Financial Aid:
The college gateway for most families

The fraction of families who can afford not to worry about the cost of college is tiny,” says Sally Donahue ’71, director of financial aid at Harvard, “and the effect on families of navigating the complex financial aid application process, as well as the admission application process, is profound.” Most families realize that the cost of attending both private and public colleges has increased annually, at a rate greater than that of inflation. According to Trends in College Pricing, an annual publication of the College Board, the average charges for four-year private colleges, including tuition, fees, room and board for 2005–2006, were $29,026. The average charges for four-year public universities and colleges were $5,491.

Aid is available: the College Board data show that “62 percent of undergraduates enrolled full-time receive grant aid from the federal or state government and/or from the institutions in which they’re enrolled.” Furthermore, Sally says that at Harvard, the average annual income of a grant recipient’s family is $90,000. The impact of increased college prices and widespread need for a finite pool of aid is greatest on families whose income is in the lowest quartile. Cost of college for these families ranges from 35 to 83 percent of family income, while that cost for families in the highest income quartile represents 12 to 19 percent of family income (see graph on opposite page).

Making your way through detailed applications, figuring out how to manage educational costs, and getting at the differences among aid policies from one institution to another is daunting. Typically, families have heard snatches of advice from relatives and friends, as well as opinions and speculation from every corner. The generalized confusion and perceived mystery to the process has been fertile ground for indiscreet entrepreneurs. A growing number of financial planners, Sally says, have sold their services to families, making unfounded promises. Thoroughly answering the financial questions is the best possible route to take, she says. Institutions are just doing their best to determine need equitably and to respond to genuine non-discretionary family financial circumstances.

“Harvard is in the extremely fortunate position of having the resources to meet the full demonstrated financial need of every admitted student, which makes it possible for us to admit students without regard for their need,” Sally explains.

“The way we assess that need, however, is typical of other highly selective colleges with institutional aid resources.

“Basically, we hope that families understand funding education as a major investment—an investment that requires drawing resources from at least three sources: cash (annual income), savings, and borrowing (out of future income). Our assessment of need is a measure of a family’s ability to absorb educational costs over time. Many families misunderstand and think that need is a measurement of what is left over, in cash flow, after all the other expenses of sustaining life have been subtracted. This misunderstanding often means that families are unprepared; they haven’t saved, and perhaps cannot manage monthly payments on what they would need to borrow without making major lifestyle adjustments.”

Sally is the chair of the College Board’s Financial Aid Standards and Services Committee (FASSAC). This group, which includes economists and representatives of selective colleges across the country, meets annually to review the institutional need analysis guidelines. The group’s job is to make sure the analysis reflects economic realities—in the nation and among applicant families.

“The goal is to be realistic and provide an equitable base for the decisions about aid. It would not be equitable, for instance, to base an aid decision solely on how much a family had ‘left over’ after annual expenses, because families spend differently. The goal of ensuring that the decision-making process is as equitable as possible is what drives the number and type of questions we ask families. The more information we have, the better we can determine a family’s relative ability to absorb educational costs.

“There are basically two need analysis systems: the federal need analysis is statutory, and establishes eligibility for federal financial aid programs; and an institutional need analysis system, maintained by the College Board and used by many colleges and universities nationwide, determines eligibility for their institutional sources of aid. Each system of need analysis, federal and institutional, allows certain basic and non-discretionary living expenses out of a family’s income, and expects those with sizable assets to contribute more than those with none. Factors such as the number of children in college and the size of a family affect the analysis significantly. However, institutional methodology reflects contemporary economic circumstances, recognizes and encourages families’ educational savings efforts, and uses more modest income and asset assessment rates. It also offers colleges the ability to customize the formula to take additional factors into consideration, such as the cost of younger siblings’ private secondary school costs.”

Both Sally and Rod Skinner, Milton’s director of college counseling, point out that major differences exist among college and university financial aid programs across the country. Schools have different policies regarding how they determine a family’s ability to contribute, for instance. Some schools use grants primarily, some rely more on grant-and-loan packages, some include on-campus jobs. Universities and colleges use their financial aid dollars to achieve strategic goals. Those goals can go from simply trying to include students of all socioeconomic backgrounds, to building certain programs, to attracting academically proficient students who may have a number of college options. Some programs are need-based, some are merit-based, and some schools offer merit scholarships to students who have qualified on a need basis. Early Decision application programs, most counselors and admission officers now acknowledge, put students who need aid at a disadvantage. They apply hoping for a better chance at being admitted, but in so doing, give up the chance to compare aid packages as they have already committed to that school. “Families whose students apply Early Decision should be really clear ahead of time about that school’s financial aid programs,” Sally says, “and about their ability to handle whatever aid package their student is awarded.”

