<p>Compare a theoretical college looking at two possible frosh classes of size N:</p>
<p>Class A is the top N applicants from an academic point of view, some of whom apply for financial aid.
Class B is the top N applicants from an academic point of view who do not apply for financial aid (i.e. pay list price).</p>
<p>Note that adding an additional non-academic screen to the applicant pool for class B means that class B will not be as “high quality” from an academic point of view as class A. Suppose M students are in both class A and class B; these are among the top N applicants from an academic point of view (regardless of applying for financial aid), and also do not apply for financial aid. But that means that class B includes N - M non-financial-aid-applicants who are weaker academically than N - M financial aid applicants in class A.</p>
<p>A wealthy college may prefer class A, offering discounts for the students it wants who happen to come from non-wealthy families. A poor college may have no choice but to take something closer to class B. Of course, there is a continuum of choices on the part of colleges as to whether their admission and financial aid policies result in something closer to class A or class B. (And then merit scholarships add another dimension to the price discrimination.)</p>
<p>Sure they are. If the price is too high, the traveler just doesn’t fly that day/week/month. (Think vacationers on a budget.) The only difference is that the feds are not around to loan them the money to fly when they would prefer.)</p>
The post you quoted discussed Harvard. Harvard has eliminated loans from their standard-situation FA packages, so Harvard’s old FA policies in 1992 involved far more use of loans than the current policy. According to the factbook, loans made up about 4x as large a portion of the total FA in 1992 than 2012, and the average loan per student was nearly twice as high (inflation adjusted dollars). Far less debt under the new FA policies most likely corresponds to more students graduating debt free under the new FA policies. This fits with Harvard adding claims to their website about 100% students being able to graduate debt free under the new FA, but not having similar statements under the old FA plan.</p>
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As discussed in my previous post (the portion of the post that you did not quote), there are advantages to having fewer loans, even if it is all the same money to the college. It’s more which students don’t bother to apply or choose a different college over Harvard because of the cost without loans, how the rest of the world perceives the college including comparisons to similar highly selective colleges, etc. See my earlier post for more specific detail.</p>
<p>Harvard’s definition of “graduating debt free” means no loans beyond the EFC that Harvard believes those families can pay, not necessarily no loans. The family EFC in many cases likely includes loans. </p>
You don’t grasp the concept of means-testing. </p>
<p>If Warren Buffet and you wanted to buy the same seat on Southwest Airlines’ website, Warren Buffet’s credit card doesn’t get charged more than your credit card just because he has a bigger income. </p>
<p>And, the post you snipped was discussing the upper-middle class.</p>
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<p>I’d be very surprised if most of that could not be accounted for by a mere rise in the number of Pell grant recipients over the space of 20 years. For example, we know from the numbers coming out of Yale (which you were also nice enough to gather for us) that the lion’s share of FA is awarded to the bottom quarter of each class economically. The rest can be explained by what @Mom2and referred to above as redefining EFC for groups at the upper margins - which Harvard would have to do continually since higher and higher income brackets keep falling short of being full-pays.</p>
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<p>Which college was outbidding Harvard for upper middle-class kids in the 1990s? I’d like to know its name. </p>
<p>I think in your earlier post you did discuss how colleges are viewed by certain ranking polls, and that may be closer to the point. FA was not always a separate line item in most college financial statements until USNews began to rate colleges by “expenditures per student”. Before that and before the widespread acceptance of the “high tuition - high financial aid” business model, FA was expressed as a function of tuition discounting and thus, on the “income” side of the ledger '(I’m pretty sure Macy’s doesn’t list its red-tag sales as an “expense”.) But, USNews has given colleges like Harvard, Stanford and Yale an incentive to list what is essentially the same financial transaction in two different places on their financial reports.</p>
