The New Financial Aid Landscape
In the last few months, the media has been drawn to the potential student loan crisis, focusing on how students will be able to weather accessibility issues to get the funds they need for college next fall.
At the same time, many of the country’s top colleges and universities have been revamping their financial aid programs to better assist parents and students in covering their college costs.
Schools Modifying Financial Aid Programs
To date, about 50 schools have made substantial changes to their financial aid programs, writes Anne Marie Chaker of The Wall Street Journal (“The New Math of College Financing,” April 21, 2008).
Several schools have chosen to replace student loans with grant money that won’t need to be repaid, effectively lowering their tuition. Others have waived tuition costs altogether for families that fall below a specific income. Some have capped the amount of money a family is required to contribute toward college costs at a certain percentage of the family’s yearly income.
Student Loans Being Replaced with Grants
Undergraduates attending Stanford, Dartmouth, Harvard, M.I.T., Yale, or Cornell next fall now have a better chance of graduating with less debt from student loans, thanks to a significant shift in the financial aid programs at these schools.
Under pressure from Congress, with legislators questioning growing student debt levels and skyrocketing tuition costs that outpace inflation even as the wealthiest schools report endowments of $500 million or more, colleges and universities with sizeable endowments are tapping into those endowments to replace student loans with grants in their financial aid awards.
Although Harvard is using grant awards to eliminate student loans from its financial aid packages entirely, other schools are reserving these loan-replacement grants for families at qualifying income levels, Chaker notes.
Cornell, for example, in the 2009–10 academic year, will only replace student loans with grants for families making less than $75,000 annually. (The threshold was $60,000 for the current school year.) Students from families earning between $75,000 and $120,000 a year may still be awarded student loans, but those loans will be capped at $3,000 for 2009–10.
Tuition Waivers for Middle-Income Families
A handful of the nation’s top schools have also implemented programs that eliminate tuition charges completely for middle-income and even upper-middle-income families, with qualifying income levels as high as $100,000.
At M.I.T. and Dartmouth, families who make less than $75,000 a year will be able to send their children to college at zero tuition cost (although they may still have to cover room and board, books, and other living expenses). At Stanford, the income cutoff for a tuition waiver is $100,000 (with assets typical for that income level).
Family Contribution Capped Even for $100K+ Incomes
Last year, Harvard announced “one of the most ambitious [financial aid] plans out there,” writes Chaker, allowing families earning between $120,000 and $180,000 a year, with standard corresponding assets, to put just 10 percent of their annual income toward their child’s cost to attend — in other words, paying only between $12,000 and $18,000 of the 2008-09 sticker price of roughly $50,000.
Yale followed on Harvard’s heels with its own 10-percent policy that went even further up the income bracket, applying to families who make up to $200,000 a year.
As part of these new financial aid plans, both Yale and Harvard require that students contribute between $2,500 and $4,000 of their own funds, earned through a part-time or summer job or both, in addition to their parents’ 10-percent contribution.