Harvard to boost aid for middle- and upper-income families

Dramatic new financial aid formula could prompt other colleges to follow suit.

In a move seen as likely to accelerate an ongoing trend among elite colleges, Harvard University announced Monday that it will sharply increase financial aid for undergraduate students from middle-class and wealthy families.

The Cambridge, Mass., university will overhaul its current financial aid program in favor of a relatively simple formula: Beginning next fall, families earning more than $60,000 will pay a percentage of their annual income for tuition and fees, rising to 10 percent for those earning between $120,000 and $180,000 a year. As of last year, families earning $60,000 a year or less pay nothing.

Harvard also announced that it would not expect students to take out loans and would no longer consider home equity in determining a family's ability to pay tuition.

"We want all students who might dream of a Harvard education to know that it is a realistic and affordable option," said Harvard's president, Drew Faust, in The Harvard University Gazette, an official magazine of the school.

"Education is fundamental to the future of individuals and the nation, and we are determined to do our part to restore its place as an engine of opportunity, rather than a source of financial stress," said Dr. Faust. "With no loans, no consideration of home equity, and a dramatic increase in grant aid, we are not tinkering at the margins, we are rebuilding the engine."

Harvard's initiative would increase the total grants to students to $120 million, up from the current $98 million. It will pay for the increase with its $35 billion endowment and from fundraising.

Harvard's move could prompt more efforts by other institutions, especially those that have already been contemplating ways to increase affordability, says Tony Pals, spokesman for the National Association of Independent Colleges and Universities (NAICU).

But Mr. Pals also notes that the trend has been accelerating over a number of years, particularly since Princeton announced in 2001 that all undergraduates eligible for aid would be given grants or work-study jobs so they could earn their degree without taking out loans. Since then, the number of low-income students attending the university has more than doubled.

"The interesting thing about Princeton back in 2001 was that the consensus was that it would have a limited effect on higher education, given that ... it has the largest endowment per student – and clearly, that hasn't been the case," said Pals.

As for how wide the ripple might continue to grow now, he says: "It's going to be difficult for the vast majority of the nation's 3,500 nonprofit colleges – private and public – to be able to match something like [what Harvard has done], however, efforts like this do have a trickle down effect. Schools have been redoubling efforts to enhance their affordability within their financial means."

In recent years, some universities have taken radical steps to cut costs, such as slashing tuition and capping student loans.

Part of the impetus to make college more affordable comes from Washington. In September 2006, a federal commission appointed by the Department of Education urged an overhaul of America's college financial aid systems.

But while some pressure comes from the government, Pals says that much of the motivation is based on "what we hear from the marketplace – students and families are increasingly concerned about their ability to attend the college of their choice."


Putting a college education within reach

In recent years, a number of US colleges and universities have launched affordability initiatives. Here is a rundown of some of these efforts, which were provided to the Monitor by the National Association of Independent Colleges and Universities.

Amherst College

Amherst, Mass.

Amherst will replace all loans with scholarships in its financial aid packages beginning in the 2008-09 academic year. The policy will eliminate loans for all students. It will affect incoming students in the Class of 2012 and current students. In 1999, Amherst eliminated loans for low-income students.

Brown University

Providence, R.I.

Beginning with the class of 2003, students who qualify for institutional aid receive larger grants and smaller loans. It gives students with the greatest financial need approximately $17,000 in additional grant aid over four years. All students can now apply 100 percent of any outside grants toward the self-help portion of their financial aid packages, reducing loan or campus work expectations.

Colby College

Waterville, Maine

Beginning in the fall of 2008, Colby College will replace loans with grants in financial-aid packages for Maine residents.

Columbia University

New York, N.Y.

Beginning in 2007-08, Columbia will eliminate the debt burden on students whose families earn less than $50,000 per year, replacing loans with grants. In 2007, an alumnus pledged $400 million, all designated for financial aid. It came a year after Columbia announced a $4 billion fundraising campaign to build an endowment for financial aid and faculty development.

Davidson College

Davidson, N.C.

Beginning in 2007-08, Davidson will eliminate loans from financial-aid packages. Students will have their demonstrated financial need funded entirely through grants and student employment, and graduate debt-free. The policy applies to both incoming and returning students. In 2006-07, Davidson capped student loans at $3,000 per year, increasing grants by whatever amount it reduced loans.

