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Like Thompson, Don Witt, the University of Kentucky’s former associate provost for enrollment management, had expressed concerns about how public flagship and research universities are trying to outgun each other for high-achieving, affluent students by spending more and more on “merit” scholarships.

“It’s like an arms race, and where will it end?” Witt asked during a 2014 interview with the Lexington Herald-Leader. “I do think that it will take an institution to be that leader at some point to question the process, but who will step up? It’s a challenge that needs to be addressed at some point, and it’s a serious one. How do we stop this cycle and change things?”¹

But unlike Thompson, Witt didn’t just throw up his hands and double down on the approach he was bemoaning. Instead, thanks to Witt and his colleagues, the University of Kentucky may just be that leader. The question now is whether other public universities will follow.

No, the University of Kentucky is not completely disarming. But in January 2017, it announced that it planned to significantly scale back its use of merit aid and make need-based aid the predominant form of assistance it awards.² At that time, the university was spending 90 percent of its institutional aid dollars on students who lacked financial need. By 2021, the university plans to spend two-thirds of its aid budget on need-based aid.³

University officials said that while heavy use of non-need-based aid helped the school attract top students, it was hurting retention and completion rates. In examining data on students who had dropped out of the university, they found that many financially needy students were leaving because the school had not come close to meeting their need.⁴ In 2015–16, for example, the university filled just 54 percent of the need of freshmen who received financial aid. And only 21 percent of these students had their full need met.⁵ Meanwhile, the lowest-income, in-state freshmen paid an average net price of $13,535.

University researchers found that students with $5,000 or more in unmet need⁶ (the amount of financial need the government assumes that a student has minus any grant and scholarship aid received) were far more likely to drop out—no matter how well they were doing in their classes—than those with less. Nearly a quarter of the university’s students have a financial gap that wide.⁷ Insufficient financial aid packages were “the single most important factor” preventing students from completing their studies, Tim Tracy, the university’s provost, said at the time of the announcement.⁸

University officials believe that making a much more substantial investment in need-based aid will help them achieve their goals of raising their six-year graduation rates from 63.5 percent to 70 percent and their first-to-second-year retention rates from 82.7 percent to 90 percent by 2020.⁹

The school has a very practical reason for wanting to get those rates up. The state of Kentucky is starting a performance-based funding plan that will reward its public colleges and universities for their success in retaining and graduating students. Critically, the state provided a premium for graduating low-income and minority students.¹⁰

In examining data on students who had dropped out of the university, they found that many financially needy students were leaving because the school had not come close to meeting their need.

Some in the enrollment management field think that the pressure to improve graduation and retention rates, particularly among financially needy students, could push other public universities to follow a similar path as the University of Kentucky’s.

“With declining demographics across the nation, schools are now focused on initiatives aimed at improving student retention,” Rosemaria Martinelli, a senior director with Huron Consulting Group’s higher education division who worked with the university on the plan, told Inside Higher Ed in January 2017. “Shifting institutional dollars focused on merit to need-based aid is one strategy that has been found to be successful, particularly for students where large unmet need has been found to be one of the barriers to student success.”¹¹

Witt, who is now the university’s assistant vice president for philanthropy, is hopeful that the University of Kentucky’s example will be instructive to other schools looking to escape the harmful cycle. “It’s exciting to be able to support more deserving students who want to pursue their college degree at the University of Kentucky,” he said at the time the university announced its plan. “This is an important step for not only UK but for higher education in general.”