A Shift Back on Aid

Many colleges hurt by endowment losses have made it a point to say that revised budget plans won't change student financial assistance. Middlebury went another route -- and others may follow.
February 4, 2009

It's become part of the formula of how budget cuts are being announced by highly competitive and wealthy colleges. Salaries may be frozen, layoffs are possible, building projects are being delayed ... but financial aid is unchanged (or if there is a change, it involves only adding more money).

So the presidential letter on the budget at Williams College says the institution will be "retaining our full financial aid program." Cornell University's president describes an additional endowment draw "to maintain our historic commitment to student financial aid and to fund the two financial aid initiatives announced last year." At Harvard University, the president vowed that the institution would be "carrying forward our recent years' initiatives to make a Harvard education affordable for outstanding students from low- and middle-income families."

When Middlebury College announced its plans to deal with a budget shortfall last week, however, it announced that financial aid was on the table; that a little more would be asked of students on financial aid and their parents; and that aid for international students would be scaled back a bit. Middlebury remains need-blind and pledged to meeting the full need of admitted applicants, but it may be unique among the competitive private colleges and universities that have faced large losses of endowment income in that it is publicly including financial aid among the areas in which downward adjustments are being made.

The economic collapse of the past six months -- while hitting all kinds of students, families and institutions -- has had an odd impact at elite private colleges and universities. Those with more money in their endowments (even after the losses of recent months) lost more than anyone else. Because these institutions have mammoth endowments, they rely much more on endowment income to support operations, and so have been forced to revise financial plans quickly, while their less wealthy and more frugal counterparts have had less adjusting to do in the short run. The global financial mess also comes after a two-year period in which the elite privates announced program after program to make their institutions more affordable for students of limited means.

With many colleges believing that their new aid policies have been successful in attracting talented students from low-income families, most have moved quickly to tell the world that the new funds and approaches to aid aren't being touched. And in that context, some experts are surprised and a bit concerned by Middlebury's approach. Others, however, said that such adjustments are probably inevitable for those schools, like Middlebury, that are wealthy compared to most of higher education, but don't have Harvard's billions. And some others speculated that Middlebury may just be being more honest than other institutions that face similar pressures.

"Nobody knows what's going to happen and the reason is because the drop in endowment values is unprecedented in recent history," said Mitchell L. Stevens, associate professor of education at Stanford University and author of Creating a Class: College Admissions and the Education of Elites (Harvard University Press). "Nobody really knows what happens when you have dedicated scholarship funds in your endowment worth less than they were when they were contributed."

Generally, he said he expects top colleges to do everything they can to protect undergraduate student aid. But he also said that colleges like Middlebury -- that like to have aid policies in the same league with institutions that are far wealthier -- "have fewer degrees of freedom" and may feel forced to include aid among categories of spending that must be reviewed. While Middlebury is not abandoning need-blind admissions, Stevens said that "the promise of need-blind admissions, which has always been extraordinarily difficult if not impossible to obtain, is going to be something that may be revisited at some institutions."

Middlebury's public announcement about its budget adjustments notes many things the university is doing to save money -- most of them similar to the kinds of changes turning up on lists of reductions elsewhere. Salaries are being frozen -- with modest increases for those on the low end of the salary scale and cuts for the president and vice presidents. Positions are being eliminated. Programs, too. But mixed in among the lists of cuts are changes in financial aid policies.

On financial aid for undergraduates from the United States, the college's announcement says that Middlebury "will adjust the family contribution as well as the academic year work expectation for students receiving financial aid. These changes will be phased in one year at a time, beginning with the class of 2013. Current students will not be affected by this change."

As for international students, the announcement says that Middlebury "will reduce the amount of financial aid set aside for incoming international students. The reduction in aid for the first-year class will likely result in a decrease in the number of international students in the entering class." But the announcement goes on to say that the college will still exceed its goal of a 10 percent international student body, and expects to spend more on total financial aid for international students next year than this year ($8 million vs. $7.5 million) although the figure for next year would have been higher without a policy change.

Via e-mail, Patrick Norton, vice president for administration and chief financial officer, said that the changes for domestic students will include increasing the minimum student contribution by $100 and increasing the work component of self-help packages by $50 -- small sums at a college where total costs this year top $48,000. (Middlebury is trying to close a $20 million deficit over the next few years.)

But Norton said that there were important reasons to make such modest shifts. "These changes will have a small impact on individual students and their families but over time they will provide the college with some savings," he said. "The general philosophy at Middlebury regarding the budget has been to consider all expenditures. We feel these measures, along with the others that are being implemented, will strengthen the college financially and help it to maintain an excellent academic program."

Ronald G. Ehrenberg, director of the Cornell Higher Education Research Institute, said he has been pleased to see top colleges announcing that they would make cuts elsewhere to avoid any changes in financial aid that don't benefit students or their families.

“One of the things that these financial problems have done is to cause universities to try to think a little more about what is in the social interest as opposed to the private interest, so most of the selective private institutions are reaffirming their commitment to financial aid if not improving it,” he said. Middlebury’s move “leaves me surprised.”

Ehrenberg also noted that with Congress having shown interest in how wealthy universities use their endowments (interest that may be lessened this year but that hasn't disappeared), protecting financial aid suggests that colleges "have gotten the message."

At the same time, Ehrenberg said that it is not surprising to see colleges having to rethink spending patterns they adopted prior to the downturn. "The '90s and the first part of the 21st century led a number of colleges and universities to devote a much greater share of their spending to come from endowment income, and to that extent, there are lots of things that were overpromised," he said.

Donald E. Heller, director of the Center for the Study of Higher Education, at Pennsylvania State University, said he would "not be surprised to see more colleges" follow Middlebury. "They're going to be hit by the double whammy of more students looking for aid, as well as students with fewer financial resources facing higher costs. So the type of announcement Middlebury made is most likely a harbinger of similar ones."

Heller predicted that the "very visible programs" that promised to replace loans with aid, such as those adopted by Harvard and Princeton Universities, "will probably be maintained." But he said that many other institutions, while not explicitly changing policies, are likely to adjust families' expected contributions to try to minimize the funds needed for some students' packages.

Gordon Winston, director of the Williams Project on the Economics of Higher Education, also predicted that Middlebury "won't be the last" college to announce some modifications in aid policy. "There is no doubt that more will feel pressure," he said.

Several aid experts who asked not to be identified said that they suspected that Middlebury was already not alone, and that colleges that are making modest adjustments are simply not announcing them because the $100 addition in family expectation here or the $100 cut in a grant there may not be visible to most students or their families.

Some others saw the Middlebury announcement as potentially a good thing. Jerome A. Lucido, vice provost for enrollment policy and management and executive director of the Center for Enrollment Research, Policy, and Practice, at the University of Southern California, said that "aid is a partnership and it is time to assess the roles in that partnership." Most colleges -- including USC -- are putting more money into aid, he said. But there is nothing wrong with a college talking about the roles of other players, Lucido said.

"The family role has got to be increased in ways that are not difficult, but maybe move it away from the recent past, which was an expectation of a discount and families not saving," he said. Likewise, finding ways to make better use of work-study may be educationally and financially sound for students, he said.

Lucido also noted that some of the more dangerous trends that could be happening now will never be announced. "There is going to be a very, very strong and irresponsible push by some to find more students who are able to pay" over those who are best prepared, he said. At the same time, Lucido said he's impressed by the way so many aid officials are stretching dollars creatively.

And regardless of what people think about Middlebury's choices, Lucido said that the college "deserves some points for just saying what it is doing."


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