April 23, 2003: Features

A typical tab

Students from middle- and upper-middle-income families frequently receive financial aid. Here is a sample package for a member of the Class of 2006. The student is the older of two children in a family of four, with an annual family income of $78,000.

Required parent contribution $11,500
Student summer savings $2,050
Required student assets $50
Total family contribution $13,600
Princeton grant $23,340
Campus job $2,320
Student loan NONE
Total award $25,660
Total budget $39,260

Includes tuition, room, board, and estimated costs of books, travel and personal expenses

Source: Office of Undergraduate Financial Aid


Princeton’s ambitious financial aid program is changing the makeup of the student body, but is it good for higher education?

By Pamela Burdman ’84

Two years ago, Princeton wasn’t part of the plan for Amanda Mitchell ’05. As a high school senior in Dallas, she had set her heart on going to Dartmouth and joining its top-ranked ice-skating team. But just when that goal was within sight, Mitchell received an envelope that changed everything: It contained a financial aid award letter from Princeton – an offer to attend the less icy Ivy and graduate debt-free. The prospect of owing $12,000 after graduation from Dartmouth made Mitchell’s choice easy.

“It’s an amazing opportunity to leave school and not have debt,” says Mitchell, 20, an evolutionary biology major and captain of the skating team, a club sport at Princeton. Her story is echoed every year by dozens of students who are drawn to campus partly because of Princeton’s financial aid largesse.

Five years ago, Princeton embarked on an ambitious project that has altered dramatically the makeup of the student body. First came small changes, such as striking home equity from the family-assets equation; then, the university replaced loans with grants that need not be repaid. University leaders said that the changes would ensure that all admitted students could attend, and would permit graduates who wanted to enter public service or attend graduate school to do so without worrying about undergraduate debt.

The changes have helped attract more minority students and students of modest means. Compared with the Class of 2001, the Class of 2006 has 152 more students receiving financial aid and 50 percent more students from families earning less than the median family income, which is now about $47,900. The proportion receiving grants has risen from 38 to 51 percent – a Princeton record and the highest in the Ivy League. African-American students made up 9.5 percent of last year’s freshman class, which was the highest percentage in 22 years. (It dropped slightly this year to 8.4 percent.)

Two years after loans disappeared from its new financial aid packages, Princeton remains the only nonmilitary institution to go loan-free. “In the world of need-based financial aid, this place is as good as it gets,” says Don Betterton, Princeton’s director of undergraduate financial aid since 1973.

Few in higher education would challenge that claim. Yet, over the last five years, as Princeton phased out loans and raised its financial aid budget 85 percent to $52 million, the impact is not confined to Old Nassau: As some had predicted, the change has rippled throughout the upper echelons of higher education, helping reshape financial aid policies among Princeton’s peers.

Harvard has come closest to matching Princeton’s aid packages, raising its scholarship budget by 50 percent since 1998. Harvard increased its scholarships by more than $4,500 per student (partly because of tuition increases), and nearly half of all students receive some type of aid. Harvard still expects $3,250 from students in the form of “self-help” – a combination of a campus job and loans – compared to the $2,350 Princeton requires from a campus job.

In the same period, Yale reduced self-help figures in several increments, down to its current level of $3,900. M.I.T. knocked $2,000 off its self-help requirement last year, reducing it to $5,600. And two years ago, Stanford lowered self-help to $5,250 and capped home-equity value for middle-income families. Brown has taken a different approach, eliminating the job requirement for freshmen beginning next year.

“Princeton deserves a lot of credit for leading the charge,” says Sally Donahue, Harvard’s financial aid director. Donahue says Harvard did not want to see an “upstairs-downstairs phenomenon” develop, in which “kids who weren’t on financial aid could write for the [Harvard] Crimson and staff the drama productions, and other students were having to work 15, 20 hours a week and forgo all of those very rich extracurricular opportunities.”

With a cadre of schools following suit, the benefits to students like Mitchell are undeniable, and the increased ethnic and economic diversity at Princeton could go far toward erasing any lingering taint of elitism at the university. Yet there is an ongoing debate about what kind of a dent, if any, Princeton’s move will have on college affordability elsewhere.

“As a statement, it was an interesting one and a benevolent act,” says David Longanecker, an assistant secretary for postsecondary education in the Clinton administration. “But in terms of higher education in the country, it’s meaningless. Less than 1 percent of our students go to the elite high-cost institutions.”

