Need Too Much

June 1, 2012

Sometimes good intentions can blind one to the realities that something might not be sustainable.

In the face of financial pressures, Wesleyan University is moving away from its blanket need-blind admissions policy. Instead, the college is planning to peg increases in the size of its financial aid budget to the size of its overall budget. As long as that money meets need, it will consider students irrespective of their ability to pay. Once the aid runs out, however, the college will start factoring in family income and ability to pay. This effectively means that, unless the college can raise enough money, the last students admitted to the class each year (possibly 10 percent of the class) will not include those who need aid.

At a time when student debt burdens are on everyone’s mind -- reaching President Obama’s speeches and the front page of The New York Times -- Wesleyan’s actions raise the issue of a college’s responsibility in admissions, particularly whether it should be admitting students even if the institution can’t meet their financial needs, thereby forcing those who opt to enroll to take on large debt burdens. Wesleyan President Michael Roth said there is a moral argument for a college like his to not accept students if they can’t meet their need, and not to compromise quality in the name of access.

“I’m willing to give up the label of need blindness in favor of giving students who are here the best chance of succeeding,” Roth said. “Our job is not to wear a badge of moral purity. Our job is to provide the best chance of success to the students we graduate.”

Until now, Wesleyan has been among a small minority of private institutions that both admit students without regard to financial need and pledge to meet the full need of those admitted. While that policy is seen as financially impractical or impossible for most private colleges, it has generally been embraced by the most elite private colleges, a group that includes Wesleyan and its competitors.

Financial Constraints

The admissions policy change is part of a broader financial shift that Roth is trying to make during his tenure as president, to put the institution on a more sustainable path and simultaneously try to control costs for families.

Since he took office in 2007, Roth has canceled two capital projects that would have cost the institution about $200 million, and made cuts to nonacademic staff that, combined with other efficiency measures and some revenue increases, resulted in about $30 million in annual savings. Part of that was done before the recession, though a large part was in reaction to it.

The savings are designed to let the university place more money into the college’s endowment, which is significantly smaller than those of its peers. It was valued at about $589 million at the end of the 2011 fiscal year, while those at, for example, Middlebury and Bowdoin Colleges were both over $900 million.  Williams and Amherst colleges have endowments of over $1.6 billion.

To grow the endowment, however, the college has to increase the money it raises from alumni and other sources of private giving each year and invest it in the endowment, rather than spend it on operations. The university spent close to 75 percent of the money it raised through fund-raising each year on operations when Roth got to campus. This year about 60 percent of the funds raised went into the endowment, and Roth said the college has a goal of about 75 percent of funds raised each year going toward the endowment.

But the college must make enough through net tuition – its other main source of revenue – to cover the change in fund-raising strategy without sacrificing quality. While many colleges would simply increase tuition by a few more percentage points, Roth said that is not an option for Wesleyan. The college’s comprehensive tuition and fees – close to $60,000 a year – are already higher than those of its competitors, and Roth said continued high tuition increases could put it out of range for many prospective students. To help keep costs down, Roth said future tuition increases will be pegged to the rate of inflation.

The college is also working on efforts to reduce the cost of a degree. The college nabbed headlines last week when it announced a structured three-year degree program, an unusual step for a residential liberal arts college.

The type of education Wesleyan offers is expensive. Three-fourths of its classes are 20 students or smaller, and they are taught by highly qualified academics who don’t come cheap. It has a beautiful residential campus that includes and amenities that students have come to expect from a top-tier institution. And Roth said he is not willing to sacrifice any of that to make the bottom line. “It would be foolhardy to maintain that commitment if it meant we had to reduce the quality of education they want access to,” he said.

All of that led to the proposed shift in the financial aid policy for the college, which could end up being a controversial move. It is notable that the administration announced the potential policy change a week after commencement, with most students far from campus.

Closing the Gap

The prevailing view among higher education institutions, and the general public, is that a family’s financial position should not be a factor in the college admission process.

“If higher education is supposed to be a vehicle for social mobility, and the purpose is to train the next generation of leaders, and we believe that leaders should come from all spectrums of social class, then there’s a strong argument to do that,” said Ronald G. Ehrenberg, a professor of industrial and labor relations and economics at Cornell University and director of the Cornell Higher Education Research Institute. Ehrenberg also sits on the Board of Trustees for the State University of New York.

A 2008 study by the National Association for College Admission Counseling and written by Donald Heller, now dean of the Michigan State University College of Education, found that 93 percent of public institutions and 81 percent of private institutions said they were entirely need-blind. Another 6 percent of privates said they were need-blind until May 1, when they considered financial circumstance for students coming off the wait list.

The flipside of need-blind admissions is a college’s ability and pledge to “meet full need” -- that is, through a combination of scholarships, grants, and a reasonable amount of loans, cover the need demonstrated by students based on their families’ economic circumstances. And on that metric, only 32 percent of public institutions and 18 percent of private institutions said they met the full demonstrated need of students. The result is that most colleges admit students, tell them that attendance costs X, and provide less than X in aid. The theory behind such policies is that some students may truly be willing to borrow a lot of money, or may find a generous grandparent or family friend -- people whose wealth doesn't factor into aid eligibility -- and find a way to pay.

Being need-blind and meet-full-need is held up as the gold standard of college admissions, since it removes a family’s economic position from the college decision, and a few dozen of the country's most prominent institutions -- generally those with large endowments, including Harvard and Yale Universities -- have both policies in place. 

Wesleyan agrees to meet full need, but over the years it gradually increased the amount that students had to fund through loans. Roth said the college cut the required loan amount by a third in 2008 and eliminated loans for the neediest students.

The ethical argument that Roth and a handful of other private university administrators are making is that the need-blind admissions process is the ideal, but may not be realistic for all colleges or all the students they admit. And if colleges can't meet full need without large loan expectations, Roth and others say, they shouldn’t entice students into coming by accepting them.

Whether the public accepts that argument is a different question.

“If the number of Pell Grant students falls, there’s a good chance that they’re going to get hammered by the larger society,” Ehrenberg said. “It’s a difficult position if you’re a president. You have to strike a balance of what’s the ethical thing to do, and is that the same thing as satisfying the demands of external constituents. What’s the social obligation?”

Ehrenberg said there are alternative solutions to the ethical quandary of need-blind admissions, such as not basing admissions decisions on financial need, but counseling students about the dangers of taking out excessive loan burdens, potentially dissuading them from enrolling at institutions that would require such burdens.

Roth said the college’s goal is to raise enough money to move back to being need-blind. He estimated that only about 10 percent of the college’s admissions decisions next year will consider need as a factor, assuming giving remains at current levels.

“The goal really is to spend more money on scholarships, not to consider need,” he said. “We want to be choosing people regardless of ability to pay.”

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