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Among state universities, a fight for rich students

State universities are increasingly becoming bastions of privilege.

In order to boost their revenue by moving up in popular college rankings, public universities are increasingly awarding merit scholarships to affluent students who live within their borders -- and beyond. This often comes at the expense of the institutions' own state residents, according to a new study by the New American Foundation, a centrist think tank that explored the merit aid practices at 424 public colleges and universities.

And the practice is on the rise, reports Stephen Burd, a senior policy analyst and former reporter at "The Chronicle of Higher Education." Some institutions that were initially hesitant to court well-off students are today feeling compelled to do so as other public universities seek to recruit high-income students in their own backyards.

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To protect their territory, schools boost their financial awards to affluent, high-achieving teenagers in their state, and also compete by hunting for prize recruits beyond their state borders.

"The level of competition is creating a prisoner's dilemma," Donald Hossler, a professor and higher-education expert at Indiana University, is cited as saying in the report. "Some schools are doing this not because they want to but because their peers are. They feel they can't afford not to do it."

As an example of this pattern, Burd notes how the University of Missouri at Columbia felt it had to react after admission representatives from the Universities of Alabama, Arkansas, Kentucky, Mississippi and Minnesota began aggressively recruiting in the state. After losing out on high-achieving students that normally would have enrolled at the U. of Missouri, the school significantly boosted it merit aid to higher-income Missourians and nonresidents.

The schools upping their merit aid to more affluent students are more likely to be located in the South, West and parts of the Midwest. The practice is less common at state institutions on the West Coast and Northeast, where schools continue to devote most of their aid dollars to those who need help.

The University of Alabama and University of South Carolina have been particularly aggressive in their recruitment across state lines. Thirty-nine percent of freshmen at the U. of South Carolina are receiving merit aid. The U. of Alabama, meanwhile, is offering the largest merit aid packages, an average of nearly $12,000.

Below are the state flagships with the highest percentage of its student bodies receiving merit scholarships:

  1. University of North Dakota, 41.3 percent
  2. University of South Carolina, 39.1 percent
  3. University of Vermont, 33.3 percent
  4. West Virginia University, 30.7 percent
  5. University of Nevada, 30.4 percent
  6. Ohio State University, 29.9 percent
  7. University of Montana, 29.3 percent
  8. University of Colorado, 26.9 percent
  9. University Hawaii, 26.1 percent
  10. University of Mississippi, 25.6 percent

Richer students crowding out poorer kids?

The share of aid going to the students at public institutions in the highest income quartile (23 percent) is nearly the same as that going to students in the lowest quartile (25 percent), according to the report. By contrast, some 20 years ago 34 percent of aid went to the poorest students, with 16 percent going to the wealthiest.

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As a result, public universities that award a large number of merit scholarships today serve fewer low- income students, Burd concludes. At schools that offer less merit aid, students with Pell Grants -- federal grants given to low and lower middle-income students -- represent 42 percent of the student body; at high merit-aid schools, Pell Grant students represent 32 percent of students.

"In bringing in more and more wealthy nonresident students, these colleges are increasingly becoming bastions of privilege," the report said.

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