Sea change in student aid policies could ripple

updated 10:20 p.m. ET Dec. 22, 2007

When it comes to paying for college, cash-strapped families have had a few good tidings of late. A string of elite, private colleges have announced major boosts in financial aid.

Duke University kicked things off two weeks ago with a plan to spend an extra $13 million on aid by capping loans and eliminating any required parental contribution from families earning under $60,000.

Two days later, Harvard said it would tap its $35-billion endowment to eliminate loans entirely from its student aid and replace them with scholarships. It will also spend millions helping families that are better-off, even those earning well into six figures.

Now, nobody wants to be left behind.

The University of Pennsylvania, Pomona, Swarthmore, Haverford and Tufts all announced they would eliminate loans — more than doubling the small number of schools promising all students a debt-free graduation.

About time, some say. At four-year private colleges, average tuition and fees rose 6.3 percent this year to $23,712, according to the College Board.

At elite private schools, the full list price, with room and board, is typically double that.

Meanwhile, endowments at those places have soared. Harvard's increased nearly $6 billion last year — more than all but about a half-dozen schools have altogether.

Michael Dannenberg, a scholar at the New America Foundation, notes that's also approximately the figure Congress spent this year to cut student loan interest rates from 6.8 percent to 3.4 percent — for the whole country.

Why the change?
Pressure to act on affordability has been building from several quarters, including parents, lawmakers and alumni, some of whom think their alma maters have gotten greedy with their pricing power. And colleges jumped at once in part to grab attention during the season when high school seniors are making final decisions about where to apply.

The next question is how many families will feel the benefit. After all, the schools involved enroll the tiniest sliver of American college students. Fewer than one in five college students attend private institutions, and most of those attend less selective and expensive institutions than those lately in the news.

Says David Warren, president of the National Association of Independent Colleges and Universities: "There's no question when Harvard acts on any issue it has an impact. It's the stone in the pond and it will reach every institution."

The elite universities of the world set the tone for what other institutions will do, once they can afford it. And these latest announcements reflect a recognition in the top circles of higher education that college costs a lot even for middle- and even upper-middle-class families.

The latest initiatives clearly target that group. Most of these schools had already eliminated loans for the poorest students, so the benefits of these policies come further up the income scale. In Harvard's case, families earning more than 90 percent of the national average will see thousands of dollars in savings.

Move may pressure other schools
The colleges say they have grown increasingly convinced that there is an educational value in sparing students — at all levels — any worry about loan repayments.

Jim Bock, who heads Swarthmore's financial aid and admissions offices, remembers what it was like to have fewer choices than his classmates because of his loan debt when he graduated from Swarthmore in 1990.

"Two people in the $120,000 range, they could both be factory workers, first-generation (immigrants), with no retirement savings," Bock said. "They could be two school teachers."

The announcements could pressure less well-off schools to start spending more on aid, too. That sounds like good news, and it is — for students and parents. But some experts worry it won't prove good for the overall cause of college affordability.

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