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John Harvard's Journal

A "Down Payment" on Financial Aid

March-April 2003

The university has created new scholarships, launched a dedicated fundraising drive, and unveiled a low-cost loan program to assist graduate- and professional-school students pursuing public-service or academic careers. Announcing the initiatives on January 15, President Lawrence H. Summers called them a "down payment" on the broader goal first propounded in his installation address. On that occasion, in October 2001, Summers said, "[A]s proud as we all are that any student...can attend Harvard College regardless of financial circumstance or need,...we should not rest until much the same is true of all this great University."


Elements of the financial-aid program


* Presidential Scholars: $14 million in scholarship grants, to be disbursed to students entering Harvard during the three academic years beginning this September who pursue public-service or research careers in eight designated schools. Between 200 and 300 students are expected to receive the grants in the course of the three-year program.

* University Graduate-Student Aid Fund: a new Harvard fund supporting public-service-related research and education across the University, with incentives to encourage giving from throughout the alumni body. Gifts will expand the Presidential Scholars program and increase financial aid within the individual schools.

* Harvard Educational Loan Program: a Harvard-Citibank partnership offering universal graduate- and professional-student access to no-fee loans at below-market rates (initially 4.125 percent). Lending began in February.

Two elements of the new program—the scholarships and related fundraising—target the Graduate School of Arts and Sciences (GSAS) and the schools of dentistry, design, divinity, education, government, medicine, and public health. Students in these fields who contemplate careers in teaching, research, or public service often risk incurring education loans so large relative to their expected incomes that they feel forced to choose another line of work. Alternatively, they may be forced to combine their schooling with employment—diluting their educational experience and delaying graduation—or simply give up and attend law or business schools.

The latter schools, given their graduates' typical private-sector earnings, rely largely on student borrowing for financial aid, and then offer loan-forgiveness programs for alumni who enter lower-paid public service. (The University Campaign raised about a quarter-billion dollars to support scholarships in the Faculty of Arts and Sciences—$225 million of that for undergraduate aid and the balance for GSAS. The professional schools combined raised about $117 million—and 31 percent and 28 percent, respectively, of the sum supports business and medical students. For fuller discussion of graduate and professional students' differing economic circumstances, see "Harvard's Financial-Aid Failings," July-August 2002, page 70.)

The third component—loans available with no fees and at below-market rates—extends to all 12,000 graduate and professional students. The loans, offered through Citibank's Student Loan Corporation in partnership with the University, can cover up to the full cost of attendance (tuition, room, and board) beyond scholarship grants and federal student loans.

That is crucial for international students, who are ineligible for federal loans, the lowest-cost tier of most education financing plans. The loan program is vital to schools such as public health and government, where international students make up one-fifth to nearly half the matriculants; their professional training is especially important to developing nations, where access to education financing is most limited. The University believes that many students also rely on high-cost credit-card debt or other private sources of loan funding. Depending on the loan volume, student savings on debt-service costs overall may be $1.25 million to $4 million annually.

Conversations with deans and students in the months after he was appointed president, Summers told reporters, left him "very struck by the fact that there was substantially more and easier financial aid available to you if you wanted to come to Harvard and prepare to be a lawyer or investment banker than if you wanted to be a scientist or a teacher, and that was very important for us to address." Effectively, he said, it costs those who want to devote themselves to lower-paid occupations more to prepare themselves than it costs those who enter high-income careers.

Devising an initial response to this problem involved review of each school's distinct programs, needs, student body, and alumni experience. Deans were asked to propose how they would use scholarship funds accumulated by the central administration from University resources. They were also required to specify how they would evaluate the effectiveness of the new financial aid in enabling students to pursue careers consistent with the public-service-oriented or academic trajectory of their Harvard educations. The scholarship resources were then apportioned.

In GSAS, for example, where tuition is typically provided by Harvard, scholarship recipients will receive annual stipends (for living expenses) of $25,000 for two years—some $4,600 more than typical awards—and, after the standard two years of guaranteed teaching fellowships, an additional year of support while they complete their dissertations. The awards are focused on doctoral candidates in the humanities and social sciences, fields comparatively less well off than the federally funded sciences, and where dissertation-completion funds have been a high priority for incremental aid. But at Harvard Medical School, the new funds will be applied after graduation, to reduce the debt obligations of students who embark on public-service practice—perhaps
in an inner-city municipal hospital.

Between these poles are the schools with a pure public-service mission, scant aid resources, and, in some cases, a special commitment to international students. School of Public Health (SPH) dean Barry R. Bloom says his school provides $3 million in scholarships each year—half from decanal and school resources and annual giving, half from department training grants. That has enabled the school to assist about 60 percent of its students, but minimally: scholarships cover less than half of tuition costs, and no living expenses. The new scholarship program will infuse $2.5 million during the next three academic years, a sum Bloom calls "a huge increment" and a "tremendous" boost given the school's limited discretionary funds. Although not sufficient to overcome the hurdle of high Boston living costs, "At least it lets us pick some students who otherwise could not come to Harvard."

