Thursday, December 13, 2007

Does Green Go With Crimson? Financial Aid at Harvard

Harvard to Aid Students High in Middle Class

College costs aren't usually a big topic on this blog: my own student loans are a distant memory, and I won't be having any children whose education will wipe out my savings. Still, this NY Times story caught my eye.
I remember hearing a while ago that Harvard had changed their financial aid package so that anyone whose family made less than $40,000 did not have to pay for their education, other than having to make a small contribution via work-study. The income level for the free ride has since been raised to $60,000.
Now Harvard has announced expanded financial assistance for families at higher income levels as well. There is nothing in the article that spells out exactly how much aid is available to different income levels, but families with household incomes between $120,000 and $180,000 will get more aid than they have in the past. They will generally only be expected to put 10% of their income towards the child's education, and home equity will not be a factor in aid decisions.
Given that the average cost of a year at Harvard is now about $45,600, this kind of financial aid makes a huge difference for a lot of students, and other top schools are expected to begin offering similar levels of assistance. Some people might think that a family with an income of $180,000 doesn't "need" financial aid-- some might not, but of course other factors come into play, such as the number of college-age children, etc. And some people think college students should have to suck it up and pay for their own education and just go wherever they can afford. But I think what Harvard is doing is great.
When you go to a school like Harvard (and someone will probably say there is no place else "like Harvard" but for the sake of argument, let's just say that $10 billion or so more in endowment funds than your nearest rival doesn't make that big a difference), your educational experience is about a lot more than just your classes and dorm life. The resources of the university pay for so many activities and networking opportunities that go beyond that. Students who have to spend too much time working on a campus job, or who can't afford the additional costs involved in these extracurricular activities are really missing out on a big part of the whole package. This ends up meaning that students from wealthy families are the ones benefiting from that part of the university's spending, even if they aren't actually getting financial aid. What Harvard is doing should help even the playing field somewhat.
The article made me think back to my own college years at an expensive Ivy League school (which may or may not have been Harvard. Wouldn't want to narrow things down here!)
I think my father was making around $50,000 when I was applying for financial aid in the mid-80s, and if I remember correctly my yearly college costs ended up being around $20,000 on average over the 4 years. Most schools where I was accepted didn't give us a penny (except for my "safety school," a state university where I could have gotten so many scholarships I practically would have made a profit). The one I ended up attending gave me $1,200 in outright grants the first year, but nothing the next 3 years. To pay the bills, my father dug into savings and took out a second mortgage. I took out some loans myself, and worked on campus in my sophomore through senior years, as well as throughout the summers. I never considered any internships or summer programs because I didn't think we could afford it.
If you do some inflation math to convert everything into today's dollars, it seems outrageous that my father was expected to pay 100% of about $35,000 in costs, on a $90,000 salary. If I was going to Harvard today, he'd pay about $9,000 out of $45,000 in costs*. Sigh. Yet another reason to wish I was a lot younger!

*I'm assuming by "household income" they mean gross income including salary and investment income, before taxes, but I have no idea if this is correct.


The Travelin' Man said...

I work in higher ed at a third-tier school where people pay quite a bit to attend school. I am looking at an new job in a new city where the endowment is huge and need based aid basically makes it such that if you can get in, you do not have to worry about financing your education to attend. So, I want to be clear that I am a big believer in higher education (in the grand scheme), and I am a believer in the private school model, as well.

That said, I don't know that Harvard's move will make the "system" any better. The great part is that as Harvard goes, others will follow - maybe not this year, or in five, but many will follow. However, this news will only generate MORE applications for Harvard, and further enhance the divide between the "have" schools and the "have not" schools - even if it helps narrow the gap between the "haves and have nots" on campus.

Anonymous said...

Being a west coaster, I'm not too enamored with the ivy league schools. My husband and I both went through the University of California system for undergrad and graduate school (me for a masters, him for a PhD) and have less than 20K in student loans and got to work with Nobel Laureates and other top researchers. It's not like our parents paid our whole way either, mine are both teachers and his mom works as the kitchen manager in a drug rehab center. What we really need are public schools that provide the same educational opportunities as the ivy leagues.

Anonymous said...

I am 33 years old, and when I started college in 1992, my parents were penalized for being fiscally conservative. We lived in a modest house which was paid for, and they had savings, so I rec'd no financial aid. Colleges seemed to expect parents to deplete savings or take out large PLUS loans to put kids thru school. Yet my friends whose parents salaries were higher got financial aid because their debt to income ratio was higher thanks to larger homes (mortgaged), expensive cars, etc. I'm sorry, but why can't higher income families give up the McMansion and the BMW to pay their kids college?

Anonymous said...

My dad took a job in a big university so his kids could get the free tuition, an option not available to all parents. I took the offer, so I was lucky to graduate with no financial obligations. My youngest sister went to a state school, so her tuition wasn't bad. Neither the big university, nor the state schools, had good programs in the subjects my other sisters needed, and they ended up going to private art schools. I don't know how my parents paid for them, my dad being closed mouthed about financial stuff, but he was a college professor, and my mother was a nurse. I doubt they had a lot of money, and I don't know how they put us all through without letting on how hard it must have been.

It's abundantly clear to all why tuition is high at the Ivy League schools. Great programs, great facilities, and great faculty are expensive. I wish state schools had the resources that private schools have, so they could run these great programs, too, but government support being what it is, that doesn't seem to be possible. I'm all in favor of private schools giving as many families as possible the help they need, so parents don't have to give up their financial security in order to enhance that of their children. I'm glad the great schools see themselves, even if only a little, as public resources.

Anonymous said...

