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Upping the Ante on Student Aid
The challenge of attracting and admitting the best students -- at least the ones who need financial aid -- got tougher for Penn this spring, as several of the University's better-endowed peer institutions announced changes in their financial-aid formulas. The changes are designed to provide more aid from grants and less from loans to students from low- and moderate-income families.
Yale University will decrease the amount of tuition that students are supposed to contribute from one summer of work to give them the chance to take low-paying internships or study abroad, and it will exempt up to $150,000 of home equity, family savings, and other assets in evaluating the need for financial aid. Similar announcements have come or were expected from Stanford University and other top-rated universities.
Admirable as it may be, this trend is also undermining the rough parity in the amount and makeup of financial-aid awards given by Penn and other institutions with need-blind admissions policies. Even the College Board's College Scholarship Service, which assists hundreds of private colleges in determining families' needs, is considering revamping its financial-aid formulas to provide more money to families in the $60,000-$100,000 income range, and to exempt a portion of the money they have saved towards their children's education. Such changes, says Joanne Hanna, director of development for undergraduate financial aid at the University, "raise the bar as far as the competition for students goes."
Currently, about 57 percent of Penn's undergraduates receive some form of financial aid, including grants, loans, and work-study funds. Nearly 41 percent of all Penn undergraduates receive need-based grants, averaging $15,200 per student, from the University.
But Penn's $2.89 billion endowment ($131,000 per student) ranks far below its Ivy League peers, and provides for about 5 percent of its current financial-aid budget. Compare that to Princeton's $4.8 billion endowment ($776,000 per student), which covers 95 percent of its financial-aid budget.
Because Princeton's enrollment is about half that of Penn's, it would also cost Penn twice as much -- some $10-12 million -- to implement those changes over the same time period, notes William Schilling, Penn's director of student financial aid.
While in terms of direct competition, "we do have a certain amount of overlap with all of these schools," says Schilling, it's not necessarily the case that Penn would be viewed as "less attractive" in its financial-aid offers. "We don't have the sort of across-the-board rules that Princeton has, but we look at everything on a case-by-case basis. There are already instances, for instance, where we've been moderating the impact of home equity on parents' contributions, either because it's out of line with the family's income or because there has been a really disproportionate appreciation in home value.
"If a student is really interested in Penn, but thinks there will be a problem coming here because of the aid we offer," he adds, "we'll always entertain requests for reconsideration. We can't always move on those requests, but we will certainly entertain them."
One reason that Penn's endowment for financial aid is so low, says Hanna, is that "we've had multiple needs to fund-raise for over the years, so we've been torn in where to use those resources." Another reason is that financial aid hasn't always been a top priority of donors. When Penn interviewed a number of potential large donors a decade ago, financial aid consistently ranked fifth out of five interest areas. A similar exercise conducted this past summer showed that it has now become a number-one or number-two priority. "I think people are much more aware," Hanna explains. "I think more people have either been touched personally or know of other people who have benefited from financial aid."
It's no accident that the goal of increasing Penn's endowment for undergraduate financial aid by $200 million over five years is a top priority of the Agenda For Excellence, the University's strategic plan. So far, some $35.5 million has been raised.
More immediately, Penn is taking steps to enhance its financial-aid program for the 1998-99 academic year, offering up to 50 new trustee scholarships to entering freshmen. The loan-free scholarships will be renewable each year, based on the recipients' academic standing and financial circumstances. Hanna notes that current trustee-chair Dr. P. Roy Vagelos, C'50, came to Penn on a scholarship, and "he has been passionate about" financial aid. Vagelos has set a goal among the trustees to raise $15 million to keep the Trustee Scholars program running in perpetuity. He also chairs the University Committee for Undergraduate Financial Aid, which was established to publicize the need for financial aid and encourage others to give, Hanna says.
In addition, the University plans to award four-year, loan-free packages to up to 35 new Philadelphia Mayor's Scholars this fall. As it has done in recent years, Penn will continue to evaluate the financial needs of students on a case-by-case basis that does not automatically penalize families for the equity they have in their homes. It will also disregard a family's eligibility for the new federal Hope Scholarship and Lifetime Learning tuition tax credits in making evaluations.
"Obviously, Princeton and Yale [because of their larger endowments] are able to offer much more than we are," says Hanna, "yet we want to try to position ourselves so we can attract those really top students."
"One of the things that we and our admissions office have tried to get across in recruiting students is that the financial-aid program available here can make Penn affordable to virtually every student who is admitted," adds Schilling. In light of the recent publicity about other Ivies' plans, he says, "I think there is a need to look even more closely at how we get that message across. We don't necessarily have to echo what Princeton did."
"The thing to me that is motivational is to hear some of the students' stories about what financial aid meant to them and their families," Hanna says. "And I think all alumni remembering their times at Penn think of the vibrancy of the student body they were exposed to -- students from all kinds of economic backgrounds. Most alumni will tell you they are very interested in retaining that and not allowing this to become a school only for those who can afford to come here."
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