Among the elites, the zero-sum nature of competition means that Princeton’s gains may be felt elsewhere as losses – and so not all higher-education leaders were pleased with Princeton’s largesse.

“I think some resented the fact that we, having made this move, might force their hand in this area,” which would not have been their preference, says Harold Shapiro *64, who championed the changes in the last years of his tenure as president.

In the world of financial aid, only a few dozen schools can afford to meet, even through loans, the full need of a class admitted without regard to financial circumstances. Princeton’s $8.1 billion endowment is fourth-largest in the country; on a per-student basis, no school is wealthier than Princeton. Many higher-education finance experts say Princeton’s no-loan policy only intensifies competition among those rich, elite schools without making aid available for more students.

“Since nobody else can afford it . . . the effect is to increase the gap between the four or five hyper-elite institutions and the institutions that are one step down. It increases the tendency to concentrate the most elite students in just a handful of places. At institutions that think of themselves as close competitors with Princeton but don’t have the resources, the pressure will be to do that selectively – they will in effect do merit scholarships to try to match [awards for] those students who they think will get into Princeton,” says Michael McPherson, president of Macalester College and coauthor of The Student Aid Game.

Such preferential packaging may be exacerbated by the weak economy, which has shrunk endowments and depleted financial aid programs in many of the 50 states. As tuition increases are hitting double-digit percentages at some universities, indebtedness becomes a greater concern.

At Princeton, the no-loan policy and other adjustments, such as the elimination of home equity from the aid calculation, are helping middle- and even upper-middle-income families afford a Princeton education. Depending on their circumstances and number of children, families with incomes of $100,000 and higher can qualify for financial aid. About a third of Princeton’s aid students fall into this category, a source of some controversy.

“When you get up over $75,000 a year, I don’t think it’s such a terrible thing to ask a student to take out federally subsidized loans,” says Donald Heller, associate professor at the Center for the Study of Higher Education at Penn State. “These are not students who are on the cusp of going to college or not.”

But Bob Laird, the University of California—Berkeley’s former admission director, sees real advantages to including higher income categories, as Princeton has done. “It reverses this trend, started in the Reagan years, of a public policy stance that says a college education is an individual benefit rather than a benefit to all of society, and therefore the individual should pay for it through loans. People who are making between $80,000 and $120,000 a year really have been priced out of the elite private institutions unless they are willing to go into debt enormously. There’s not much point in having a big effort at the very bottom end of the economic spectrum and affluent families who can afford it with no problem, and a real squeeze in the middle. It skews who ends up at that university.”

While other institutions also would like to become more affordable, many struggle just to maintain aid awards as tuitions rise and more families face decreased earnings. Those very conditions have made the Princeton policies far more popular – and more costly – than the trustees had envisioned in setting them in motion.

Noting that Princeton already has more qualified applicants than can be admitted, Shapiro says the financial aid program was not designed to gain a competitive advantage. The goal was having an institution that was truly open to students from all backgrounds, he says. That message apparently is reaching some high school students, for that same vision was what enticed sophomore Ryan McDonald to Princeton: “I wanted a college experience where you end up with an array of students from various socioeconomic backgrounds, where money is not a factor, nor is there a class system within the university.”

Though Shapiro may not have intended it, Princeton has gained a competitive edge. Five years ago, only 60 percent of students admitted with financial aid chose to attend Princeton. Today, that figure – the “yield rate” for students on aid – has climbed to 71 percent. Driven by that dramatic jump, Princeton’s overall yield went up from 65.6 percent to 74 percent in the same five-year period, placing Princeton second only to Harvard, which has a 79 percent overall yield.

Dean of the College Nancy Malkiel also credits the system for boosting ethnic diversity. Last year, the Journal of Blacks in Higher Education ranked Princeton third among leading universities – and first among the Ivies – for diversity, and cited the university’s financial aid innovations for helping to increase African-American enrollment. Research suggests that minority students are more averse to debt than white students, according to Cecilia Rouse, a Princeton professor of economics and public affairs who has studied financial aid policies.

Whether Princeton will become a pioneer in a larger movement to end student debt won’t be clear until the economy improves, and financial aid directors take their wish lists off the shelf. And whether ending student debt will, as many predict, allow more students to pursue public-service careers or attend graduate school also remains a question.

Some time within the next 10 years, researchers may be contacting Amanda, Ryan, and their classmates to learn how it all turned out.

Pamela Burdman ’84 is a freelance journalist and former higher education reporter for the San Francisco Chronicle.

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