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Harvard University on Monday unveiled a new approach to financial aid and a new definition of "middle income." The result will be substantially more generous aid packages for Harvard students with families that have incomes up to $180,000, who will be assured that family contributions to students' costs will not exceed 10 percent of family income in a given year. Harvard is also eliminating all loans from aid packages and eliminating home equity in calculations of family wealth.

For Harvard students or prospective Harvard students, the news was clearly great and the university was praised by many for using its resources to try to attract a broader economic cross-section of students. While Harvard has no trouble attracting students, officials said that they were concerned that the university's high sticker price ($45,620 including room and board) was discouraging some potential students from applying and that the university was losing some talent to flagship public universities. Harvard officials said that they believed the changes would make the university competitive on price with publics for many of these students.

That is but one reason that Harvard's announcement could have a significant impact outside Cambridge. Most aid experts said that they believed only a handful of colleges and universities could afford to match Harvard's policies, but that many institutions may feel new pressure to enhance aid packages.

Some predicted that Harvard's move could further the gaps between "have" and "have-not" institutions as the university becomes more attractive financially to some of the best students who wouldn't have applied previously. Others predicted that flagship publics would respond with more merit aid to try to hold on to some of these students. And some questioned whether Harvard's program -- officially designated as a "middle income initiative" -- had so broadened the definition of middle income that it was blurring the line between need and merit, and between middle income and wealthy.

Harvard's new plan will do the following, starting with the next academic year:

  • Create a "0 to 10 percent standard" under which students from families with incomes up to $60,000 will not be expected to make a family contribution, those with incomes greater than $60,000 and up to $120,000 will be paying a sliding scale of 0 to 10 percent of their income, and those from $120,000 up to $180,000 will pay 10 percent of income. Those in the under-$60,000 bracket are continuing an earlier aid initiative by the university, but those in the other brackets will see substantial reductions in expected family contributions.
  • Loans will be eliminated from all aid packages and replaced with grants.
  • Home equity will be eliminated from calculations of family wealth, a move that is expected to result in the university spending more than $2.5 million a year extra in aid.

About half of Harvard's undergraduate student body is in the group with incomes up to $180,000 and so will benefit in one or more ways from the changes, which are expected to cost about $22 million annually. But because Harvard officials said that they hoped the plan would attract new, less wealthy applicants, the share of undergraduates eligible could grow over time.

In a phone briefing for reporters, Drew Faust, Harvard's new president, said that the university was concerned about two groups of students: Those who currently attend Harvard but whose loan and work obligations are such that they don't fully experience the university extracurricular offerings, and those who "may not be applying to Harvard" because of concern about costs.

More and more families feel that top colleges are out of reach financially, Faust said. Having reached out to lower income students over the past few years, she said it was time to address "the real stresses" of middle-income families. "We're trying to reconfigure our whole approach to affordability," she said.

Harvard's announcement comes at a time that many members of Congress have been complaining about rising tuition rates, especially at institutions with large endowments (Harvard's leads the nation at $35 billion). Faust said that the university was also looking at how it sets tuition rates, but she said it was important that a Harvard education be "a shared responsibility and that individuals do contribute to their education." She noted that those students who will pay full tuition rates are benefiting from endowment funds that pay for much of their education, so "everybody will be subsidized," not just those officially on financial aid.

In the press conference, there were several references to concerns that Harvard may be losing students to public flagships and to the gaps between the experience of wealthy Harvard students and the less wealthy. William R. Fitzsimmons, dean of admissions and financial aid, at one point said that it was an "Upstairs/Downstairs" situation, given the amount of time lower income students have to spend on jobs.

In some ways, the most dramatic shift may be the use of a percentage of income as the basis for calculating family contributions. Historically, Harvard and other colleges have used formulas based on a variety of factors (family income, savings, number of students in college and so forth) to arrive at an expected family contribution. While Harvard officials said they, too, would look at a range of factors, they said that the contributions would generally follow the percentage of family income. In so doing, they are in some ways taking the advice of aid experts who have said that simplicity counts for a lot in devising aid programs.

Consider the case of Princeton University, which beat Harvard by years in eliminating loans from aid packages and (until Monday) offering more generous aid packages to students in the income categories on which Harvard is focusing. Princeton uses the traditional method of analyzing students' family capabilities on a case-by-case basis. That means, said a Princeton spokeswoman, that some in the $120,000-$180,000 bracket are paying 5 percent of family income and others 20 percent. The average is about 16 percent.

That's a lot less predictable than what Harvard was able to release about what most families will pay under its new program -- and the substantial gains that the change will mean for most of those families.

Impact of Harvard's Aid Plan

Income Level Average Cost Until Now Average Cost Under New Plan
Up to $60,000 $0 $0
$60,000-$70,000 $5,950 $2,600
$70,000-$80,000 $7,510 $3,750
$80,000-$90,000 $9,320 $5,950
$90,000-$100,000 $11,900 $7,600
$100,000-$110,000 $14,710 $9,450
$110,000-$120,000 $17,360 $11,500
$120,000-$130,000 $19,260 $12,500
$130,000-$140,000 $20,700 $13,500
$140,000-$150,000 $23,310 $14,500
$150,000-$160,000 $26,200 $15,500
$160,000-$170,000 $28,360 $16,500
$170,000-$180,000 $30,360 $17,500

Harvard's move won immediate praise from some who have worried about the impact of loans on students. Harvard's approach based on family income "provides simplicity and clarity that families urgently need," said Robert Shireman, executive director of the Project on Student Debt, which maintains a database of pledges colleges have made on aid policies.

