Monday, December 10, 2007

Harvard's new financial aid plan

Harvard announced today that it will substantially increase the financial aid it awards to students whose families earn between $120,000 to $180,000 per year, charging them no more than 10% of their income for tuition. Three years ago, former Harvard President Larry Summers instituted a plan that eliminated tuition for families earning $40,000 or less, requiring little more than a small work-study contribution. Summers later raised the amount to $60,000 per year.

Harvard has a $35 billion endowment, the largest of any university in the country. I'm pleased to see it use its resources wisely. And it's great that someone who is able to get into Harvard can now generally go. But what does this mean for colleges who do not have Harvard's resources, like mine? How are we supposed to bridge the divide between the rich and everyone else? A ticket to American University costs approximately $45,000 per year, about the same as Harvard. We don't compete with Harvard for students so there's no competitive disadvantage there. But the number of students scratching and clawing to get through American is not insubstantial, and I've yet to hear a serious proposal yet to make our university less expensive to attend. Instead, we tell them that charging them more money makes us a better school, a statement that is simply not true.

Then again, I think college should be free for anyone who wants to attend a public university. How or why we don't value education enough after high school to make college available for anyone, subject to the appropriate qualifications, who wants to attend is beyond me. Private colleges are a different matter, and a different topic altogether.


John said...

Something like 95% of AU's operating budget comes from student tuition. This university will not be less expensive until its alums are willing to contribute to the endowment. Its alums will never contribute to the endowment until the administration addresses the issues that make people hate AU by their senior year (which you have addressed previously). Given this, and assuming my assertions are correct, this university will never be less expensive than it is now.

David said...

Maybe Harvard won't end up being that different from AU after all - this PR doesn't address the question of who Harvard lets in. No doubt things will be better for low and middle income students who do attend, but I'd be surprised if the student body is very different in the near future.

Jeremy said...

At his last Q & A session, President Kerwin addressed the tuition question. According to him, to go from 95% reliance on tuition to 90% would require an endowment of $2 billion.

Like john said, alumni have to contribute to make it happen, but Kerwin admitted on the spot that he doesn't expect it to happen.

Rachel said...

I think I may have told you about this earlier in the semester, but I actually co-wrote a blog entry about endowments (
_policy/2007/10/flawed_reasoning_endowments) earlier in the semester. There are some good links in there to other stories by Higher Ed Watch staff members about endowments as well as a link to the NACUBO (National Association of College and University Business Officers) study about the size and growth of college endowments. AU is number 168 out of 765 (
research/2006NES_Listing.pdf). Endowments are a really interesting topic, to me at least, and they raise some questions about their tax exempt status. The enormous size of endowments and the rate at which they earn capital gains is often unbelievable. Look into it more; there's a ton of information out their about college endowments, financial aid, college costs, and operating budgets.