An Optimization Model for the Allocation of University Based Merit Aid

Abstract

The allocation of merit-based financial aid during the college admissions process presents postsecondary institutions with complex and financially expensive decisions. This article describes the application of linear programming as a decision tool in merit based financial aid decisions at a medium size private university. The objective defined for the model is to maximize the quality of the incoming class as measured by average combined SAT scores. The approach involves using the yield rates from the previous year for each combination of SAT score and merit aid award while eliminating from consideration combinations for which insufficient data is available. Parameter estimation is based upon 2006 data and the results of the model are measured against 2007 data. It is shown that the modeling approach yielded a higher average SAT scores when applied to actual 2007 admissions data.