What’s the story with merit aid these days? It’s a hot topic among more and more schools as they debate the value of investing in building application demand and quality while addressing concerns of affordability for some families. Merit aid within National Association of Independent Schools (NAIS) member schools is certainly on the rise, but still comprises just a small percentage of awarding done by schools for the 2015-16 school year. Here are four key trends about merit aid usage over the past five years, based on cohort samples from NAIS Data and Analysis for School Leadership (DASL), that may have important implications for independent schools in the next decade:

Trend 1: Overall, the number of schools reporting they offer merit is increasing but offering merit is still uncommon, especially among day schools. While there was a 7.9% increase in the overall number of schools reporting offering merit since 2011-12, only 33% of NAIS members reported offering it in 2016-17. This is up from 31% offering it five years ago (and up from 29% offering it 10 years ago). Interestingly, more than half of boarding-day schools (55%) offer merit, which make them almost twice as likely to offer merit as day schools (29% offer merit).

Trend 2: The increase in the number of students awarded merit outpaced the increase in students awarded need-based. Since 2011-12, there has been a 7% increase in the median number of students awarded merit aid but only a 1% increase in the median number of students awarded need-based aid. This is in part a reflection of slower demand for need-based financial aid as the median number of need-based aid applications have dropped 8% at NAIS member schools.

Trend 3: Dollars awarded for merit are growing more rapidly than those for need-based aid. Since 2011-12, the median amount of merit aid given by a school that offers it grew by 40%. This outpaced the growth in the median amount of need-based aid over the same period, which grew by 29%.

Trend 4: Merit is growing but is still a small amount of aid in the aggregate. A snapshot of NAIS members in 2016-17 showed that just 3.4% of all dollars awarded (not including tuition remission) took the form of merit aid. While this is up from 2.8% of all dollars in 2011-12, the growth in dollars is slower than the growth in the proportion of enrolled students receiving merit. In 2016-17, of all students receiving assistance, 9.6% received merit, while just 6.7% of all students receiving aid in 2011-12 were given merit awards.

Is there a slowing commitment to need-based aid or a growing commitment to merit? Even though most schools still spend the bulk of aid resources on need-based funding, these data suggest that a slowing commitment to need-based aid has begun to take shape over the past decade or so. While this is not unlike what has been a trend in higher education financial aid support, it is particularly notable in the context of recent SSS survey research showing that the typical school meets only an average of 77% of demonstrated financial need for aid-eligible families. NAIS’s perspective is, and has long been, that schools should first commit resources to families who show they cannot meet the full cost and to fund them fully before committing school funds to merit aid.

That said, many schools view using merit as an enticing marketing tool to attract families who might look elsewhere for various reasons. While this may be the case for some, if the sands continue to shift toward increasing investment in merit funding, school leaders must be sure to ask themselves a key question: Is the possible erosion of the school’s value of economic diversity or willingness to address the access imperative a trade-off they are willing to make? Will that boost or reframe their ability to sustain their mission, build a desired culture, and/or respond to families’ perceptions of value and affordability?

¹ Cohort sample = A group of the same schools reporting data over the period studied. Using a cohort eliminates the possibility that changing data over time is driven to some degree by having a different set of schools in each year examined.

² Source: 2016 SSS State of Financial Aid survey

Mark J. Mitchell is vice president at School and Student Services (SSS) by NAIS (DC), and a member of The Enrollment Management Association board of directors.