Shireman called on other colleges to adopt similar policies. "It’s not only the Harvards of the world that can afford to adopt policies to reduce student debt," he said. "Public universities and smaller liberal arts colleges, with humbler endowments and more low-income students, can also limit the use of loans and provide clearer information about what families should expect to pay. Even if schools cannot go as far as Harvard did, many more can and should take steps in the same direction."

Publicly, aid experts and officials of other colleges agreed: What Harvard has done is great for its students and could inspire others. It's always wonderful when more money is spent on student aid. Anything that makes the best colleges more welcoming and accessible to more students is worthy of praise.

Privately, however, there was some grumbling. Colleges with a fraction of Harvard's endowment and larger proportions of low income students struggle to meet full need and some aid officials said they have a hard enough time focusing aid on the most needy without Harvard announcing that families with incomes up to $180,000 need financial aid. More than one aid official ended up yesterday at the Census Bureau to be able to quote real median family income (just over $48,000) and to express wonder at the idea of $180,000 being "middle" income. But, expressing fear of looking jealous of Harvard's wealth, these aid officials said they wouldn't be quoted at all by name.

"At what point does the generosity begin to look more like merit aid," asked one aid expert.

This expert also questioned the university's announcement that home equity would no longer be used in calculations of wealth, noting that for many families in the upper middle class, home equity has grown enormously in the last 15-20 years and represents genuine wealth. "There is a philosophy that an asset is an asset is an asset," said this expert.

When Stanford University this year announced it was dropping home equity from family wealth calculations, some praised it, and others said that the policy would end up provide more aid to students who might not need it. Many have noted, for example, that while black incomes have, on average, increased relative to white incomes in recent decades, home equity is overwhelmingly held by white people, so policies shielding home equity shield white wealth.

James Belvin Jr., director of financial aid at Duke University, is among those who think home equity should be considered, provided there are ample protections for families so people don't need to lose their home or entire nest egg to pay for college. "Let's face realities," he said. "Home ownership makes a difference. It is indicative of a family's financial status," and provides most families with a base of wealth and considerable tax breaks. "It is appropriate to consider home equity. To not do so is to be unfair to those who don't have home equity."

Belvin stressed that "it's not for me to criticize Harvard" and that he applauded the university for putting more money into financial aid. While Belvin showered praise on Harvard, it might be understandable if he felt a little frustrated Monday (which he showed absolutely no signs of being). Over the weekend, Duke announced a major expansion of its aid programs -- but most of the benefit will go to students with incomes up to $100,000, and while loans are being capped, they aren't being eliminated. A special fund raising drive is paying for the better aid packages.

Asked about Harvard's definition of middle income, Belvin said "if Harvard wants to define middle income at that level, that's their decision, but what does that make high income mean?" Noting that in the United States, many have quipped that just about everyone self-identifies as middle income, Belvin did say: "If you go into the factories and shops, and ask them to pick a middle income figure, you might get a different take."

Belvin said he was "very proud" of Duke's aid improvements, and believed it was more important to focus on that than the gaps between his aid plan and the one in Cambridge. "I don't look at this as saying 'oh no, we've been trumped,'" he said. "Harvard has the resources to do things that most institutions can't do. It is just the nature of the reality we face."

Ronald G. Ehrenberg, director of the Cornell Higher Education Research Institute and a leading analyst of colleges' tuition and financial aid policies, said that it was very hard to predict how the Harvard aid plan would play out with regard to which students enroll where. If Harvard attracts more applicants from middle-income families, those students would not be going to other institutions, but in turn "there is going to be one student who is almost equivalent who is no longer going to get into Harvard."

Regardless of individual enrollment choices, Ehrenberg said, "this puts extraordinary pressure on the less well endowed institutions to do more. Harvard is demonstrating to Congress, as Princeton has demonstrated that 'we are socially responsible,' but now the less well endowed have to do something, but it's very very difficult for them."

Given that only a few institutions can match Harvard or come up with comparably generous plans, Ehrenberg said that he fears "a greater concentration of talent" in fewer universities. Just as the gap in faculty salaries between Harvard and a few others on the one hand, and everyone else on the other, has grown, the same may now be happening in enrollments. Even if Harvard has always attracted a disproportionate share of talent, that could now increase. Whether that's good or not, he said, depends on whether you believe that the best students benefit only from one another or from being part of larger communities.

Harvard's Ivy League competitors and some other elite colleges reject the idea of merit aid, and Ehrenberg predicted that those policies would not change. But he speculated that the better public flagships, potentially losing their price advantage against Harvard, would respond with more merit scholarships.

The leader of one such institution, in fact, said in an interview that he would do just that. James C. Moeser, chancellor of the University of North Carolina at Chapel Hill, has pushed for expanded aid for low-income students there. But Moeser said that he does see how Harvard's policies could have an impact. Harvard is among the top five "overlap" institutions to which Chapel Hill students also apply, he said.

Of Harvard's new program, Moeser said it was "good for the students and good for the country," and he said the university's leaders should be praised. But Moeser said that it was wrong to assume that all students Harvard may recruit will prefer it to his institution or other public flagships. For some students, Harvard may be the best choice, but for others "the opportunities of a flagship" are superior. And if cost is a factor, he noted that the university is pushing hard to raise more money for merit scholarships -- on top of a $100 million gift in February to expand existing merit scholarships.

Competition can be a good thing for everyone, Moeser said. "We'll just redouble our efforts."

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