Colleges see national trend in financial aid expansion

Christine Vines Guest Writer

In December 2007, Harvard University sparked what has fast become a fiscal trend among elite colleges and universities: dramatic increases in financial aid spending. Harvard’s new policy, geared to better support middle-class and upper-middle-class students, dictates that families with annual incomes between $120,000 and $180,000 per year will pay only 10 percent of their income for tuition, a sizeable drop from the $30,000 contribution currently expected from families who make around $180,000 a year. This policy will affect students enrolling in Fall 2008, as well as current students.

This increase in aid spending comes following public concern that many colleges and universities are becoming unaffordable, even for middle-income families. Congress pushed the original movement at Harvard after deciding that tuition has outpaced inflation, and are still considering requiring schools to spend a percentage of their endowments on financial aid.

Harvard’s push toward increased financial aid spending began three years ago when it waived fees for families who make less than $45,000 annually, and later raised that cutoff to $60,000.

These changes increased the number of low-income students by 33 percent in three years, according to Harvard’s Dean of Admissions and Financial Aid William R. Fitzsimmons in a Dec. 11 interview with The New York Times. Still, many remain concerned the class dichotomy that the policy generated.

“We’ve all been aware of increasing pressures on the middle class,” said Harvard President Drew Gilpin Faust. “We hear about this in a number of ways—housing costs, both parents working, the difficulty of amassing any kinds of savings, just the increasing pressures as middle class lives have become more stressed.”

Harvard’s total financial aid spending will see an increase from its current $98 million to $120 million annually. Although few schools have financial resources close to Harvard’s $35 billion endowment, many institutions have followed in its footsteps.

President of Yale University Richard C. Levin announced a similar policy just last week that will reduce total cost of attending Yale by 50 percent for students with financial need. The school boosted its financial aid spending from $58 million to $80 million a year with this policy.

Last week, Dartmouth College made a similar announcement, significantly increasing financial aid spending to middle-income students.

Smaller schools such as Amherst, Williams, and Haverford Colleges have implemented no-loan policies in the wake of Harvard and Yale in which all loans will be replaced by grants. Haverford officials created the Next Generation Fund to help pay for the increased spending. Recipients of these grants will be encouraged to pledge to the fund throughout their lives, although no particular amount will be set and beneficiaries will be free to decline.

Vassar College, whose endowment is smaller than all of these schools apart from Haverford, adopted a need-blind admissions policy last year, though loans continue to be included in financial aid packages. Vassar College President Catharine Bond Hill, who has written extensively on the economics of higher education, said that she was encouraged by the trend toward financial aid at schools around the country.

“It is a very interesting time!” said Hill. “As you can imagine, we are looking very carefully at all the actions at other schools.” Hill believes that Vassar’s move to need-blind admissions, announced at Commencement last spring, shows significant commitment to financial aid, with the percentage of students on financial aid increasing by over four percent last year. Hill expects this trend to continue.

Though pleased that financial aid spending seems to be increasing across higher education, Hill noted that a trade-off can exist between no-loan and need-blind policies. “If we weren’t need-blind, we could save financial aid dollars by rejecting some needy students, and then use the savings to reduce the loan burden for the students we do admit,” she said. “I don’t think this would make lower income students better off. Some wouldn’t get access at all, while some would have reduced loan burdens. This doesn’t seem like a good trade-off.”

A school’s endowment per student, as well as the number of students on financial aid, are important indicators of the institutions ability to provide financial aid. “We have a relatively high share of students on financial aid, and our endowment per student is lower than many of the schools that have adopted changes,” said Hill.

Vassar’s endowment per student is approximately $310,000, compared to approximately $412,000 at Haverford and $731,000 at Williams.

Though Vassar has no immediate plans to increase financial aid spending enough to eliminate loans from financial aid packages, Hill and other senior administrators are actively considering the issue.

“We are working on that right now,” she said. “We are looking at what it would cost us to make a variety of changes. It would be unfortunate if students end up at schools that weren’t really their first choice because of a more attractive financial aid offer.”

Director of Institutional Research David Davis-Van Atta has been following the changes at peer institutions closely. “From this analysis, Vassar is not very positioned to be able to make similar reductions in its loans,” he said. “Further, as Cappy points out, having returned to need-blind admission makes it all the more difficult for us to do so. There are now more students receiving loan-based aid than there have been, and there is less money available in the budget, since we’re now using quite a lot, perhaps $4 million per year, or more, to support the very good and worthy practice of being fully need-blind in admission.”

“I'm happy with the package now,” said Chris Dieguez ’11, “Of course, I'd be happier if I could have a free ride, nobody wants to graduate with debt. But at the same time, I think it's worth it, and there's only so much the school can do. If it's just not feasible, then it's fine that we aren't making identical changes. Going need-blind this year was a step in the right direction.”