals to increase access to higher education and help more students earn high-quality degrees.

Over the past several decades, a powerful enrollment management industry has emerged to show colleges how they can use their institutional aid strategically in the pursuit of high-achieving and affluent students. And worse yet, there is compelling evidence to suggest that many schools are engaged in an elaborate shell game: using Pell Grants, the primary source of federal aid for low-income students, to supplant institutional aid they would have provided to financially needy students otherwise, and then shifting these funds to help recruit wealthier students. This is one reason that, even after historic increases in Pell Grant funding, the college-going gap between low-income students and their wealthier counterparts remains as wide as ever.