And by the way, I'm not sure I made clear another wonderful thing my parents did -- they let all of us go to school for the arts without trying to talk us out of it. This is a financial decision in itself, because they must have known that the three of us would be financially insecure for years, and they would have to (would decide to) give us some help.

Blessings on them (and on my baby sister, the union electrician)!

Anonymous said...

No children for you ever???

Madame X said...

Nope, I do not plan to have kids. I figure if my biological clock hasn't made me want them by now, it's not going to happen! I have a niece and nephew and I love the idea of being there for them as a special aunt who pays extra attention to them. That's enough for me.

frugal zeitgeist said...

Right there with you, Madame X. I'm 38 and my biological clock hasn't kicked in, so I'm pretty sure it's not going to. I like being the family friend who gives great presents and has all of the fun and none of the dirty work

Anonymous said...

I don't know what my parents' combined income was when I applied for colleges in 1999, but I do know that it was enough to knock us out of almost any financial aid yet not so much that being knocked out didn't hurt. Since I was going to be the third kid in college, they instructed me to go to the state school -- the University of Texas at Austin -- I had applied to as a safety. Because of a National Merit scholarship and other scholarships and grants, I received checks from UT during my freshman year. Yes, that's right, we made money off of me going to college (at first).

And I will say this about public schools: in my experience, they absolutely have less funds, and you must seek out opportunities. It's more difficult in that sense. I had to seek out connections and programs that would help me. Now that I teach at a wealthy private university, I cringe sometimes at how very coddled my students are. I went to an expensive private girls' school for high school, and the huge public university was an intense wake-up call for me. I'm completely convinced that I'm much better off for it, despite going kicking and screaming.

Mike G said...

I think your post points out how overrated a lot of these Ivy League schools are. Are you really getting that much more education than you would at the State school with the much more reasonable tuition?

Our society tends to glamourize superlatives and extremes, for example why does Paris Hilton get so much attention when all she's ever done is be rich; for most, a state school is more than adequate, there is no need for an expensive Ivy League university that is at the top of some arbitrary magazine "best of" list, for the Gucci sunglasses over the practical ones.

Miss Noodle said...

I read the same article, and felt very strongly about it. I'm glad Harvard is taking the step to help the middle class - just because families might have some resources doesn't mean things are a walk in the park.

But I totally agree with the poster above whose modestly-earning family scrimped and pinched to pay for college. I attended 4 years of private college and received not a cent of aid. I'm certainly not complaining: I'm very grateful for my education, and super-lucky to graduate with no loans.

It's wonderful that the federal government helps out the neediest, but the system at present totally disincentivizes saving for college. What about a tax credit? Tuition discount?

I don't know what the solution is, but I do know that the present agreement just isn't fair.

Anonymous said...

I think what Harvard is doing is admirable. My school didn't do anything like that--but then again, it's located in one of the impoverished counties in Michigan.
I’m currently working on post-grad debt, so anything I can find to help me save money is great.
I’m blogging my “adventures,” too; here:

Anonymous said...

Chicago Rob summed up exactly the points I was going to make. My family was in the same situation, with both parents working and saving, and as a result, I did not receive much financial aid to attend a private university. I also wonder whether schools which are bolstering their financial aid are also looking at whether one or both parents work when making their decision. If my mother had stayed home with the kids, our family income would certainly have been much lower and perhaps qualified me for more aid.

Anonymous said...

This is pretty sweet, IMVHO.

I was lucky enough to get into MIT 8 years ago. I was so excited until the financial aid package came in - $1250 for the whole shebang. MIT calculated my parents' (paid-for) home, my dad's just-under-six-figures income, and decided we had upwards of $35k/year to spare. We were well off, but not THAT well off.

Needless to say I went to a (good) state school who offered me $27000, and I graduated with no debt and a great education. What can I say - MIT would've been sweet, but I'm frugal. Had the aid package been different, who knows what I would have done.

Anonymous said...

As a parent who will be looking at college costs in about 7 years, I applaud what Harvard is doing. My husband and I both work, and our gross combined salary is about $120,000 per year. If I had to fork out $35,000/year to pay for college tuition, we'd be completely unable to save an extra penny. We realize we have to save for our retirement so as not to be a burden on the system in 25 years, but if we have to flip the entire bill putting two children through college, we'd have nothing left to retire on. Nor would we have any money left over to help our kids get started when they graduate. In my area, $120,000 a year (before taxes) is not wealthy. It's in the lower-middle of middle class. We live in a very modest, 3-bedroom twin home and are saving as much as we can for college tuition and our retirement. If my children were ever fortunate enough to get into an ivy league school, we'd do everything we could to make sure they went there, but certainly don't want to go broke in the process. I can only hope that by the time my boys are ready for college, they will have more of a choice than I did.

Anonymous said...

Amason, the difference in education simply isn't large enough between MIT and a state school to make any other decision than the one you did. In particular, most of the big-name research universities like the Ivy League and MIT don't do a particularly good job with undergraduate education anyway. So what you're really paying for is status and cachet. This probably does translate to a certain amount of extra salary after college, but even that might not be the case if you can graduate summa from a state school and couldn't have at MIT.

I would advise any student in your position to make the same decision you did.

E.C. said...

I'm with Amason. My prestigious top choice offered nice scholarships, but they didn't come close to covering the costs. I'm attending the honors college at my state university, getting great research experience, taking interesting classes from mostly good professors, and getting paid a nice stipend in addition to having all of my costs covered.

I know folks who, with the right grades, experience, and test scores from undergrad at my school who got in to graduate programs at top universities in their fields, including MIT and Harvard. Since I'm reasonably certain I want to go to graduate school anyway, why take on tens of thousands of dollars in debt when I know the big name schools will likely still be around later if I deserve them?