Written by: Barbara Lauren
Published: 01/16/2008

Yale and Harvard Financial Aid Plans Put Pressure on Less Wealthy Colleges

In 2001, Princeton announced that it would replace loans with grants for all students on financial aid. Students would henceforth finance their education by grants, term-time and summer jobs, and borrowing (by them and/or their parents). More recently, Williams and Amherst, among other schools, have announced that they, too, would replace loans (for all students on financial aid) with grants.

Other schools have moved to eliminate loans for selected categories of students. Colby College, for instance, offers special aid packages for Maine students, while undergraduate students from families earning less than $50,000 per year at Emory University can graduate debt free.

On December 10, 2007, however, in the words of The New York Times, Harvard “shook up the landscape of college pricing” by announcing that it would charge students from families earning $120,000 to $180,000 per year only 10% of their family’s income, meaning that students from such families would pay a maximum of $18,000 per year – “a deep discount from the university’s full annual cost of more than $45,600,” as the Times stated. Yale quickly followed suit.

Harvard’s largess responds to the question raised in 2001 by Ellen Tuttle Hansen, the President of Bates College, which in that year joined the elite club of approximately 75 colleges charging more than $40,000 per annum. “The important question for us is at what point can people no longer pay these prices,” said the Bates college president. “It’s not that $40,000 is the watershed, but somewhere there is a point. There has to be a point, and we have to worry about that.”

Under the new financial aid rules at Harvard, wrote the New York Times, “a family making $120,000 would have to pay about $12,000 for a child to attend Harvard, compared with more than $19,000 under current policies. A family making $180,000 would pay $18,000, down from $30,000.” The Times went on to quote Harvard president Drew Gilpin Faust as stating: “Education is the engine that makes American democracy work. And it has to work, and that means people have to have access.”

The Times led its story about the Harvard initiative with an anecdote gleaned from William G. Durden, the President of Dickinson College (tuition, $45,000). Dr. Durden stated that he had received a query from a student’s father, asking whether the college would follow Harvard’s lead. “‘He even said, ‘I know this costs a lot of money, but you should do it anyway,’” Dr. Durden said. Dr. Durden explained that Dickinson did not have the resources to match Harvard’s initiative.

The Times article also quoted Jenny Rickard, dean of admissions and financial aid at Bryn Mawr. “Harvard has started to redefine the financial aid landscape, and it’s redefined it in a way that is quite beneficial to the wealthier institutions. It is just a handful of schools that can really respond this way, but it leaves others kind of pulling their hair.”   

As the Times pointed out in its article covering the Harvard announcement, Senator Charles R. Grassley of Iowa, the senior Republican on the Senate Finance Committee, has suggested that colleges be required to spend more of their endowments – perhaps 5% – as a condition of keeping their tax-exempt status.

Steven Roy Goodman, an educational consultant and co-author of College Admissions Together: It Takes a Family, suggested in the Boston Globe that the Harvard announcement, no matter how well motivated otherwise, might also been seen as a preemptive move. “Harvard estimates that it may spend an additional $22 million a year [on this initiative],” Goodman states. Harvard’s endowment currently stands at $35 billion, he notes. “Harvard’s Alumni Affairs and Development Office reported that the university spends 4.3 percent of its endowment in fiscal year 2006. The difference between 4.3 percent and 5 percent might not seem significant at first glance, but the savings to Harvard [would be] $245 million in one year alone.”   

Harvard’s move may also provide a rationale for state universities to argue for more state assistance to public higher education. Robert J. Birgenau, chancellor of the University of California, Berkeley, where tuition is roughly $25,000, was quoted in the Times news story as saying: “My intention, frankly, is to use the Harvard announcement to try to exert pressure on the government of California to increase resources for financial aid.”

Related Links:

Harvard Crimson
http://www.thecrimson.com/article.aspx?ref=521564

New York Times
http://www.nytimes.com/2007/12/11/education/11harvard.html

The Hartford Courant
http://www.courant.com/news/education/hcu-yaleaid-0114,0,2022466.story?coll=hc-utility-opinion