Harvard Liberalizes Undergraduate Financial Aid
Harvard’s new initiative will take effect for all students—those continuing their College education, and those enrolling as first-years—beginning in the fall of 2008. Harvard estimated...
Harvard has liberalized its financial-aid policies for undergraduate students, focusing particularly on those attending the College from middle-income and upper-middle-income families. The changes, announced on December 10 by President Drew Faust, Faculty of Arts and Sciences (FAS) dean Michael D. Smith, and dean of admissions and financial aid William R. Fitzsimmons, have the following major features (see www.hno.harvard.edu/gazette/2007/12.13/99-finaid.html for the full announcement):
- An income-based standard. Families with incomes from $120,000 to $180,000 will be asked to pay 10 percent of their income toward a child’s cost of attending Harvard College. For a family with $120,000 of income, the cost would be $12,000 per year—compared to the current family cost of $19,000; for a family with $180,000 of income, the cost would be $18,000 per year—compared to the current family cost of about $30,000. For families with incomes below $120,000, the family contribution will decline from 10 percent to zero at a level of income of $60,000 or less. This reduction, totaling one-third to one-half of the current cost to families for sending a child to the College, would, Harvard estimates, make the price of a Harvard education for a student receiving aid comparable to the cost of in-state tuition, room, board, and fees at leading public universities.
- No loans. In calculating aid packages, Harvard will no longer expect students to take out loans, instead providing increased grants. Students and their families may, of course, use loans to cover their newly reduced cost of attending the College. For students from the lowest income cohorts, that means an additional $1,000 per year of scholarship aid.
- Eliminate home equity. Harvard will no longer consider home equity in calculating a family’s ability to pay for college; in practice, for affected families, this will reduce the expected contribution toward the cost of attending Harvard by $4,000 per year.
Harvard’s new initiative will take effect for all students—those continuing their College education, and those enrolling as first-years—beginning in the fall of 2008. Harvard estimated that the enhanced aid packages would initially cost about $22 million annually: the grant-aid budget would increase from $98 million this year to nearly $120 million in the 2008-2009 academic year, or more than 20 percent. During a news conference, Faust said funding for the enhancements would come from presidential discretionary funds, FAS discretionary funds, and distributions from the endowment (which totaled $34.9 billion for the University as a whole as of June 30, 2007; FAS endowment funds account for about 45 percent of that sum).
In announcing the new aid elements, Faust said, “We want all students who might dream of a Harvard education to know that it is a realistic and affordable option.” She stressed, “[W]e are determined to do our part to restore [education’s] place as an engine of opportunity, rather than a source of financial stress. 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. This is a huge investment for Harvard,” consistent with her emphasis on access in her installation address on October 12 (see “Knitt Together…As One,” November-December 2007, page 60).
According to Fitzsimmons, 53 percent of undergraduates now receive grant aid. That cohort typically comes from families whose incomes are $180,000 or less—between the 90th and 95th percentiles for family incomes nationwide. (A couple of hundred students whose families’ incomes exceed $180,000 receive grant aid, reflecting unusual circumstances such as health crises, a large number of children in college simultaneously, or other factors.) The remaining students do not qualify for financial aid. In the future, the proportion of the undergraduate student body receiving financial aid could rise if the enhanced aid program encourages additional talented applicants, who are now leery of seeking admission, to do so.
Indeed, Fitzsimmons said, “[D]espite our best efforts to help families deal with rising college costs, our methods for measuring financial need are not as sensitive as they should be to the real circumstances faced by American families. Many parents won’t even allow their sons and daughters to apply to private colleges, while others allow their children to attend but experience real pain in paying the share we ask of them.” Hence the new elements of the aid policy. “I am deeply grateful to Dean Smith, President Faust, and the Harvard Corporation,” he said, “for their willingness to take such powerful action to remedy this situation.”
In the news conference, Fitzsimmons pointed not only to his direct experience with families who feel they must discourage children from applying to private universities, but also to survey research on students’ college years. The data, he said, show that students from the highest-income groups—about half of the College student body—enjoy “differential access” to the Harvard undergraduate experience. Those who receive grant aid are constrained in their ability or willingness to explore unpaid research opportunities on campus, to spend time with friends (as opposed to working or helping their families secure loan funds), to pursue unpaid internships, to study abroad during the summer, and so on. Fitzsimmons called this finding a “kind of Upstairs, Downstairs situation,” resulting in a “diminished experience” for half the student body.
The enhancements in financial aid build on measures begun in 2004 to bring private education within reach for lower-income families. They also reflect heated competition among private institutions to liberalize their aid programs—most recently, a comprehensive program announced by Duke University on December 7.
Harvard’s financial-aid initiative began in 2004, when President Lawrence H. Summers announced that families with incomes below $40,000 would no longer be expected to make any contribution to the costs of educating their children at the College, and such contributions were reduced for families with incomes between $40,000 and $60,000 (see “Class-conscious Financial Aid,” May-June 2004, page 62). Yale, Stanford, Penn, and other institutions put comparable programs in place, and public schools such as the University of North Carolina widely promoted their own augmented aid programs. Harvard’s threshold was raised to $60,00o in 2006, with reduced contributions expected for families with incomes between $60,000 and $80,000 (see “Aid Augmented,” May-June 2006, page 69).
Williams College, emulating Princeton, eliminated loans from aid packages this fall. And Duke, nearing the conclusion of a $300-million financial-aid campaign, on December 7 eliminated parental contributions for families with incomes below $60,000; moved to make it possible for students with family incomes below $40,000 to graduate debt-free; reduced loans for students from families with incomes up to $100,000, and capped loans for families with incomes above that level at $5,000 per year. The changes apply to current students returning in the fall and those enrolling in 2008; Duke estimated the cost of the initiatives at $12.7 million in the first year, a 17 percent increase over current-year spending on need-based, merit, and athletic scholarships. Details are available at http://dukefinancialaid.duke.edu/newsupport.
Harvard’s new aid enhancements thus reflect a number of factors. First, middle- and upper-middle-income families have been increasingly hard pressed by the rising costs of private higher education, relative to their own incomes. Second, Harvard, like other need-blind selective colleges, has had success in expanding applications from lower-income students, and now sees the opportunity, using recent endowment gains, to extend effective aid tools to most of the population. Third, there has been competitive pressure to do so. (In announcing the aid enrichments on December 10, Harvard, which no longer offers early admissions, sent a signal to students awaiting early-action decisions, binding or not, from other institutions, typically mailed in the middle of the month.) And fourth, members of Congress have been raising questions about endowed universities’ and colleges’ use of their funds and about continuing increases in tuition, room, and board fees, particularly after several years of very strong investment returns.
Dean Smith made clear that the aid enhancements are not meant to address only “one segment” of FAS’s students. He cited recent increases in graduate-student stipends and fellowships. Faust promised more action on this front in the “near future,” reflecting the increasing importance of graduate and professional education and the “enormous debt” that many students assume during those years (a particular concern for those pursuing public-service-oriented occupations in sectors such as education, public health, or government).
As for the December 10 announcement, Faust said, “What we’re trying to do is reconfigure our whole approach to what affordable access means,” from the time students decide where to apply to college to their years as undergraduates. Rather than incremental changes, she stressed, the size and reach of the new aid program demonstrate that “We’re reframing the whole approach.”