Sometimes, colleges (and states) really are just competing to outbid each other on star students. But there are also economic incentives at play, particularly for small, endowment-poor institutions. "After all," Burd writes, "it's more profitable for schools to provide four scholarships of $5,000 each to induce affluent students who will be able to pay the balance than it is to provide a single $20,000 grant to one low-income student." The study notes that, according to the Department of Education's most recent study, 19 percent of undergrads at four-year colleges received merit aid despite scoring under 700 on the SAT. Their only merit, in some cases, might well have been mom and dad's bank account.
There's nothing inherently wrong with handing out tuition breaks to the middle class, or even the rich. The problem is that it seems to be happening at the expense of the poor. At 89 percent of the 479 private colleges Burd examined, students from families earning less than $30,000 a year were charged an average "net price" of more than $10,000 annually -- "net price" being the full annual cost of attendance minus all institutional and government aid. Less technically, it's what students can actually expect to pay. At 60 percent of private colleges, that net price was more than $15,000.
In other words, low-income families are routinely being asked to fork over more than half of their annual income for the privilege of sending their child off to campus for a year.