Dive Brief:

• Colleges have significantly increased the amount of non-need-based aid they offer students, according to a new report from New America, a left-leaning think tank. It analyzed the annual financial aid spending of 339 public universities over a 17-year period.
• Those colleges offered nearly $3 billion in non-need-based aid in 2016-17, up from an inflation-adjusted $1 billion in 2001. Since 2014, spending on non-need-based aid has outpaced need-based aid.
• The report attributes the change in part to tactics used to grow enrollment and raise institutions' profiles. Such strategies, which were spurred by a drop-off in state funding, have included recruiting wealthier students with higher test scores. The result has been a "merit-aid arms race," the report explains.

Dive Insight:

Annual spending on need and non-need-based aid climbed from $2 billion in 2001 to $8.6 billion in 2017, New America notes. During that time, 40% of the $81 billion that schools spent on institutional aid — about $32 billion —​ went to non-need-based support.

Of the institutions tracked in the report, more than one-half doubled their spending on non-need-based aid, adjusting for inflation, and one-fourth quadrupled it during that time period. Enrollment, meanwhile, rose by nearly a third.

The growth in non-need-based aid started before the Great Recession, when enrollment began to expand. It slowed during the crash as colleges shifted to need-based awards, the report notes, though it picked back up after. Regional colleges spent a larger share of aid dollars on non-need-based aid than public flagships.

"With state spending still lagging in the years after the recovery, and enrollment growth slowing, these schools became more aggressive in using non-need-based aid to pursue wealthy out-of-state students with standardized test scores high enough to help schools rise up in the rankings," the report explains.

Flagship universities in 46 states increased non-need-based aid by 65% over a recent five-year period, Bloomberg Government reported in May. That outpaced a 53% increase in need-based aid.

The publication found that nearly one in three students with no financial need got non-need-based aid.

According to New America, schools that use their institutional aid to recruit more affluent students tend to leave financially-needy students with some unmet costs. By its analysis, public universities met two-thirds of student aid recipients' financial need in 2016-17, down six percentage points from 2000-01.

The Institute for Higher Education Policy found that just six of 50 flagship institutions were easily affordable for low- and middle-income students, according to a recent report. As state support for higher education waned in the last two decades, the share of the cost of attendance that fell to students rose from 29% to 46%.

As tuition prices across public colleges have climbed, some institutions are raising the income threshold that qualifies students for institutional need-based aid. The University of Virginia will waive tuition for state residents whose families earn less than $80,000 per year. Other states have similarly moved to offer aid to students from higher-earning families.