Caveat Lector: Don't Let New College Cost Book Sucker You In

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Thanks to new student aid initiatives at America's private colleges and universities, many students and families are getting welcome news: a private college may be as affordable as a public university---and their best buy. Unfortunately, the growing trend of colleges replacing loans and grants---or undertaking other steps to minimize student out-of-pocket costs and debt---was not mentioned in a press release issued yesterday for the new book on college cost.

reshaped the financial aid landscape for students entering college next year.

Thanks to new student aid initiatives at America's private colleges and universities, many students and families are getting welcome news: a private college may be as affordable as a public university---and their best buy, says the National Association of Independent Colleges and Universities (NAICU).

Unfortunately, the growing trend of colleges replacing loans and grants---or undertaking other steps to minimize student out-of-pocket costs and debt---was not mentioned in a press release issued yesterday for the new book No Sucker Left Behind: Avoiding the Great College Rip-Off.

The press release for No Sucker speaks darkly of "colleges (that) gather billions of dollars in their endowment funds and reward their employees with lavish salaries and perks."

Here's what wrong with that false generalization of higher education.

  • First, the release does not mention that only a sliver of the nation's higher education institutions have endowments of $1 billion or more. Of the nation's 1,600 private colleges and universities, only 46 fall into this category. The remaining 1,554 private institutions have a median endowment of just $14 million (yes, that's million, with an "m").
  • Second, the press release fails to note vital consumer information about bold new steps being taken by wealthy colleges to become more affordable. Those institutions with robust endowments have taken advantage of the healthy stock market gains of previous years to dramatically increase the amount of institutionally provided grant aid to low- and middle-income students. The bottom line is that these schools have used their wealth to become among the most affordable options in American higher education.

Using Endowments to Cut Out-of-Pocket Student Costs and Debt:

Dozens of initiatives have been announced since December 2007. For example, beginning in 2008-09:

  • Amherst College will replace all loans with scholarships in its financial aid packages. The policy will eliminate loans for all students. It will affect incoming students in the Class of 2012 and current students. In 1999, Amherst eliminated loans for low-income students.
  • Brown University will eliminate loans for students whose family incomes are less than $100,000, reduce loans for all students who receive financial aid, and no longer require a parental contribution from most families with incomes of up to $60,000.
  • At Dartmouth College, all students from families with incomes of $75,000 or less will receive free tuition. Dartmouth also will eliminate loans for incoming scholarship recipients. Over four years of enrollment, students will see loans that totaled as much as $17,500 replaced with scholarships. Currently enrolled students will see their loan expectation cut by 50 percent for each of their remaining years at the college.
  • At Harvard University, families earning $120,000 to $180,000 a year will pay, on average, no more than 10 percent of their income. Harvard will also eliminate loans in financial aid packages, replace them with grants, and remove home equity in determining a family's assets.
  • At the University of Pennsylvania, new and current students with calculated family incomes under $100,000 will receive loan-free aid packages, while families above that level will receive a 10-percent reduction in need-based loans. By fall 2009, all undergraduate students eligible for financial aid will receive loan-free aid packages, regardless of family income level.
  • At Yale University, families with incomes of less than $60,000 will not be required to pay anything toward the cost of a student's education. Families with incomes of $60,000 to $120,000 will contribute from one to 10 percent of the student's bill. The policy will apply to all students returning to campus in the fall as well as entering freshmen.

And the list goes on at http://www.naicu.edu/affordabilityinitiatives.

What Others Say:

Even people not employed by our organization, the National Association of Independent Colleges and Universities, have been impressed by these new programs.

For example, Senator Charles Grassley, ranking member of the Senate Tax Committee, recently praised Harvard's decision as "big news" and said that "students and parents are the winners with Yale announcing significant increases in financial aid." The New York Times reported in March that recent financial aid announcements had "reshaped the financial aid landscape for students entering college next year."

Private Colleges Without Large Endowments Take Action:

What about private colleges with smaller endowments? They are also enhancing affordability through innovative efforts, within their limited financial means. Here are some examples of initiatives launched by schools that have fewer resources, for the 2008-09 academic year:

  • Blackburn College and Warner Pacific College are cutting tuition.
  • Incoming freshmen who are admitted to California Lutheran University and either the University of California, Los Angeles (UCLA) or University of California, Santa Barbara (UCSB) can attend CLU for the cost of attending the public university.
  • Juanita College will guarantee that students graduate in four years. Students avoid an additional year of tuition payments and enter the workforce sooner than most of their peers at public universities.
  • Dickinson College will increase its discount on the 529 savings plan to four percent. Assuming a 6-percent annual increase in tuition, parents must save $32,596 today to buy a year's worth of tuition in 2023 -- $90,830 -- under the previous discount rate. With the four-percent discount, they will need to save $20,545 instead.

For more information:

These examples are just a few of the many new and existing affordability initiatives ignored in the No Sucker press release. Go to http://www.naicu.edu/affordabilityinitiatives for a complete listing.

For free, consumer-friendly information on more than 600 private colleges and universities, including data on tuition trends, net tuition, student aid, and more, visit U-CAN at http://www.ucan-network.org.

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