The Merit Aid Illusion: The Hidden Winners in a Competition for Affluent College Students

There is widespread concern in the policy community that colleges and universities are increasingly shifting their financial aid budgets to favor students from high-income families. Observers often argue that institutions of higher education are offering more merit aid to the most affluent students, leaving less aid for their low-income peers. In this report, the authors use a comprehensive approach that compares the net tuition that institutions charged students relative to what the institutions spent on each student, focusing on changes between the 2003–04 and 2015–16 academic years. The results contradict the claim that rising institutional aid has increasingly favored wealthy students. They find that the subsidies institutions of higher education provide to low-income students have increased relative to their high-income peers.