College welfare for the wealthy?

This post comes from Lynn Mucken at MSN Money.

College recruiting is big business, but in ways that might surprise you.

The wooing of athletes gets the headlines, but while those 220-pound running backs and 6-foot-3 women basketball players get a $1 billion-plus piece of the scholarship money each year, a much bigger chunk of the chocolate is spent to bring in kids whose primary reason for going to college is an education.

And the colleges are fighting over them, something many parents have been quick to recognize. 

"We're getting calls back from families saying, 'We're getting this much from another college. Can you match it?'" Joseph Urgo, St. Mary's College of Maryland president, told The Washington Post. "We’re wasting billions of dollars nationally competing for kids, but we can’t stop it." Post continues after video.

Most college scholarships -- and about $110 billion worth are given out each year -- fall into one of three categories: athletic (you can jump, throw or run), need (your parents are less than well-to-do) and merit.

The same Washington Post story focused on the awarding of merit aid, which used to be called academic scholarships, to two young women:

• Gillian Spolarich, a student at Blake High School in Silver Spring, Md., wanted to go to American University in Washington, D.C. She was attracted by its communications program. But American, which would have cost $50,000 a year in tuition, fees and living costs, offered no aid despite her 3.85 grade-point average and 30-plus ACT scores. The College of Charleston, however, offered $13,000, so Spolarich is heading off to South Carolina this fall because the resulting annual bill of $21,000 better fits her white-collar parents' pocketbook.
• Samantha Shevach of Queens, N.Y., with an "A" average and high SAT scores, chose the University of Delaware over Penn State, her first choice. Penn State offered no aid. "It was $43,000 a year," she said. Delaware offered $20,000. "(My parents) said that they would have paid for Penn State," she said, "but I didn't want them to be $160,000 in debt. You need to think about the investment you're making: Are you going to get that $160,000 back?"

The Harvards and Stanfords can still skim off the top layer, but the second- and third-tier schools, still fine academic institutions, are increasingly engaged in what the Post calls "a polite bidding war."

"They were straightforward at the beginning that if she applied, and if her numbers were what she had written on the (information) card, they would be able to make her a very good offer," said Audrey Spolarich, Gillian's mother.

Athletes get to go to college, the lower-income students get in through the nine federal and 605 state scholarship programs, and the middle- to upper-middle-class kids get a little help, too. In turn, those second- and third-tier schools brighten up their academic credentials with students smart enough to qualify for the elite schools and with parents wealthy enough to pay the difference in costs. What could be wrong with this system?

Plenty, according to critics.

The Washington Post's Daniel de Vise writes:

Critics deride merit aid as affirmative action for the wealthy, a system that increases access for students who can afford college without it. … It's natural that families would shop around: The sticker price at top private colleges can exceed $50,000 a year in tuition and living expenses, beyond the reach of the middle class.

But merit dollars are spent, by and large, on students who would go to college anyway. A middle-class student denied merit aid by a $50,000-a-year college might not be able to afford that college, but he or she can still afford college.

Merit aid favors the wealthy: Children from affluent families tend to have greater "merit," in the form of higher grades and test scores.

... Winners of the bidding wars lose tuition money that might otherwise be spent on teaching or on students with need. Merit discounts inflate the tuition charged to those who pay full price.

"There are colleges where the average price paid by rich kids is lower than the average price paid by poor kids, and the reason is merit aid," said Sandy Baum, an independent policy analyst.

A study conducted in 2009 by the Cornell Higher Education Research Institute showed that within six to 10 years after middle- and top-tier colleges start offering merit aid, the number of Pell Grant recipients -- lower-income students -- drops by an average of 5 percentage points and black student enrollment declines 2 percentage points.

"Every dollar that we spend on merit aid as opposed to need-based aid is wasted," said Douglas Bennett, president of Earlham College in Indiana.

Others feel differently. In a comment on The Washington Post article, "ArmyBrat1" wrote:

The suggestion to do away with merit-based aid is simply wrong. It speaks of a mindset that's disconnected with reality.

I have three children in college this year …. Two are receiving merit-based aid. If they weren't, they wouldn't all be in college, because I will not permit them or myself to take on large amounts of debt. As far as DeVise's suggestion that, if you can no longer afford the college of your choice without merit aid, you just go to a different (lesser?) college, that would work nicely to crush the aspirations of those who started as lower middle class and want to get ahead.

More on MSN Money:

• Big changes come to college loans
• Calculator: How much should I save for college
• Is a college degree worthless?
• Calculator: Will I be able to pay off my student loan?
• 6 reasons not to save for kids' college
• College scholarships: A wacky world