For Those without Billions: Navigating the Wave of Dramatic Aid Awarding Changes
Epstein, Jonathan P., Parrott, Sarah, College and University
So, you're not Harvard or Yale. Most colleges and universi- ties are unable to infuse an additional $15 million to $20 million per class year into financial aid to reduce costs for families earning upwards of $150,000 per year, as Harvard and Yale plan to do. Most are unable to devote an addi- tional $2.5 million per class to eliminate tuition entirely for families earning up to $75,000, as Dartmouth plans to do. Since the reality is that nearly all institutions operate on considerably leaner budgets, it's a jaw-dropping combined endowment total that most inequitably separates the three venerable universities mentioned above from the vast majority of institutions within the nation's higher education community: $60 billion. For the other 97 percent of colleges and universities in this country that don't have billions from which to draw (just 76 institu- tions ofthe 2,582 four-year colleges and universities have endowments of $1 bil- lion or more, according to nacubo), comparisons with these elite institutions are utterly unrealistic, and competition with them is inherendy unfair.
Unfair or not, the dramatic shifts in financial aid awarding policies at many elite institutions are rippling through the entire higher education landscape. Whether by altering public perception and expectations of costs ("Do you offer the 'Harvard Plan'?"), or by influencing financial aid packaging at competing institutions, make no mistake, while only the elite and wealthy institutions can afford to enact such wholesale policies, the impact is not limited to institutions that breathe the rarefied air.
After the dramatic December 10th announcement by Harvard University, the dominos started to fall. They continue to fall. There's a good chance that the trend won't end anytime soon. Here, we offer an analysis of the current state of affairs :
* What is happening in need-based financial aid awarding and why?
* What do the financial aid policy changes really mean and where are they headed?
* If your institution doesn't have millions of non-restricted endowment dollars at your disposal, what can you do?
It is possible to successfully navigate the rising wave of competition set into motion when more than two dozen of the nation's wealthiest colleges and universities elected to offer greater financial incentives for talented students to enroll at their institutions. As the wave gathers speed and power, fueled and supported by an endless stream of media attention and billions of dollars, it becomes increasingly important for all of us as higher education professionals to more deeply understand these critical changes in the undergraduate enrollment climate and how the new realities may eventually affect our institutions.
WHAT HAS HAPPENED
Throughout the 1990s, college tuitions skyrocketed well ahead of the rate of inflation. Aid officers struggled mightily to find ways to help families finance an education that, on average for a four-year private school degree, soared past $100,000 in total costs. Educational loans became an ever larger part of the packages being offered to families with demonstrated financial need.
In early 1998, Princeton University became the first college in the nation to buck that trend. The university eliminated loans from financial aid packages for low-income families earning up to $40,000 annually, and at the same time, reduced the loan burden for families earning between $40,000 and $75,000. Scarcely a year later, Amherst College followed suit. Not to be outdone, in January 2001, Princeton expanded their program and eliminated loans entirely, replacing them in financial aid packages with grants and scholarships. According to their press release, "No undergraduate student will be required by the University to take out a loan to finance his or her education."
In the wake of the moves by Princeton and Amherst, other higher education institutions did not immediately react. …