News from
PRINCETON UNIVERSITY
Office of Communications, Stanhope Hall
Princeton, New Jersey 08544
Tel 609/258-3601; Fax 609/258-1301Contact: Justin Harmon 609/258-5732
Date: January 26, 1998
New Princeton Financial Aid Policies Increase
Affordability for Lower and Middle Income StudentsQuestions and Answers
Why are you making these changes now?Changes in the University's loan requirement for lower and middle income students, and in the extent to which the value of the family home is taken into account in determining what a family can afford to pay, have been discussed for several years. These discussions have taken place among the trustees, in the faculty and student committees on undergraduate admission and financial aid, and in the faculty-student-staff Priorities Committee that makes recommendations each year to the president on the following year's operating budget.
They arose in part from a concern that some excellent students were not considering Princeton solely on financial grounds. Students from lower income families seemed especially concerned about the loans they would be required to take out as part of their financial aid awards. Both lower and middle income families expressed concern that the contribution expected of them was somewhat larger than they believed they could afford.
The changes that have now been adopted were presented to the Priorities Committee this past fall after the percentage of students on financial aid, which over recent years has averaged roughly 43% of each class, had declined to 41% in the Class of 2000 and 39% in the Class of 2001. The strong initial success of Princeton's $750 million 250th Anniversary fundraising campaign, both in unrestricted Annual Giving and in gifts specifically earmarked for financial aid, has provided the resources necessary to make these changes at this time.
Why did you choose to eliminate and phase out the loan requirement at these particular income levels, and why will you continue to require loans at all?Princeton has long believed that students on financial aid should be expected to contribute to the costs of their own educations. This "self-help" typically includes some amount of work and a federally subsidized loan. Even students who are not on financial aid frequently take campus jobs and borrow to help their families meet the costs of sending them to college. All students receiving financial aid will still be assigned campus jobs (generally nine hours a week) and will be expected to make contributions from their summer earnings.
But we have learned that required loans are a much greater deterrent for students from lower income families than for students from other families. Frequently these students' families have less experience with borrowing or with making purchases on credit; in many cases these students may be contributing financially to their families even while in school; and in some cases students from these families are less confident than others that their Princeton educations will lead to careers that will permit them to repay their loans.
While we know of no way to be certain about which income levels to select, we want to be sure that potential applicants whose parents earn less than the national median family income (roughly $40,000) will not have a loan assigned as part of their financial aid package. To avoid a situation where earning one more dollar could result in a substantial increase in a family's loan requirement and to reinforce Princeton's affordability to families that are likely to feel especially pressed, we decided to reduce the level of loan on a sliding scale for students from families with incomes between $40,000-57,500.
In all cases where loans are eliminated or reduced, students will instead receive additional scholarship aid. Students from families that earn more than $57,500 will have a $4,080 loan as part of their aid package. To the extent that students who qualify for loan elimination or reduction have higher expenses or are unable to meet their summer earnings requirement, they will still be eligible to take out loans for these purposes.
Why didn't you entirely eliminate home equity for all students?One of the greatest challenges to a financial aid office is trying to determine a fair contribution from a family toward a child's education. Since a quality education is one of the best investments a family can make -- with both financial and other dividends that accrue over a lifetime -- it has seemed appropriate to expect that families will pay for college as they pay for other major investments, not solely out of current income, but also out of some combination of savings and borrowing. Thus, in determining a family's capacity to pay, Princeton's financial aid office looks not only at income, but at savings and other assets, as well as at family size, number of children in college, and any unusual expenses.
For many families, the value they have accumulated in their home is one of their principal assets, and a portion of that value has been included in determining a family's ability to pay. In our judgment, it continues to be appropriate to consider home equity as an important family asset. But it is different from other assets in also serving as the family residence; in being non-liquid and not easily converted into college payments; and in being excluded from the need measurement system that the government uses to determine eligibility for federal programs. In recognition of these differences and in response to concerns from families that current expectations are greater than they can reasonably afford, Princeton has decided to eliminate or reduce the consideration of home equity in its calculations of financial capability.
As can be seen on the attached graph, under Princeton's revised policy the value of the home will be excluded entirely for families with incomes up to $60,000 a year whose home equity is $150,000 or less, and for families with incomes up to $90,000 whose home equity is $100,000 or less. The home equity will be included at half its actual value for families with incomes between $90,000-120,000 whose equity is $100,000 or less; for families with incomes between $60,000-90,000 whose equity is between $100,000-150,000; and for families with incomes below $60,000 with equity between $150,000-200,000. For other families with higher incomes or higher home equity who qualify for financial aid, home equity will be included at three-quarters of its actual value. Since these changes only benefit homeowners, Princeton also has increased its "asset protection allowance" for renters.
Why didn't you change these policies for students currently at Princeton?We would like to have been able to do this, but these changes are sufficiently expensive that we decided we could make this significant a change only if we phased it in over four years.
How do you think these changes will affect the composition of Princeton's student body?We hope that some excellent students and their families who now believe that a Princeton education is beyond their reach financially will recognize that, because of its financial aid programs, Princeton is much more affordable than they realized, and in many cases is no more expensive to them than the major state universities. We hope that other students who now are admitted to Princeton but decide not to attend largely for financial reasons will find Princeton affordable, and will feel able to base their choices primarily on educational rather than financial grounds.
Princeton believes it is very important to the country that, through a combination of federal, state and institutional financial aid programs, students at all income levels have access to the resources they need to be able to afford whichever college or university can best meet their educational needs and allow them to achieve their fullest potential. Princeton also believes that it is critically important that the nation's most competitive colleges and universities continue to enroll students from diverse backgrounds and all income levels.
Companion documents:
Entire press kit and charts
Press release: Princeton Changes Its Financial Aid Policies
Fact sheet: Questions and Answers (this document)
Press release: 3.7 Percent Increase in Student Fees Lowest in Three DecadesBack to Princeton news
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