Why Elite Colleges Have Sweetened Their Student-Aid Packages
Op-ed as Published in the Chronicle of Higher Education
From the issue dated May 23, 2008
http://chronicle.com Section: Commentary Volume 54, Issue 37, Page A29
Why Elite Colleges Have Sweetened Their Student-Aid Packages
By AMY GUTMANN
Selective colleges are undergoing intense scrutiny these days when it comes to student aid. The decisions of the University of Pennsylvania, Harvard University, and other private institutions to expand our aid packages for students from less-affluent families have drawn both high praise and heavy fire: high praise for making ourselves more affordable to students from all economic backgrounds, and heavy fire for using aid to compete unfairly for middle-income students at the expense of more needy students and for widening the gap between the "have" and "have not" institutions. Meanwhile, some in Congress are pressuring many institutions to spend more endowment money on student aid.
In fact, our new student-aid policies represent a sea change in higher education. Until recently, the average student on aid at selective private institutions had virtually no choice but to graduate with significant amounts of debt. That weakened our ability to compete for students who had been severely underrepresented on all our campuses. And it increased the divide between students who could graduate with no loans and those whose career choices would be circumscribed by the large debt burdens facing them immediately upon graduation.
Far from neglecting the neediest students, we began our push to improve student aid at Penn two years ago by substituting grants for loans for low-income students. Starting this fall, a student from a typical family earning $40,000 will pay no tuition, room, or board to attend Penn; a student from a typical family earning $90,000 will pay no tuition. Having made Penn so affordable to the neediest students, we then will substitute grants for loans for all students from families with financial need, beginning in the fall of 2009. For the first time, all students with demonstrated financial needs will graduate from Penn debt-free.
Legislators and other critics who focus on the escalating cost of attending college should recognize that low- and middle-income students who attend highly selective private institutions like Penn are not paying anything close to the sticker price — and that student aid at our colleges has often increased faster than our tuition. Penn's total grant aid over the past five years, for example, has increased at twice the rate of our tuition.
Now, thanks to the new aid policies, thousands of students from low- and middle-income families will not have to pay tuition or take on debt to attend not only Penn and Harvard, but also other private institutions, including Amherst College, Brown University, Cornell University, Dartmouth College, Duke University, the Massachusetts Institute of Technology, Princeton University, Stanford University, Swarthmore College, Wellesley College, Williams College, and Yale University, among others. To make ourselves fully affordable, we are increasing our student-aid budgets, usually by spending more from our endowments and raising more money for aid from donors.
Penn, for example, is increasing its own expenditures for need-based undergraduate financial aid from $87-million for the current fiscal year to $114-million for FY 2010, while running a fund-raising campaign that includes a goal of $350-million for undergraduate financial aid and an additional $323-million for graduate and professional student aid.
Moreover, at Penn we do not set our annual student-aid budgets in stone. We admit the most-talented students, without regard to their need. If it costs us more to meet the financial needs of all our students in a given year, we increase our aid budget accordingly. That is how we avoid zero-sum scenarios in which every dollar we give to assist a middle-income student means one less dollar for a lower-income student (or vice versa).
We can afford that only by making student aid one of our highest priorities. Every dollar that we spend on aid from our operating budget is a dollar that we don't spend on something else.
Penn is also investing heavily in outreach programs to encourage high-achieving students in inner-city and rural schools to apply to the most-selective colleges. Our message is simple: If we admit you, we will make ourselves affordable to you.
There are three basic reasons why we are willing to absorb so much of the cost of educating more students who could not otherwise afford to attend our institutions:
1. We recognize that socioeconomic diversity and excellence go hand in hand toward educating great future leaders for a diverse world.
2. Higher education will optimally advance democratic values when, and only when, all capable and aspiring students have access to an education that enables them to realize their full potential as citizens and leaders.
3. For our generation of presidents and trustees, the commitment to aid based on need is a sacred trust. In our ranks are many people who would not have achieved high stations and successes but for the opportunity to attend college on scholarships.
Brown University's president, Ruth J. Simmons, is the daughter of sharecroppers and attended school in Houston's poor Fifth Ward. Jon Huntsman Sr., a Penn trustee who is a leading philanthropist and founder of one of the world's largest chemical companies, grew up in poverty in Idaho. A full-tuition scholarship to Radcliffe College enabled me to pursue my lifelong passion for education.
But while we have increased equality of opportunity for students with our new aid policies, aren't we also widening the chasm between "have" and "have not" institutions?
Not at all. In fact, most state universities have become more expensive for middle-income students for reasons that have nothing to do with our improved aid programs. Tuitions have risen at a faster rate in public than in private universities, while state appropriations for financial aid have not kept pace with tuition increases. Exacerbating the problem is many states' growing reliance on "merit-based" or scholastic scholarships, which disproportionately reward high-income families at the expense of less-affluent ones. Government support for both private and public universities has slowed as a percentage of colleges' budgets over the past two decades to our mutual detriment — and our national competitiveness — but public universities depend more heavily on state funds and therefore are harder pressed to make up for the shortfall in student aid. This fall it will actually cost students from families making $90,000 less to attend Penn — where they will receive about $38,000 in grants per year — than it would to attend many of their state institutions.
Critics who attack how we manage our endowments — fueling calls for Congress to require a uniform minimum payout — have missed a key message: By not spending too much when the market is booming or too little when it is declining, colleges are better equipped to maintain our high-quality teaching and research missions over a long period of time. We are committed to spending our endowment income to ensure both quality and equity across generations.
Moreover, the recent fascination with the large endowments of a relatively few institutions deflects attention from a serious and insidious problem: the erosion of a decades-old social contract between colleges and both state and federal governments.
When the Morrill Act was passed in 1862, land-grant colleges struck a compact with state governments. In exchange for significant and sustained public investment in higher education, public colleges and universities would offer high-quality and low-cost education to citizens. Likewise, with the passage of the GI Bill after World War II and the first Higher Education Act in the 1960s, the federal government carved out a central role in democratizing access to college.
Imagine the 21st-century equivalent of the GI Bill. Working together and looking far past the next election, legislators and higher-education leaders would craft a bold federal program that would make college affordable to every high-school graduate. A new national-service bill would invite high-school graduates to enroll for two years in one of a range of valuable public-service opportunities — including the Peace Corps, any branch of military service, plus a new Civilian Conservation Corps, dedicated to vital national endeavors like making our country more environmentally sustainable. That program would provide up to four years of tuition at the level of a flagship state university to every student who served for two years and whose family could not otherwise afford it.
If that seems too bold a move for many to consider today, let us at least recognize where preserving the status quo will lead the country. Declining government support has contributed significantly to the decreasing affordability of public higher education for less-affluent students, along with the growing disparity in affordability between the most selective private and public universities. Many well-qualified students from middle- and low-income families who are not admitted to places like Penn are being inordinately squeezed, graduating with great debt and limited career choices. Worse, many others find themselves priced out of college altogether.
Never before has higher education been more important, both for individuals and for society in general, and never before in the modern era has public support for higher education been more tenuous. And never has so much of the criticism leveled at well-endowed institutions been more misguided. We would all do well to shift our attention toward repairing and strengthening the ties that have tightly — and rightly — bound our government to our institutions of higher learning.
If the federal and state governments truly want to make college more affordable, they should reinvest generously in need-based student-aid programs. That would once again enable millions of Americans to secure their futures through an excellent college education, while ensuring that our colleges and universities remain the envy of the world.
Amy Gutmann is president of the University of Pennsylvania.