Federal grants represent only 4% of the grant based FA students at Harvard receive. It could be called negligible. It’s certainly not going to explain the reduction in loans. I’m not sure how one could conclude anything of the sort from the Yale numbers. The Yale numbers showed the very low income Pell Grant group was only a tiny portion of the FA group, and FA grants often cut parental cost in more than half with incomes as high the $150k to $200k group, which is slightly above the expected median income of Yale families. </p>
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In my earlier post, I wrote, “Other colleges like Yale, Princeton, and Stanford have implemented similar improved FA policies. If I remember correctly, Princeton was the first HYPSM school to have a no parental cost for under $60k income, no tuition for under $100k income, no loans required, type FA policy. If YPSM and other highly selective private colleges all have great FA, but Harvard does not, it does not reflect well on the school, and they may lose out on a lot of great potential students.”</p>
<p>It reflects badly on Harvard if their FA does not keep up with Yale, Princeton, Stanford, and other selective colleges. I don’t know which highly selective colleges were among the first to make large FA improvements in the 1990s, but it’s a safe bet that Harvard pays attention to what other highly selective colleges are doing and considers how their FA package compares. The difference in net cost after FA grants no doubt influences which colleges students apply to and which college cross admits pick.</p>
I wasn’t discussing Federal grant money. I was discussing university-based grant money which has to supplement the other 90% of what it would cost a Pell Grant recipient to attend Harvard (because Pell Grants max out at $7k per year.) But, you knew that.</p>
<p>Does it really make a difference? A small portion of students receiving no more than $7k per year somehow has a bigger impact on loans than restructuring the standard FA packages to not use loans and reducing inflation-adjusted parental cost for typical middle class families to the point where the average grant per student (total grant dollars / total students in class) is the majority of the sticker price?</p>
<p>First of all, I don’t think 17% of an entering Harvard class (according to its latest IPEDS) is a “small portion”.</p>
<p>And, yes, if the group by virtue of a means test:</p>
<p>1) meets the requirements for a no-loan FA package, and
2) has doubled or even tripled in size over the time period being discussed. </p>
<p>And, btw, you haven’t shown that anything has been reduced for “typical middle class families”. At best, you’ve provided some hermeneutic evidence that certain groups are no worse off in terms of inflation adjusted tuition costs than they were twenty years ago. However, it comes with a caveat which you haven’t addressed: the strong possibility that full-paying families will eventually stop feeling so kindly about making post-graduation donations to Harvard after they have already donated more than their share in “up front” costs for four years.</p>
To have a notable contribution to the overall loan and FA changes, the important portion is not the fractional increase, it is how that fractional increase compares to the size the overall loan and FA changes. For example, suppose a type of grant increased from $1 in total aid among all students, to $10,000. That’s a huge 10,000x increase, but $10k isn’t going to mean much in the scheme of the $177 million Harvard students receive in grants. It’s a similar idea for Pell Grants. Federal grants composed only 4% of the $177 million grant money. 4% doesn’t mean much in the scheme of the total grant money. The dominant force is most likely the institutional grants, which compose ~90% of the overall grant money Harvard students receive and had dramatic increases, The amount of the inflation adjusted increase in institutional grants is ~15x larger than the total revenue provided by all federal grants.</p>
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When you maintain an average cost, if cost goes up for one portion of the group, cost needs to go down for another. If cost goes up for those paying sticker price, cost needs to go down for some of those not paying sticker price. The high income paying sticker price aren’t seeing a decrease, the low income students who received large FA under the old plan probably aren’t seeing a big decrease, so it’s extremely likely there is an overall decrease occurring between the two extremes of high and low incomes, which fits with Harvard’s claims about what changes they made to their FA when implementing the new policies. Sure there have been income changes, but no where near enough to explain to the overall result. Or you can look at the actual numbers. The chart I previously posted mentioned a parental cost varying from $0 cost at $65k income to $15k cost at $150k income. This is equivalent to a cost of $0 to $9k in 1992. Do you think many upper middle class families were paying $9k for Harvard in 1992? Do you think many middle class families with incomes near the US median had no parental cost at all? The few I know about in this income group who attended HYP… schools in the 1990s weren’t getting anywhere near this degree of FA, in some cases paying sticker price.</p>
