Tuesday, January 22, 2008

Will Harvard's and Yale's Well-intentioned Move Hurt College Prospects for the Poor?

In the January 22, 2008, New York Times, Roger Lehecka and Andrew Delbanco published an op-ed about Harvard's and Yale's recent decision to increase financial aid for students from middle income families. (Blogged here, here and here).  The article suggests that Harvard's and Yale's move might actually hurt poor students who dream of going to college because money that could ordinarily be given to these poorer students will now likely be re-directed to others.  Here is an excerpt:

The problem is that most colleges will feel compelled to follow Harvard and Yale’s lead in price-discounting. Yet few have enough money to give more aid to relatively wealthy students without taking it away from relatively poor ones.

Most colleges already tend to favor the affluent because their budgets require it. More than 90 percent of America’s private colleges have endowments less than 1 percent the size of Harvard’s. Giving an upper-middle-class applicant even a generous partial scholarship puts less strain on their budgets than giving a full scholarship to a student whose family can afford to pay nothing.

For the entire story, go to "Ivy-League Letdown" in the January 22, 2008, New York Times.

DAB

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I commend to your attention a Boston Globe article by Steven Roy Goodman, from 12/31/07, entitled "The real story on Harvard's generosity," http://www.boston.com/bostonglobe/editorial_opinion/oped/articles/2007/12/31/the_real_story_on_harvards_generosity/

It begins,

A RELATIVE called the other night to make sure I had heard the good news: Harvard announced that it was now going to be more accessible to the middle class.

I smiled - just as I did when I first read the Harvard pronouncement. Sure, Harvard was now going to spend a little more money to make sure that admitted students would be burdened with slightly lower tuition bills. The underlying story, of course, is the university's effort to make sure that Congress doesn't mandate that universities spend 5 percent of their endowment funds every year, as private foundations are required to do.

After the 5 percent issue was raised a few weeks ago before the Senate Finance Committee, alarm bells sounded throughout the academic world. Senator Chuck Grassley, the top Republican on the committee, said that Congress should consider requiring schools to spend a minimum amount of what their endowments earn. Failure to do so would bring with it serious consequences: the loss of tax-exempt status on endowment earnings. Hardly Senator Grassley's soul mate, Senator Hillary Clinton on the campaign trail challenged the wealthiest schools in the United States to "devote substantially more of their endowment to recruiting more low-income and minority students."

Could Harvard's announcement be a preemptive move? The numbers tell the real story. Harvard estimates that it may spend an additional $22 million to assist families earning between $60,000 and $180,000 a year. Under the plan, families with incomes of $120,000 to $180,000 will be asked to kick in 10 percent of their income toward tuition. Given that the yearly cost of Harvard is $45,620, some families will still be paying almost $20,000 per year. Even if the initiative does total $22 million, compare this with the figure Harvard could be required to pay if Congress mandated that Harvard and other universities spend 5 percent of their endowment income.

Five percent of $35 billion is $1.75 billion. Harvard's Alumni Affairs and Development Office reported that the university spent 4.3 percent of the endowment in fiscal year 2006. The difference between 4.3 percent and 5 percent might not seem significant at first glance, but the savings to Harvard was $245 million in one year alone.

Posted by: Wyn Achenbaum | Jan 23, 2008 11:21:00 AM

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