Looking to Attend College for Free? Try Harvard

Everyone knows that the cost of a college education is rising–according to the College Board (the lovely folks who bring us the SAT and the AP exams), the average cost per year to attend a private four-year college is currently $23,712, up 6.3% from last year. But now, thanks to expanding endowments (and perhaps a bit of governmental pressure) some of the nation’s top universities have implemented sweeping changes to student aid. Many students can now attend college tuition free, and even upper-middle class families will receive substantial financial assistance.

America’s elite private colleges are non-profit institutions, which means that their endowments grow tax-free. It also means that their basic financial information is publicly available. They must file a form 990 with the IRS each year, detailing their revenue and expenditures for the previous fiscal year. (The forms are accessible by the public online at websites like GuideStar.)

The size of many college endowments is also reported each year by NACUBO, the National Association of College and University Business Officers.  And those endowments are growing, sometimes by margins as large as 25% per year, as was the case for Yale University in FY 2007. That growth represents an increase of almost $4.5 billion from the previous year.

According to NACUBO’s latest statistics (pdf file), four private universities currently have endowments worth over $10 billion–Harvard, Yale, Stanford, and Princeton.  These universities also saw double digit returns on their investments last year. This windfall attracted the attention of the Senate Finance Committee, which held hearings this past fall to explore regulating endowments, either by repealing universities’ tax-exempt status or by mandating that universities use a minimum percentage of their endowments each year to reduce tuition.  In December, Harvard, whose tuition had risen 3.9 percent in 2007 despite a 23 percent return on its endowment, responded by announcing a sweeping new aid program that would allow even wealthy families to send their children to Harvard for far less than its $45,620 sticker price.

Student loans would be eliminated, replaced entirely with grant aid. Families making under $60,000 a year would be able to send their children to Harvard for free. According to The Harvard Gazette’s article on the new changes, those making over $60,000 but less than $120,000 would pay between 0 and 10% of their yearly income. Those making $120,000 to $180,000 would contribute approximately ten percent. And, just in time for the housing slump, Harvard will stop taking home equity into account when computing financial aid (though families having assets atypically large for their income level may see the amount of aid they receive reduced). Children, regardless of their income level, will be expected to make a student contribution to their education, but that number is typically small, and funded by work-study jobs of less than ten hours per week.

Yale and Stanford have followed Harvard’s lead, with remarkably similar programs. Princeton, which eliminated loans in favor of grants in 2001, recently wrote a letter to the Senate Finance Committee (pdf file), detailing their own financial aid package, in which families making under $75,000 a year pay an average of less than $5,000 to send their children to college. And there is evidence that even universities with smaller endowments will follow suit. Brown University, whose $2.7 billion endowment is less than half of Harvard’s returns for last year, recently announced its intention to replace loans with grants for those families making less than $100,000 a year. Families making less than $60,000 would not have to contribute any money to their child’s education. At the University of Pennsylvania, by 2009, grants will replace loans for all families on aid.

Many families don’t need any extra incentive to push their kids towards elite universities, but for those who remain unconvinced, the numbers are beginning to speak for themselves.

Institution: Harvard
Endowment: $34.6 billion
Yearly Cost (2007/8): $45,620 (not including books and personal expenses)
Aid Program: Under $60,000 $60,000 to $120,000 $120,000 to $180,000
No contribution 0% to 10% of income 10% of income
Institution: Yale
Endowment: $22.5 billion
Yearly Cost (2007/8): $45,000 (not including books and personal expenses)
Aid Program: Under $60,000 $60,000 to $120,000 $120,000 to $180,000
No contribution 0% to 10% of income 10% of income
Institution: Stanford
Endowment: $17.2 billion
Yearly Cost (2007/8): $45,608 (not including books and personal expenses).
Tuition: $34,800
Room and Board:$10,808
Aid Program: Under $60,000 Under $100,000 $100,000 to $150,000
No contribution No tuition, just room,
board and living expenses
35% less than
families paid four
years ago*

*Actual amount unclear, though the average cost in 2007 was about $16,000, and will be lower next year. The flip side is that tuition continues to rise, so if your family income is over $180,000, or your children don’t plan to be among the approximately ten percent of applicants admitted to the above institutions, it’s probably time to start saving.

Topics: Smart Spending

5 Responses to “Looking to Attend College for Free? Try Harvard”

  1. Bibi Michel

    Dear reader, As we prep our second child to get ready for college in August 2008, we are having a very difficult time on how to pay for both kids. If you can offer any help or organization on getting free help we would appreciate it. Times have changed!

    Thank you and best regards.

  2. Don’t forget the relative bargain price of a high quality education from a public university, many of which are joining the elite private institutions in making a college education accessible to everyone. For instance, my alma mater, the University of Virginia (www.virginia.edu), ranked #2 in the nation amongst public universities, doesn’t cost $50K, $60K, or $70K to attend; it costs $19,325 for in-state students. In addition, UVa offers tuition grants (not loans) through its AccessUVA program (www.virginia.edu/accessuva).

    AccessUVa makes available an Ivy-league calibre education at one of the best universities in this country, public or private.

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