Harvard and many other colleges and universities have taken the position that the affordability and accessibility of a college education for low- and middle-income American families has reached crisis proportions.* In an address to the American Council on Education in February 2004, former Harvard president Larry Summers described “the manifest inadequacy of higher education’s current contribution to equality of opportunity in America.” He outlined a growing inequality in the United States: “In the same period when the median family income was going up 18 percent, the top one percent of all families saw a 200 percent increase in their income. Sharp increases in inequality and their relation to education are a serious concern.” An overriding concern is the evidence that intergenerational mobility—the ability to move out of poverty to higher income levels, that in the past has been linked to education—may be decreasing in the United States. He and a number of other educational leaders believe that access to college education has historically made our society more just and more prosperous, and it is our most powerful option today.

President Summers notes that today, “a student from the top quartile is more than six times as likely as a student from the bottom quartile to graduate with a B.A. within five years of leaving high school. In the most selective colleges and universities, only three percent of students come from the bottom quartile and only 10 percent come from the bottom half of the income scale.…Children whose families are in the lower half of the American income distribution are underrepresented by 80 percent.”

According to Sally Donahue, children growing up in low-income households often do not have access to good secondary schools, and therefore lack the kind of college counseling and academic advising that would prepare them better for college. Many parents do not know how financial aid programs make broad-based college opportunities available for their children. This lack of awareness is compounded by the “sticker shock” of an education’s cost, which is often cited without mention of financial aid programs. So if a family is earning $45,000 and they see that it costs $45,000 to go to Harvard (or any other high-cost school), they often rule out that opportunity for their talented student simply because they cannot imagine that it might really only cost them a few thousand (or nothing at Harvard). Also, need-based federal financial aid programs (primarily the Pell Grant program) have not kept pace with the rising cost of education, and the recent growth of merit financial aid programs at the state and institutional level have eroded what is a limited pool of resources.

To prepare for the financial aid initiatives the university ultimately took, Sally and her office colleagues held focus groups with students from low-income families. Many students talked about confusing terminology, like “need-blind admission and need-based aid,” and a complex process. Others talked about the responsibility they felt for new burdens to their families. They would rather work or borrow themselves than impose on their families the burden of meeting even a seemingly small parental contribution amount. Students acknowledged that they hadn’t believed that college, especially a highly selective college, was a possibility for them.

Harvard, Princeton and many other colleges and universities such as the University of North Carolina at Chapel Hill, Amherst and the University of Virginia have each decided on their own packages of initiatives to encourage capable, talented students to enroll and attend. Harvard’s program, HFAI (Harvard Financial Aid Initiative) includes: absolving families with incomes below $60,000 from parental contribution; recruiting more aggressively—getting the word about financial aid programs out earlier to students; and looking carefully at applications that reveal students that have “achieved a great deal despite limited resources at home or in their local schools.”

Sally finds her professional role in this high stakes field of admissions and financial aid both fascinating and gratifying. She works simultaneously at several levels. With colleagues at the College Board (FASSAC) she helps define and promote realistic and equitable data-gathering. With the administration at Harvard, she implements initiatives aimed at rebalancing a crucial playing field for students and their families, and more equitably diversifying the Harvard student body. As a teammate in the admission effort and director of financial aid, she feels fortunate to find, as she frequently does, students who are talented, resilient and brave. She works hard to reach out to the many families who apply for aid, as well as to educate a larger constituency about a process that should ensure equal opportunity.


Cathleen Everett

*University of North Carolina, Chapel Hill, is hosting a national forum this fall on this issue entitled “The Politics of Inclusion: Higher Education at a Crossroad.” Sponsored by the Lumina, Andrew W. Mellon and Spencer Foundations and UNC at Chapel Hill, it will convene 125 federal and state policymakers, lawmakers, economists, researchers, business leaders, educators, news media and foundations who are invited to examine the roles of politics, policy, and practice in the determination of who gets to go to college and where. Sally Donahue ’71 is helping to organize the session at this symposium devoted to the discussion of outreach programs that have worked to increase access to higher education.

 

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