WINCHESTER — Hannah Moore graduated from George Rogers Clark High School this year with all the right boxes checked off for college acceptance: a 4.0 GPA, National Honor Society member, cheerleader, and community volunteer.
Moore, who lives with her mother, always dreamed of going to the University of Kentucky, but in the end she didn't bother applying. It was "out of reach."
Moore knew her standardized test scores weren't high enough to earn her most of UK's merit-based scholarships, and she couldn't afford the $25,400 it costs to attend for a year without taking on lots of debt.
"I would really like to go there, but they barely give any money for anything," she said. "It's really competitive."
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Instead, she's heading to Eastern Kentucky University, where she won a scholarship that pays some of her tuition and fees.
Moore is part of a growing group of students who can't consider UK, said her guidance counselor Robin Detring, as the state's flagship university shifts resources away from assisting low-income students and toward chasing top scholars.
"We try to show them where scholarships are," Detring said, "but the bar has risen so high with merit-based aid, it's changed a lot in the past several years."
The numbers bear that out. In the past seven years, the amount of undergraduate financial aid based solely on merit at UK has risen 149 percent, compared to just 46 percent for aid based on need alone. Of the nearly $70 million UK gave in institutional aid this past school year, less than 4 percent was earmarked solely for students who need financial help to attend college.
Meanwhile, UK data shows that nearly one in four students who got financial aid in the 2011-2012 school year had no financial need under federal guidelines.
UK's shift toward merit aid — a trend mirrored around the country — has increased the divide between the haves and have-nots in higher education, many experts say, which means many talented Kentuckians can no longer afford their top college choice.
It's the consequence of a series of complicated trends: decades-long competition between schools to raise their national rankings by recruiting top students; multi-million dollar losses in state funding that require higher tuition rates; and an increased focus on recruiting out-of-state students, who pay much higher tuition rates. This fall, a record 35 percent of UK freshmen will come from outside Kentucky.
Don Witt, UK's associate provost for enrollment management, said he and colleagues from around the nation constantly grapple with how to best use their schools' financial aid.
"It is like an arms race, and where will it end?" he asked in a recent interview. "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?"
Witt and other UK officials are also quick to point out that many merit scholarships help students with financial need as well.
Overall, about 26 percent of UK's scholarship recipients are eligible for federal Pell grants — generally available to families who make less than $30,000 — although that number dwindles to 6.7 percent for Singletary Scholars and 4.3 percent for Patterson Scholars, the university's two most prestigious merit-based awards.
In addition, the school has tripled funding for the Charles Parker Scholarship, which is used to improve all kinds of diversity — minorities, first generation college attendees and those with economic need.
Funding for the scholarship has increased from about $4 million in 2006 to $12 million this year. About 40 percent of recipients are eligible for Pell grants.
UK President Eli Capilouto said the university will always put Kentuckians first, but the university has chosen a thoughtful way forward in the face of state budget cuts.
"Growing our enrollment and enhancing our commitment to diversity at all levels — including attracting qualified students from outside our state — strengthens the sense of community we can build, enhances the education we provide and helps us ensure affordability," he said in a statement.
'Not so low-cost now'
For decades, private universities have used their financial aid as leverage to attract the top students and raise their rankings. Historically, public universities didn't give nearly as much financial aid because they had low tuition, said Don Hossler, an Indiana University professor who studies enrollment issues.
"We're not so low-cost now," he said.
Now public universities are ruled by what Hossler calls the "U.S. News effect," because of U.S. News' influential college rankings list. What moves schools up the list are research dollars, faculty reputation and student selectivity.
It's a long process to move big institutions up the ranks, but "what doesn't take a long time is using financial aid to buy students," Hossler said.
When colleges are competing for the same group of top students, "it's not the best thing for policy, because you're not affecting the students who might not go to college at all — the only thing you're doing is affecting students who will already go," Hossler said. "But I'm also sympathetic to what the realities look like on the ground."
For UK, that reality is legislative and public pressure to raise rankings while the school absorbs $55 million in state funding cuts since 2008. This year, for the first time, less than 10 percent of UK's overall budget will come from the state.
"We gave UK a mission of being a top-notch research university, so they're trying to reach that goal by attracting the best students from everywhere, but at the same time, we've cut funding," said Rep. Derrick Graham, chairman of the House Education Committee. "A lot of this is our, the General Assembly's, fault."
