Colleges have conflicting motives when considering applicants for admission. Their prime motive is to accept qualified applicants who will pay full tuition, assuring the college that it will be able to operate at or above its desired educational level. However, the drive to maximize revenue is tempered by another motive — the desire to enroll as many excellent students as possible to sustain or improve the college’s reputation.

To satisfy both motives, many colleges offer institutional merit aid to certain applicants who don’t qualify for need-based aid but are exceptionally promising academically. In effect, these colleges discount tuition to attract superior students who would be unlikely to attend their school otherwise.

Merit Aid and “Merit Aid”

Need-based aid focuses on a family’s income as reported on the FAFSA. Applicants await the results of the FAFSA process to find out how much need-based aid is available to them from public agencies, colleges, and other sources.

Merit-based aid depends on what applicants have accomplished academically. A high GPA in a strong high school curriculum can be worth a lot of money. This is the reward for high aptitude students who devote years of hard work to their studies.

Many colleges now use merit aid as a means of boosting their institutional reputation. They use partial merit scholarships as bait to land strong academic performers who will raise their position in college rankings, which many people use as a proxy for educational value. These colleges use merit aid to buy a better class of students. As this practice has evolved, tuition discounts disguised as merit aid have been used by some colleges to help reverse declining enrollment. These colleges buy students who are even marginally qualified.

There are still some scholarships awarded solely on merit. But now, admissions departments report to senior administrators in an “Enrollment Management” capacity. They tend to spread merit aid strategically as a means of maintaining enrollment and assembling the best possible freshman classes. They’re awarding tuition discount coupons to worthy applicants in the hope that they’ll be redeemed.

A high school student’s academic record still matters because it remains the key factor in admissions. But it has also become the primary determinant of what the applicant will pay for an undergraduate education. This phenomenon has given rise to a parallel financial aid system that adds yet more complexity to finding a student’s best-fit colleges.

Because all but the most highly selective colleges now use merit aid strategically, the list price of a college’s tuition is largely irrelevant. College freshman classes have become like airline cabins — filled with people who paid a wide range of prices for the same thing.

The Common Data Set

In considering colleges and merit aid, a family should gather information about factors like the percentage of applicants who are offered tuition discounts, the average size of the discounts, and the qualifications of applicants who receive discounts.

The easiest way to gather such information is by means of the Common Data Set (CDS) of a college. According to Ron Lieber in a recent article in the New York Times, “The CDS is a rich trove of information for college shoppers, no matter what you’re able or willing to pay.”

The CDS is a collaboration that promotes the accuracy of data provided by colleges to publishers. A college’s CDS record has information about admissions, demographics, financial aid, academics, and campus life. It becomes part of a common database accessed by U.S. News & World Report, Peterson’s, Money, Forbes, Kiplinger’s, Princeton Review, Washington Monthly, the College Board, and other entities that analyze and rank colleges.

The CDS is also available to families. A college’s CDS record can be found by entering “Common Data Set Name-of-College” in a search engine. Most colleges also include CDS information on their website. It includes a wide-range of metrics such as the percentage of students in fraternities and sororities, the number who live off campus, and faculty demographics. But it is the financial aid information that can be most helpful to families.

Colleges now post Cost of Attendance (COA) information on their websites to comply with the FAFSA Simplification Act of 2020. The COA includes tuition and fees as well as estimates for room and board, books, supplies, transportation, loan fees, and other expenses. The COA price of tuition causes “sticker-shock” because it’s the full price of tuition before discounts. The average price of tuition after discounts, as determined through CDS records, is comparatively more affordable.

Families Not Eligible for Need-Based Aid

Families with high household incomes don’t qualify for need-based aid. Nevertheless, they may not have adequate current income or assets to pay for their child’s education at a best-fit college. They may be simply unwilling to pay a college’s full tuition price. These families that have children with strong academic records should examine CDS financial aid data closely. Colleges complete a data field named “Institutional non-need-based scholarship or grant aid”. Lieber describes this field as consisting primarily of the amount of merit aid (i.e., tuition discounts) issued to families that are considered to have the ability to pay the full COA but are unwilling to do so.

In addition to CDS, there are other organizations that offer free comparative pricing information for use by families. They include MeritMore, Dataverse, Road2College, Big J Consulting, TuitionFit and the U.S. Education Department’s College Scorecard.