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Financial Aid at Georgia Tech should be primarily merit-based, rather than need-based. -Fastmax

“Relatively few students receive awards that are explicitly labeled as “non-need-based” or “merit” awards (in our sample of 7,000 full-time, dependent students who completed the SAT, for example, only 4 percent of the undergraduates at public colleges, and 15 percent at private colleges received such awards from institutional funds), while many more receive “need-based” awards (22 percent at public colleges and 52 percent at private colleges) (Mcpherson 2002, 39).” This variation comes from the governments desire to create an equality of opportunity, since the nineties the government has shifted resources to benefit students of need rather that awarding students for their achievements. The only federal aid available for students that do not qualify for need-based support are loans or merit-based awards, and loans can leave students in debt for many years. The Congressional Methodology used by colleges to determine a family’s ability to pay for college is often inaccurate, institutions give need-based awards that are more reliant on a student’s academic performance than their neediness, and merit-based scholarship programs are successful in many places.

When a college applicant files for student aid they apply to the college of their choice, but the decisions for need-based financial are set up by the Congressional Methodology (CM). This process is there to ensure the proper use of funds given to institutions by the government. This system considers many variables, like the parents’ gross taxable income, amount to be taxed, and their income supplement. These assets contained in the income supplement can make “Two families with identical earnings paths pay dramatically different amounts for college if one saves more than the other. Thus, while the financial aid system may contribute to vertical equity, since the poor get more aid than the rich, its horizontal inequities are substantial (Edlin 1993, 143).”
The CM takes investments that pay dividends into account, yet these investments have no guarantee of paying out. These assets will also increase their total taxation for many years to come. Most middle-income families fall victim to this over generalized process of determining who is available for need-based aid and can often leave students that are in need of aid without it. Even if some of these students qualify for aid, their parents will be burdened by a financial aid tax. For example,

One way to get a feel for the potential impact of the financial aid tax on asset holdings is to ask how much it reduces real returns. As a baseline, consider an investment that pays a return of 10 percent, for a family that faces an inflation rate of 5 percent, a federal tax rate of 28 percent, state rate of 8 percent, and a Congressional Methodology tax rate of 39 percent (a 47 percent CM tax rate, adjusted for the value of the loans). Under these conditions, the real annual after-tax return on the investment, ignoring the financial aid asset tax, would be 1.3 percent (Edlin 1993, 148).”

As you can see, this tax can have devastating effects to the parent’s investments. The tax took what would have been a ten percent return and turned it into a 1.3 percent return. The CM for need-based help is greatly flawed. Many parents that are in this lower-income bracket need the most help to pay for schools, and they also need to have investments to be able to retire comfortably, yet this system is counter-productive for those goals. Even low-income families need a different type of aid that is not going to make their lives more difficult.

