You are here

Aiding the Neediest

Colleges and universities are expanding their need-based financial aid--and making arrangements that respect institutional budget constraints.
University Business, Sep 2006

Over the past several months, the message has been hard to miss. University of Pennsylvania President Amy Gutmann spoke in March on the value of access. Amherst College (Mass.) President Tony Marx talked about it in a February issue of Business Week. Stanford, Harvard, and other schools made national headlines with their own financial aid announcements.

University of Denver Chancellor Robert Coombe, at his April inauguration, noted that he plans to deepen the school's financial roots enough to cover every needy student's tuition by 2014. "With every fiber of my being," he said, "I'm going to work for that end."

Schools around the country have expressed a commitment as of late to supporting financially needy students, particularly those with families at the lowest end of the income scale. At the heart of the commotion lies the notion that colleges and universities benefit from the presence of all qualified students, not just those who can afford expensive tuition, fees, and living costs.

"We are dedicated to increasing the quality of our programs and the quality of our student body," says James Rund, vice president of University Undergraduate Initiatives at Arizona State University. "But we're convinced that we can increase our accessibility, and that those can go together."

While not every IHE boasts significant funds for financial assistance, many are setting aside increasing amounts of money and launching development campaigns to bolster need-based aid. ASU recently launched a program to cover nearly all costs (minus some incidentals) for students from families earning $18,850 annually or less (the federal poverty level). The ASU Advantage program is part of a larger push on the part of the university to keep the state of Arizona vital.

"I think as (Arizona) grows, and it is growing quite dramatically, part of what we want to help people understand is that to build a strong economic base, it's going to take a good group of educated citizens to make that happen," says Craig Fennell, executive director of Student Financial Assistance at ASU.

The state of Arizona has an abysmal record in funding financial aid, and while ASU isn't waiting around for help, it is working hard to get its financial aid objectives noticed. "We're going to have to find ways to support higher education," says Fennell. "I'm confident that Arizona will find a way to do it."

Arizona State is far from alone in boosting its financial aid aims. Schools are following various paths to expand their aid offerings without cutting deeply into other priorities.

Some marquee schools with eye-popping endowments have increased funding of financial aid (see Harvard, Stanford, and Amherst for examples). But not every IHE can reach into deep pockets of endowment interest to expand aid options.

The University of Pennsylvania has an endowment nowhere near the size of Harvard's (Penn has $4.4 billion compared with Harvard's $25.9 billion), so the school's top administrators are finding other ways to expand aid funding. In March, Penn announced a policy to eradicate all loans for families with annual incomes of less than $50,000. The policy comes during a year in which the university is increasing its undergraduate financial aid budget by $6.3 million, with a predicted growth of 7.7 percent in need-based undergraduate grants and scholarships.

"By providing financial aid packages without loans to students whose parents earn $50,000 or less, we can ease their financial concerns, not only throughout their education but also after graduation, enabling them more freedom to choose the most satisfying careers," Gutmann said in an official statement.

According to Bill Schilling, director of Student Financial Aid, expanding need-based aid remains a priority for the school. When Gutmann took office in July of 2004, she noted increasing access as one of her goals. Schilling explains that for Penn to make financial aid expansion work, "There was a conscious decision to use a little bit more of our unrestricted general operating fund to pay for these initiatives. At the same time, we are engaged in active fundraising, and we're cranking up to do a major campaign to increase endowment, and undergraduate aid is one of the targets.

"We are much more dependent than some of our peers on general operating funds," says Schilling. "Of the $80 million in need-based grants to undergraduates, probably $10 million will be from endowment income, and the balance from general operating funds."

Elite private universities are not the only ones finding ways to ease financial burdens on students and families. ASU, as a public university with annual in-state tuition of $4,613 for new students, claims to be the first large public IHE in the west to cover costs for the lowest-income students.

As a public university, ASU can benefit from state support for financial aid--but not much. In fact, less than one percent of ASU's financial aid budget comes from state funds-about $600,000 out of a total $380 million disbursed annually.

