In tight economy, Princeton remains committed to aid
By Eric Quiñones
Princeton NJ -- The rising cost of higher education -- a contentious topic even in the best of times -- has become a more pressing issue among colleges, parents, students and the media amid a tighter economy and intensifying competition to attend the nation's top schools.
Princeton in 1998 began enacting significant changes in its financial-aid policies to make the University more affordable for lower- and middle-income students. The centerpiece of this reform was the unprecedented replacement of loans with grants for undergraduates beginning in the 2001-02 academic year.
Don Betterton, director of undergraduate financial aid since 1975, spoke with the Princeton Weekly Bulletin about the impact of those changes and the future of the "no-loan" policy.
Eliminating undergraduate loans gets the most attention, but how else has Princeton revamped its financial aid program?
We removed the value of the family home from the formula that calculates how much parents are expected to contribute to college. This considerably lowered the contribution levels for middle- and upper-middle-income families. We reduced the contribution rate on student savings from 35 percent to 5 percent, using the same rate that applies to parental savings and eliminating the financial aid penalty faced by parents who save for college in the student's name.
We are now admitting all students, domestic and foreign, on a "need-blind" basis, making us one of only five colleges that admit all students without regard to their financial circumstances. Finally, we decreased the summer savings expectations for lower- and middle-income students.
What is the cost of all those changes?
It is hard to pinpoint exactly because not only did current students receive better aid awards, but the popularity of our changes attracted more needy students in each new freshman class. The best way I can quantify it is to compare our grant budget for this year to what it would have been without any of our changes. Using that comparison, we paid out approximately $10.3 million in additional aid.
Where does the money come from?
Our primary source for aid is the annual earnings from our endowed scholarship funds -- money that has been given to us for centuries to support needy students. When I say centuries, I mean that literally. Our first scholarship was established in 1792 by James Leslie of the class of 1759, intended for "the education of poor and pious youths." (See "By the numbers".)
We also receive money from yearly scholarships, mostly those established by individual alumni, alumni clubs and classes. To the extent that these two sources were not enough to fully cover the higher aid budget, we turned to unrestricted income or general funds. In 2002-03, for example, our budget includes $38.5 million from endowed scholarships, $1.1 million in yearly scholarships and $3.3 million from general funds.
Is Princeton meeting its goal of increasing the economic diversity of the student body?
We have made considerable progress. The percentage of students on financial aid has risen to 51 percent for the current freshman class, an increase from 38 percent in the last class before we began our changes. We also increased the percentage of students on aid accepting Princeton's offer of admission from 60 percent to 71 percent. As far as low-income students go, we went from 88 to 129, an increase of 48 percent.
How has the broader college marketplace responded to Princeton's initiatives?
The first thing I usually say is that my colleagues stopped inviting me to financial aid meetings. Kidding aside, I would say that not long after we made our changes virtually all of our competition looked at their financial aid programs and improved them to some degree. Among selective private colleges, this has led to students in general getting better aid packages than they did five years ago.
Our alumni and friends of the University have been very supportive. We've also gotten a favorable response from some members in Congress. If you remember the climate in the late '90s, we made our improvements at a time when colleges were raising costs at about two times the rate of inflation while their endowment returns were very high, so it looked like colleges were getting a bit greedy. The fact that Princeton went in the other direction and decided to relieve some of the pressure on hard-pressed low- and middle-income families sent a positive message to Congress. Also, Princeton had the reputation of being an elite college with students from wealthy backgrounds, so what we did has helped change the image of the University -- a message people at Princeton feel good about. We now have the largest percentage of students on aid of any Ivy college.
If the economy continues to struggle, will Princeton have to rethink this strategy?
Much of the increase in costs for our aid program is due to the fact that we give better financial aid packages, but some of it is undoubtedly due to the fact that some of our families are not making as much money as they were a couple of years ago. We've seen more families with job losses, with bonuses being taken away and various other effects of the economy.
We're firmly committed to staying with these policies. We feel strongly we did the right thing, and we're proud of Princeton's leadership role in this area. To the extent that it is becoming more of an expense than we had originally planned for, we are actively trying to raise more scholarship funds. We hope that will be the way we can take care of whatever extra money is required to operate this program in the future.
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