By: Gaurav Bhola, MSM, Managing EditorIvy League universities have started a new trend, that of eliminating or slashing student debt. The mounting pressure from congressional corridors is leading some colleges to use their endowments to help students and their families afford higher education.
Recently, Harvard University announced an expansion of its financial aid program, an initiative started in 2004. The aid program will cut college tuition by thousands of dollars from many disadvantaged families, even families earning six figures. The university is changing its student loan and grants policies, in so far as providing more grants.
Taking the cue from other private schools, Williams College announced that elimination of student loans from all financial aid packages beginning next school year and substituting them with grants. This fall, Davidson started switching loans with grants and enhancing student employment.
Earlier this year, Emory University eliminated college loans for undergraduate students whose families’ household income was less than $50,000 annually. Other schools are not completely getting rid of school loans, but are still exploring avenues of helping some students minimize college debt.
These moves by certain members of the college and university system are aimed squarely at easing the debt burden of low- and middle-income families.
Many members of Congress, irrespective of party affiliation are nudging colleges to use more of their ever-burgeoning endowments for student benefits, such as loan programs. Several universities have seen their endowments grow; endowments valued over $1 billion have doubled since 1996.
The renewal of the Higher Education Act, addresses certain college-financing issues, includes conducting a study into the amounts and uses of college endowments by the secretary of education. Also, under consideration are suggestions to legislate minimum payout requirements for college and university endowments to further help lower school costs.
Currently, colleges spent an average of 4.6% of their endowments in 2006. The amount spent far outweighed the growth in the endowment portfolios. For example, Amherst College’s endowment increased by 15.8% in market value in 2006 compared to the previous year.
Even though with such market returns, endowment portfolios vary year-to-year, many don’t see the new grant initiatives by these colleges endangering their perpetuity. Many outside experts believe that as school tuition continues to rise to higher levels, the federal government should play a more proactive role in pressuring universities to increase their annual endowment payouts.
It is a hopeful sign that colleges are recognizing the need to initiate such financial aid programs. The imperative of the hour is to nurture these programs, so that in the future even more needy working families can afford to provide the best higher education to their children.