There is also a great irony in the system established to give so-called need-based scholarships at the institutional level. Public and private colleges desire to have the best students attend their schools, but with the new trend to of equality of opportunity. These two goals lie on opposite ends of the financial aid spectrum. The phrase equality of opportunity makes the colleges find loopholes to get the students they want, which contributes the fact “that SAT scores are significantly correlated with levels of need-based grant aid at both public and private institutions (McPherson 2002, 40).” This significance is shown “In both sectors, a student receiving a need-based institutional award can expect more than a $300 increase in her annual need-based award for every 100-point increase on her SAT (McPherson 2002, 40-41).” That leaves quite a bit of room considering that the SAT is out of 1600 and the average score is around 1000, and many people can get into a college with lower than 1000. This means two people with the same amount of need can vary in actual aid granted by as much as $2100. If institutions desire to give money to students for scoring high on tests, then the money should come in the form of non-need-based aid. By making use of this system it gives more money to people that are on lower income, but only the people in lower income that are also scoring high on tests get to see the real advantage. This system creates a great disadvantage for people in the higher-income bracket, because a student could score a 1600 on the SAT and not see any money because he does not qualify for need-based financial aid. This student might get some institutional merit-based award, but in the end, the student will not get as much because the majority of funds go to need-based grants. If schools want bright students to matriculate then they should give money for academic achievements.
Merit scholarships are a controversial subject, and some would say that they create a boundary between students that get the money and students that do not, that they do not provide for diversity or equality, and that these systems are expensive to operate, but none of these statements are true. Many states have tests that students are required to pass before they can graduate high school, but the problem with many of these tests is that the standards are set so low anyone can pass the test. Others states that are a little more ambitious to create a smarter generation of students have created ways for the states to award merit-based scholarships like the Hope Scholarship in Georgia and the Michigan Educational Achievement Program (MEAP). Georgia’s system provides that any student who graduates from high school with a grade point Average (GPA) of 3.0 or higher can receive up to $3,000 for up to four years to pay for college tuition. The Michigan system provides that if students take the required tests and place in the first or second level they can receive $2,500 for the first year of college (Bishop 2004, 64-67). These two systems are quite different, but both have set the standards at a point were any motivated student can get the money needed. In Georgia, that $3,000 at The Georgia Institute of Technology covers tuition for a year making it virtually free for students who receive Hope Scholarship to go to one of the best schools in the nation. Also these systems do not incur a high cost as John H. Bishop points out that, “The total expense for the Michigan Merit Award comes to less than 1 percent of the state’s K–12 education spending, yet the program has the potential to realign incentives within the school system in a way that serves the interests of students, parents, educators, and the community (Bishop 2004, 64).” What is the point of all the different financial aid systems? In my opinion, it is to give more students a chance to go to college, and “Since Michigan’s scholarship program enhances a student’s ability to attend college, one might expect that it would also increase college-attendance rates. This is what happened in Georgia, particularly at colleges in the state, after the creation of the Hope scholarship program (Bishop 2004, 67).” The evidence from Georgia’s success is enough to show that these types of systems work for what they are supposed to do. The rules are straightforward and every high school student knows that if they do not get that 3.0 then they do not get the money. It is not like the need-based money that institutions give away were one student gets more than the other does. The merit-based financial aid system is fair and honest.
Whether a student is taking an exit examination or maintaining a high GPA, the benefits are endless. When Canada enforced external exit examinations the results were outstanding. Students were learning more, being taught by better-educated teachers, and their parents were more active in their schoolwork. (Bishop 2004, 66-67) The merit-based system creates awards for doing well in school, and is an incentive to motivate students to do even better. The federal government and all academic institutions need to use a financial aid system that emphasizes merit-based awards. The word “award” is a key part of that statement, because in all other types of financial aid we have seen that there are penalties, like the interest on a federal student loan and the financial aid tax that is placed upon already determined needy families. Money is the main reason the federal government has taken a position to support need-based financial aid, and that is never a good reason to do anything. Students in the United States score poorly when competing against students from other nations, and that is probably because those students are under government that favors merit-based awards, so in the end having smarter and more motivated students attending college would benefit the entire nation.

Evaluation by Whiteviolet
You did a good job at making some interesting points in your paper that back up your position. I ecspecially agree with the statement,"Why should a person that may have high grades have to pay more than someone with lower grades that has a greater financial aid?" However, I think you need to organize your paper better either into paragraphs or similar points. It will help convey your position better.

Evaluation by AdamSmith
Great job I think you made a good point. The only thing is that I don’t think that you read objectives of the paper carefully because you are missing the first objective that is:
(1) Effectiveness at using print, web, and other sources efficiently and wisely
In your paper you don’t mention any source.

Evaluation by Cross44

I think you did a fantastic job in organizing your paper You back up your arguments well with real world example but you definietly need real world sources to back up your claims. A good place to start looking would be at The Jstor Journal has plenty of material that can cover all your source needs.

Additionally I would be countering the reasons why Need-base would be more important. People who are pro-need base claim that it would help eliminate racism in society as well as eliminate the poverty cycle. (Rich get richer, the poor stay poor).

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