He plans scholarship awards for 10 top Ph.D. candidates per year, 15 two-year-master's students, and 10 one-year-master's students. He envisions no rigid formula, Bloom says, but—given the number of international students among master's candidates—"I have a hunch it will enable us to take on international students from resource-poor countries." Emphasizing the school's role in training leaders, he says, "We have a student here from Burkina Faso. It doesn't take 50 leaders to transform public health in Burkina Faso" (and the new funds aren't that ample), "but it takes some. This gives life to some of our hopes."

Calling financial aid "our number-one need," Graduate School of Education (GSE) dean Ellen Condliffe Lagemann bluntly says, "We have been losing students to other schools." In this sense, as at public health, enabling students to pursue their public-service aspirations also strengthens Harvard competitively. Summers has expressed interest in bringing the "yield" of admitted graduate and professional applicants who choose to enroll closer to that of the College (now a record 61 percent for GSAS, for instance, versus 79 percent for undergraduates). Making more attractive financial offers to top doctoral candidates certainly helps.

Until recently, none of the 60 doctoral candidates enrolling at the education school annually received a multiyear aid package. Typically, students could expect a year of assistance and then had to rely on teaching fellowships and other work to make ends meet, resulting in protracted courses of study and punishing debt burdens in a field whose graduates earn average starting salaries of $43,000. Using
$6 million of funds allocated by then-president Neil L. Rudenstine, the school two years ago began making offers to nine "Presidential Fellows" in each class; these cover four years of tuition and fees, three years of stipends to cover living expenses, and, contingent on performance, dissertation-completion funds. With the additional $1.1 million provided by the Summers initiative, the number of scholarships available will rise by one-third, to a dozen students annually. Include the loan program, which extends across the debt-dependent student body, and Lagemann emphasizes, "I just want to reiterate how important this is for us."

Harvard already has experience with a schoolwide private-loan program. Citibank has for several years provided lending services to the Business School, whose global student body has a significant need for such financing. Among graduate and professional students as a whole, the University estimates there are $80 million of federal loans outstanding, $8 million of University loans, and $45 million of private loans; the latter figure includes $30 million borrowed by business students through Citibank. In designing the new, wider program, proposals were solicited from a dozen lenders; Citibank was chosen based on the cost of its program to students and Harvard and its servicing capabilities.

According to Sue Roberts, president of Student Loan Corporation (, the Harvard loans now available to all graduate and professional schools are structured similarly to Citibank's standard product. They offer three-minute, on-line credit approval; 15-year terms; payment deferral until six months after graduation (interest accrues and is capitalized); and a variable rate, adjusted quarterly. Interest rates are reduced if the borrower agrees to automatic debit payment, and upon timely remittance during the first four years of payment.

The unique features, Roberts says, are the below-market rate and Harvard's willingness to share credit risk so loans could be made to ordinarily ineligible borrowers who lack a cosigner—namely, international students. (Summers said Harvard would reserve $1.5 million for possible defaults.) In the bank's eyes, she says, that represents "Harvard's willingness to stand behind the quality of the education" students receive. The likely high loan balances and experience with the Business School entered into Citibank's proposal, she says: from a lender's perspective, "Harvard students have very good portfolio performance."

Evaluating the aid initiative overall, GSE dean Lagemann notes that grants are obviously more valuable than loans, and the availability of low-cost loans is worth more to students than high-cost borrowing. "This is real money," she says, "and these loans will make a real difference."

She goes on to emphasize that the fundraising targeted to underwrite scholarships permanently, and to extend their availability, may in the long run be the most important part of the financial-aid initiative, overshadowing the cash available now. "That's a big deal," she says, particularly citing the new flexible class-crediting policy that allows alumni to receive recognition for gifts to designated University priorities beyond their school affiliation (see "Where Credit Is Due," January-February, page 68). "I have run into people from the Business School, the Law School, who understand that education is our number-one domestic problem," she says, anticipating that more liberal class crediting will result in giving across institutional boundaries. SPH dean Bloom seconds the sentiment, calling the new fund and crediting policy "a profound opportunity for us, one we never had before."

Certainly Summers intends to pursue that opportunity. As funds are raised, he said, more scholarships will become available, and the proportion of grants relative to loan assistance will rise "for students attending schools where they earn more of their return from service to society rather than in pecuniary terms." The scholarships, loans, and fundraising unveiled in January, he said, are "a significant move toward the ultimate objective of drawing more young people into public service and making possible careers of many different kinds for the most talented students from around the world."