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Down the Up Staircase

March 25th, 2013 by dfarish

When we tire from worrying about North Korea, Iran, fiscal cliffs and sequestering, we can sit back and luxuriate in the knowledge that our institutions of higher education are still doing their job of opening the door of opportunity to permit successive generations of students to achieve both educational and economic advancement. Regardless of the circumstances of their birth, or of the wealth of their families, talented and ambitious students rest secure in the knowledge that their efforts will be recognized and rewarded by top colleges and universities. Because of their enormous endowments, these institutions now more than ever have the capacity to be need-blind in the admissions process, meaning that students will be admitted without regard to their ability to pay.

Oops! Maybe it’s time to go back to thinking about nuclear weapons and cliffs. Several of the wealthiest campuses have recently announced that they are reducing their aid packages for needy students and are no longer offering need-blind admission.

In effect, students with financial need are being compelled to walk back down the staircase that was intended as the pathway up, both academically and economically.

What’s going on?

Well, it is true that, for the financial year ending on June 30, 2012, most colleges and universities showed very little return on their endowment investments. However, their returns the previous year averaged almost 20 percent, and by June 2012, the endowments of six of the richest 12 universities were higher than they had been before the recession of 2008-09. Colleges and universities with large endowments have weathered the recession much better than most families, who are a long way from regaining the wealth they lost in 2008-09.

So it is surprising to see the reaction of campuses like MIT, Cornell, Wesleyan and Grinnell, all of which have announced that they cannot afford to be as generous in the future as they have been in the past (“As Colleges Retool Aid, Can Entry Stay Need-Blind?NPR, Nov. 27, 2012). MIT, Cornell and Grinnell have converted some of their grants into loans that, unlike grants, must be repaid. Wesleyan is limiting the number of students it admits need-blind.

MIT’s endowment exceeds $10 billion; Cornell’s is over $5 billion. A vice provost from Cornell justifies the institution’s change in financial aid by saying “…we have institutional fiduciary responsibilities and responsibilities to future Cornell students to have an approach that is truly financially sustainable.” So Cornell is placing the interests of future students ahead of the needs of current students because of concerns that the endowment might not keep pace with the cost of living. But Cornell’s endowment is the 18th largest among more than 4,500 colleges and universities. If it can’t afford as many grants next year as it gave this year, what campus can?

Not MIT, it would seem. Even though MIT has the sixth largest endowment in the country, it has also switched some of its grants into loans. Yet it claims that admissions will still be need-blind – except that the students with loans will graduate in debt – which somehow doesn’t sound like “need-blind.”

And that’s the point that the president of Wesleyan made when he announced that Wesleyan would be need-blind only until the pool of money it sets aside for aid was exhausted. At that point, it would limit admissions just to those who can pay full price; needy students at that point would be denied admission. The Wesleyan president notes that many so-called “need-blind” colleges do not, in fact, meet the full need of students with grants, and that “the label ‘need-blind’ actually can conceal a certain amount of hypocrisy.”

At about $600 million, Wesleyan’s endowment ranks 131st among American colleges and universities.

And then there is Grinnell, ranking 49th, with an endowment of about $1.5 billion. However, with only 1,600 students, Grinnell has almost $1 million in endowment per student! Assuming the standard 5 percent annual drawdown from the endowment, that’s almost $50,000 per student. One might hope that $50,000 would be sufficient to cover a student’s entire yearly educational costs.

Apparently not. Grinnell has also announced it is converting some of its grants to loans. The Grinnell president says, “It’s not unreasonable to expect students to carry a slightly higher amount of their aid in the form of a loan.”

Here’s an idea. At these four institutions tuition, fees, room and board range from $50,618 (Grinnell) to $59,062 (Wesleyan). What if they froze tuition, as we have done at Roger Williams University? They wouldn’t have to spend so much on financial aid if their prices weren’t so high.

The reason they don’t, of course, is because they still have a significant number of full payers – and they require some of what those students are paying to create the funds they use for need-based aid.

This is the merry-go-round I have spoken of many times in this blog. But it is interesting to see that even some of the most highly ranked schools in the country find themselves unable to deal with the problem, other than by cutting aid to needy students.

It is shameful and a repudiation of the meritocratic ideals that are at the heart of American democracy. It is time to stop the madness.