In response, UK has hiked tuition and raised the number of out-of-state attendees. Those students can often be lured to UK with a relatively small amount of aid, since their total attendance cost of $38,000 a year is still cheaper than many schools in surrounding states.
In 2012, about half of UK's out-of-state students received financial aid, about three-quarters of which came from UK coffers.
"What we're charging is still less than other states, so now we — the university system and the legislature — are collaborating together in creating a greater divide between the haves and have-nots," said state Rep. Kelly Flood, D-Lexington, whose district includes UK. "That collaboration has to be unpacked and dismantled."
Stephen Burd, a senior policy analyst with the New America Foundation, authored a study last year titled "Undermining Pell: How Colleges Compete for Wealthy Students and Leave the Low-Income Behind."
Currently, the percentage of UK students who receive a federal Pell grant is at 18 percent, compared to schools such as Eastern or Morehead State University, where it's closer to 40 percent.
Burd said UK's percentage of Pell grant recipients is on the low end for public universities, especially in a state as poor as Kentucky, where about 21 percent of adults have a bachelor's degree or higher, according to census data.
"The question is, in trying to raise the academic bar, the prestige rank, has the school moved away from its mission of serving Kentucky residents and serving low-income working class students?" Burd said. "Are these schools serving the mission they were founded on? I would question if they are."
Shortly after he arrived at UK in 2001, former President Lee Todd started the financial aid shift in an effort to keep Kentucky's best and brightest students in the state. He created a scholarship for high school students who attended the Governor's School and the Governor's School for the Arts summer programs, a fund now worth almost $11 million that serves 1,200 UK students.
Todd also expanded the university's two most prestigious scholarships, the Singletary and the Patterson. The Singletary is a competitive prize awarded to all-around top students, and it pays for tuition, room and board, a $1,500 stipend, a new iPad, and $2,000 for a summer program abroad. The Patterson is an automatic award to all National Merit finalists, the top scorers on the PSAT and SAT test, who choose to attend UK. It has the same benefits as the Singletary with a $1,000 stipend.
Singletary scholarships, named for former UK President Otis Singletary, are given mostly to Kentucky students; about 35 percent of Patterson scholarships this past year went to out-of-state students.
In the rankings game, the strategy has worked. Last fall, Capilouto — who expanded the Patterson awards — noted that UK in 2013-2014 had an all-time record number of National Merit Scholars — 105 —which put UK in the top 10 public universities for those students.
The plan has also worked for students such as Hayes Hagan, a high-achieving St. Xavier High School graduate from Louisville, who wasn't thinking much about staying in Kentucky for college.
"Once I got the call I was a Singletary Scholar, UK was a much more fulfilling option," he said. "Realizing the cost of other schools I was looking at, there was something to be said to go to such a strong university in a state that I love, and be at the top of the class as opposed to going to Yale and Vanderbilt where I'd be another fish in the pond."
His father, Tim Hagan, said he would have paid for Hayes to go wherever he wanted, but he's thriving, immersed in global studies, student government and the UK polo team.
"I think now he plans on staying or coming back to Kentucky after graduate school," Tim Hagan said. "I don't know that all that would have happened without the Singletary Scholarship."
Sam Saarinen decided to stay in Kentucky as well. A graduate of the Gatton School at Western Kentucky University for gifted students, he was accepted at Yale and Cal Tech, which were top choices because of his interest in artificial intelligence. But UK's offer changed that direction.
At UK, "I have all of the opportunities I have asked for to develop intellectually," said Saarinen, a computer science major also working in physics and math.
Hagan and Saarinen represent the top of the academic ladder. Linda Rudolph, a counselor at Garrard County High School, said she sees only slightly less academically talented students leaving UK out of their consideration.
"Middle class students don't qualify for anything, and UK is their first choice, but they're going to Eastern because Eastern is awarding them more money," she said.
For middle class students who do choose UK, debt often becomes a problem.
Katherine Mertz graduated from UK in 4½ years, working two and three jobs to help pay tuition and board. Another top student with a 3.7 high school GPA and National Honor Society membership, she still ended up with debt when she graduated in 2012.
"A lot of the scholarships at UK are for the extremely intelligent people who would have everything paid for, but get even more money," said Mertz, now a residential market coordinator at Big Ass Solutions. "They are paying them to go to school. Those who need it most are paying for college themselves."