Did Yale get it right?
For over forty years, the Ivy League colleges have been trend-setters in providing financial assistance and other forms of aid to people that some newspapers are calling the new middle class in America--or a family of four earning between $150-200,000. That's $150K!!!
Believe it or not, the so-called elite universities have priced themselves out of the market for what some people would call the moderately rich. If Yale and Harvard (plus some of the other wealthier Ivies) are sitting on their billion dollar nest eggs, also known as endowments, then is this really good for education?
Probably. But Probably not.
According to the article below from the New York Times, Congress is doing some arm-twisting, making these schools spend money from their endowments. Yale's endowment is over $22 Billion dollars. That's billion with a "B." At four percent interest on $22 Billion dollars, Yale would reap $880 million in interest to spend from its nest egg with another $220 million that can go back into the endowment. That's a great deal of money, even when you think about the size of the an institution like Yale. To put this in perspective, the cost of educating all 4,000 of its undergrads is a mere $192 million. Of course, the price of a Yale education is priceless, but should a university earn more money in its endowment than it cost to educate its students? Hmmmm....
What does this mean? Since the Ivies set the trends for the other colleges and universities in the US, small and large, particularly when tuitions began to mirror buying a foreign luxury sedan (between $30 - 48,000 a year), Congress is banking that the universities must begin to make college more affordable. Who wants to see a coed go to debtor's prison (see Countrywide Home Loans). Universities that have been literarily printing money since the mid- to late-Eighties will see some of that come back to the people (who can probably afford the high tuition), although it may be a stretch for most. Perhaps that remodel of the kitchen will have to wait four more years.
Indeed, some families are opting out of the rat race by "disowning" their children, emancipating them early on or even making them go and and get a "real" job so that they will appear to be penniless in the eyes of the universities. Do many kids do this? Probably not, but the desperation of getting those poor little rich kids into Yale has its price.
$22 Billion!! With a "B."
January 15, 2008
Yale Plans Sharp Increase in Student Aid
By KAREN W. ARENSON
Yale said Monday that it would sharply increase financial aid for undergraduates, including those from families with annual incomes up to $200,000, in a bid to ease costs for a broad swath of students.
Yale and other universities with large endowments have been under pressure from Congress to spend more and reduce charges for students. Harvard announced a similar aid expansion in December, saying the policy would cut the cost of attending college to 10 percent of income for a typical family making $120,000 to $180,000 a year.
Last week, Yale said that it would increase its annual spending from its $22.5 billion endowment, freeing up money for more aid.
The president of Yale, Richard C. Levin, said Monday in an interview, “I hope this will send a strong message to people with incomes between $45,000 and $200,000, some of whom at the high end perceive our sticker price as very daunting, that Yale does offer help at that range.”
On average, students who receive financial aid will see their charges drop in half, Mr. Levin said. A family with two children in college, $180,000 in income and $200,000 in assets will sees its Yale bill drop, to $11,650 from $22,300. Full tuition, room and board this year costs $45,000.
Students will still be expected to contribute in addition to parental payment — but the bill will drop to $2,500 next year, down from their $4,400 share of the $45,000 total. Despite other efforts to increase the aid and outreach to low- and middle-income students, Dr. Levin said, “we are still believed in many parts of the country to be inaccessible and too expensive.”
Yale said its changes, to take effect in the fall and apply to all undergraduates, would raise spending on undergraduate aid by $24 million, to more than $80 million. Yale also said it would limit the increase in tuition, room and board next year to 2.2 percent, raising total costs to $46,000. In the last five years, the increases have ranged from 4.5 percent to 5.5 percent.
Senator Charles E. Grassley, the Iowa Republican who has been pressing colleges and universities to spend more of their endowments, applauded Yale, saying, “Students and parents are the winners.”
But Mr. Grassley questioned why other colleges with endowments of more than $1 billion had not followed suit.
Other well-heeled colleges have also taken steps to assist low- and middle-income students by replacing loans with grants in aid packages.
Not everybody welcomes the trend. Critics say it could lead less-well-off colleges to reduce aid for lower-income students as they tried to compete for upper-income students.
“We encourage colleges to fully fund the neediest students before extending financial aid pledges up the income scale,” said Robert Shireman, executive director of the Project on Student Debt, a group that focuses on financial aid.
Copyright 2008 The New York Times Company