Duke University

Durham, N.C.

A new need-based financial aid program will begin in fall of 2008. Duke University will eliminate parental contributions for families who make less than $60,000 a year and make it possible for students from families with incomes below $40,000 to graduate debt-free. To help relieve financial pressures on the middle class, Duke also will reduce loans for students from families with incomes up to $100,000 and will cap loans for eligible families with incomes above $100,000.

Emory University

Atlanta, Ga.

Beginning in 2007-08, Emory will replace need-based loans with grants for students whose parents earn $50,000 or less. Students whose families earn between $50,001 and $100,000 won't have to take out more than $15,000 in loans over a four-year period. Emory will pay the rest.

Harvard University

Cambridge, Mass.

Since 2006-07, parents in families with incomes of less than $60,000 are no longer expected to contribute to the cost of their children attending Harvard. Harvard also reduced the contributions of families with incomes between $60,000 and $80,000. The new thresholds build on those announced two years ago, with eliminated expected contributions for families with incomes below $40,000, and reduced contributions for families with incomes between $40,000 and $60,000. The number of students enrolled at Harvard from these income brackets increased by 24 percent for the class entering in the fall of 2005 – the first full year of the program.

John Carroll University

University Heights, Ohio

John Carroll makes it possible for families making under $40,000 to enroll their incoming freshman tuition-free, effective for the 2007-08 academic year. Once federal and state aid eligibility is determined, John Carroll scholarship and grant aid will be awarded to cover the remainder of the cost, up to full tuition and fees.

Massachusetts Institute of Technology

Cambridge, Mass.

Since 2006-07, MIT has matched students' Pell Grants, up to their maximum amount. Earlier, MIT revised its financial aid package to replace $2,000 in loans or work-study with grants for all students.

Princeton University

Princeton, N.J.

Princeton no longer requires undergraduates on financial aid to obtain loans, providing grants instead. In addition, the summer earnings expectation for financial-aid students was reduced, with the largest reductions for students from lower-income families. The amount that students are expected to contribute from their own savings was also reduced. Princeton's calculation of expected parental contributions has been reduced by removing home equity from consideration (or giving an equivalent renter's allowance to those who don't own homes, but have other investments). As a result of these improvements, the portion of tuition covered by the average grant for a freshman with financial aid rose from 65 percent in 1997 to 90 percent in 2006.

Stanford University

Stanford, Calif.

Since 2006-07, families with annual incomes of less than $45,000 have not been expected to contribute to the cost of tuition at Stanford, and the requirements for families earning $45,000 to $65,000 have been cut in half. In 2007, Stanford increased need-based financial aid by 15.2 percent, to $76 million annually, to assist students from middle-income families and reduce the sum parents are expected to contribute. It reduced the amount of home equity it assesses when calculating need, capping the amount at 1.5 times a family's income. An allowance is also made for renters. It reduced the amount middle-income students are expected to borrow during the school year to $2,000 from $3,500. Both of these reductions will be offset by increased scholarship funds for students.

University of Pennsylvania

Philadelphia, Pa.

Since 2006-07, Penn has replaced loans with grants for students of families earning less than $50,000. As a result, the highest-need students each receive grant aid of more than $45,000 in 2006-07. The move coincides with a $6.3 million increase in Penn's undergraduate financial aid budget for the coming academic year, with those funds targeted to middle- and low-income students. In 2005-06, the university reduced the summer savings requirement and increased allowances for incidental expenses for students from low-income backgrounds.

Wesleyan University

Middletown, Conn.

Beginning with the first-year class enrolling in the fall of 2008, most students whose total family incomes are $40,000 per year or less will receive an aid package that substitutes grants for any loan obligation. Beginning with the same class, all other students who receive aid will graduate with a four-year total loan indebtedness reduced by an average of 35 percent. Aid packages will include a single student loan, the federally subsidized Stafford Loan.

Williams College

Williamstown, Mass.

Several times in recent years Williams College has reduced what it expects students to borrow and has made up the difference with increased grant aid. Students in the lowest income bracket now have no loans at all. The next bracket borrows a cumulative total of $3,800 at graduation. The highest loan expectation is a cumulative total of $13,900 at graduation.

Source: National Association of Independent Colleges and Universities.

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