"We rank right around the bottom for state financial aid," says Fennell. "That requires us to be more creative." Fennell notes that the university is setting aside 15 percent of all tuition collections for need-based aid, providing enough money in the near term to fund ASU Advantage as well as other aid programs.

The arrangement works because the university is growing: It enrolled its largest freshman class in its history last fall, with more than 8,700 students. Since the need-based aid budget comes from tuition set-asides, the amount of money available for aid grows with the student population. "So as enrollment grows, we are able to fund a program like this without impacting other parts of the university," says Fennell.

Notes Rund: "We're building our capacity to accommodate a rapidly growing populace, and we're building our financial support in a commensurate fashion." He is expecting a 15 to 20 percent annual growth in ASU Advantage participation, and also hopes to raise the income ceiling for qualifying families to $25,000 (from the current level of $18,850). "We are doing some fundraising in that regard to see if we can make that happen sooner than later," he says. "We would look to private support to see."

According to Fennell, ASU is undertaking a $150 million fundraising campaign targeted at need-based aid.

Of course, some schools are lucky enough to have immense endowments--including Stanford, with a fund of about $12.4 billion. In March, Dean of Undergraduate Admission and Financial Aid Richard Shaw announced that families earning less than $45,000 would not be expected to make any financial contribution. "When Jane and Leland Stanford created the university, they wanted students admitted based on their abilities, promise, and willingness to work hard and not on whether or not they could pay the cost of tuition," Shaw said in a statement.

For Stanford, the $3.1 million required to fund the policy shift will come from various sources. It is just part of the school's total scholarship budget of $66 million. "A significant portion of our budget comes from endowed funds, about $47 million total," says Karen Cooper, associate dean and director of Financial Aid. "The rest comes from a combination of gift funds, president's discretionary funds, and the operating budget."

Recent financial aid announcements have introduced new or shifted policies--but they have also functioned as mechanisms for reaching out to low-income students. Administrators say that the perception created by these announcements--the idea that higher education is accessible to even the lowest-income students--is as important as the financial aid itself.

"Many students just don't come and ask, so we're trying to find ways to get out and talk to them about the school," says Fennell of ASU. "We're hoping that a program like (ASU Advantage) is that spark, so that they at least want to come and ask. Then they'll find out that it is doable."

ASU has put up a web page about ASU Advantage, and extended its reach by hiring two new staff members whose sole responsibility is to spend time in schools and communities sharing information about financial aid. Three years ago, before the university boosted its need-based aid efforts, 49 freshmen were at the federal poverty level, notes Rund. With ASU Advantage in full swing that number has grown. Nearly 290 students at the school come from families earning $18,850 or less. "A federal Pell Grant is not enough," Rund says. "We are pleased by the progress, and we look forward to continuing on that path."

Stanford issued a press release on its new policy in March, then rode a wave of local and national press coverage. That helped get the word out to students, while staff members began hitting the road to raise funds in support of need-based aid. "The idea is that we're getting a clear message out there to these families," says Cooper. "They may not have always thought of us as an option because we're an expensive school."

"We've always been need-blind," Cooper notes. "The difference in this new policy is that we're clearly saying that for those of you earning less than $45,000, your expected contribution is zero. This is a clear message."

Financial aid budgets in general are increasing at many institutions of higher education, highlighting an underlying commitment to opening doors for needy students. At Stanford, the current $66 million aid budget represents a significant jump of $6 million over the previous year. At Arizona State, institutional need-based gift aid has grown by 189 percent in the last three years.

Whatever the individual circumstances of the institution, many administrators agree that increasing access is a key priority these days. Of the 288 students who participated in ASU Advantage in its first year, 23 percent were in the top 10 percent of their graduating class. "We know that these are kids who aren't enrolling without the support," says Rund. "We expect the program to grow as we continue to maintain our commitment to financial aid."

Register now for UBTech 2018

Register now for UBTech 2018, June 4-6 at the Mirage, Las Vegas. At UBTech 2018, you’ll network with a dynamic community of higher ed leaders who are shaping the future of campus technology and explore topics like cyber security, distance learning, campus learning space design, communications, personalized learning and more. Your UBTech registration also includes a free pass to the InfoComm exhibit hall.

Register now>>