__Study finds that the average graduate debt for the College exceeds $14,000__
For many students whose families earn up to $180,000 per year, Harvard University is now cheaper than the College.
p. Harvard unveiled a new financial aid plan last month under which a family making less than $180,000 a year would be eligible. Families earning less than $60,000 per year will pay nothing.
p. Since then, other Ivy League schools have unveiled competing plans. Yale University announced a new aid plan Jan. 14 that will be funded by the school’s endowment. The plan also gives financial aid to students with family incomes of under $200,000, according to the Associated Press. At both universities, tuition will be free for any student with a family income of under $60,000.
The new financial aid offerings raise questions about whether the College will respond.
p. “Through the implementation of our Gateway program, we have made significant strides in reducing the loan commitment of our highest-need students,” Ed Irish, director of student financial aid at the College, said. “Nonetheless, we, along with all but a handful of other colleges and universities, do not currently have the aid resources to compete with Harvard’s new policy.”
p. The College determines aid using the standard federal financial aid formula. Almost 60 percent of the freshman class applied for financial aid, and slightly less than half of those were determined to be eligible based on the federal guidelines. The College then met 84 percent of the identified need.
p. Many students at the College have to take out loans, and the average debt after graduation at the College is $14,770, according to The College Board. At Harvard, the average debt is $9,717, while at Yale it is $14,306. Both numbers are expected to go down following the new aid plans.
p. Thanks to greater resources, some private schools use more charitable financial aid formulas.
p. “[Harvard’s new] formula is less of a burden on the family than the federal formula, or the adjusted formula that is used by some other privates,” economics Professor Robert Archibald, who teaches a seminar on the economics of higher education, said.
Harvard economics Professor Gregory Mankiw said that these generous financial aid plans allow colleges to charge based on ability to pay.
p. “The list price is set high, and then many customers are offered a discount called ‘financial aid’ based on their ability to pay,” Mankiw wrote on his blog. “Here’s the secret plan: In the future, Harvard will cost $1 billion a year, and only Bill Gate’s children will pay full price. When anyone else walks through the door, the message will be, ‘Special price, just for you.”
p Archibald agreed that this phenomenon, known as “price discrimination” in economics, is at work in financial aid plans.
In the past, the College has also increased financial aid to correspond with tuition hikes.
p. “We are determined to keep William and Mary accessible to students from all economic backgrounds,” Samuel Jones, vice president for finance, told William and Mary News after a tuition hike proposal was approved by the Board of Visitors in April. “The new budget takes this into account, and approximately $700,000 of the revenue generated from tuition increases will go toward financial assistance programs.”