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I haven’t seen anything to suggest decreasing donations with improved FA + higher sticker price. Instead I’ve heard about record donations at colleges with such policies. For example, Stanford recently set a record by collecting over 1 billion during the year 2012. Harvard had the 2nd highest donations for the year 2012, after Stanford, with a greater rate of increase in donations than predicted by inflation.</p>
<p>UCBAlumnus, you’re still assuming that if a ‘second screen’ is added, then fewer of the full-pay students will make it through that second screen. Unless the second screen is explicitly a “We just love the diversity that comes from having students in our Econ class that are from the lower SES group,” then I fail to see how you can ASSUME that raising the SAT scores by, say, thirty points (at least for the non affirmative action groups) will automatically result in all or most of the full pay kids being screened out. You’re still assuming that there’s some percentage of seats on the ‘airline’ that can be purchased by people who are willing to pay, but who somehow lack the qualifications of everyone else on the ‘airplane’. I have a degree from Oxford and I have seen my share of wealthy scions of third world dictators, but on average, most of them were still really intelligent. The fact that they were wealthy didn’t negate their intelligence in some way, any more than being impoverished somehow magically makes you smarter. Yes, the trust fund kids bought their seats on the airline at a higher price, but no one lowered the bar for them, and it’s stupid to assume that someone automatically did. OR that it was done every single time. A bit like the fact that everyone talks about how Bush bought his way into Yale, but everyone assumes that JFK earned his seat at Harvard. </p>
<p>I have no argument with that. You seem to be addressing a straw man.</p>
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<p>Now, now, Data10. If you’re going to express Harvard tuition in constant dollars you should do the same for the income bracket you’re discussing, too. A family making $150k a year in 2014 would likely have been making only $81,000 a year in 1990. Considering that tuition and fees for Harvard in 1990 totalled $12.7k, it’s perfectly conceivable such a family might have qualified for a $3,000 FA package. Granted, the award would have included a loan, but, the eventual cost to the family would be about the same. Conceivably. Neither of us has access to complete data.</p>
First off, I said “upper middle class” in the quote, The obvious assumption would be you’d use upper middle class income from 1992 (the year we have been comparing), not use the amount an upper middle income family earned in 2014. According to the 1992 factbook, the net cost was $22k in 1992, far more than the cost you used. So to pay $9k the upper middle class family would need to get a large grant covering ~60% of the total charges (may be slightly less with work study). The factbook budget mentions an average of under $4k in institutional grants per student in 1992. So this upper middle class family would need to be getting a grant many times larger than the average, while still having enough FA left over for middle and low income families to get far larger portions of the cost covered. Harvard quotes from later years suggest most upper middle class families were not even eligible for FA grants and certainly were not getting the majority of the net cost covered by grants.</p>
<p>Your assumption of what I wrote is incorrect.</p>
<p>The “second screen” of taking only non-financial-aid applicants increases the number of full-pay students who make it through, by reducing the number of financial aid applicants who would otherwise pass a purely academic screen. This will yield a class with lower academic credentials than a class selected using only the academic screen.</p>
<p>Here is a concrete example:</p>
<p>Let’s say that the college screens academics purely by GPA.</p>
<p>Let’s say that there are four applicants, and the college will admit two of them:</p>
<p>GPA 4.0, no FA needed
GPA 3.9, needs FA
GPA 3.5, no FA needed
GPA 3.0, needs FA</p>
<p>If the college admits purely academically and gives financial aid as needed, it will admit the applicants with GPA of 4.0 and 3.9. But if it adds the “second screen” of only admitting those who do not apply for financial aid, it will admit the applicants with GPA of 4.0 and 3.5, which (from its point of view on academics) is a lesser qualified class.</p>
Sorry, to chastise you again, old bean, but, if you’re going to use the term “net cost” interchangeably with the word tuition, then you should really point out for everyone’s benefit that you are combining it with room and board. The Harvard “factbook” you are using as a reference for tuition is obviously doing just that and therefore it’s inflating all your calculations by about 50%. Contrary to your analysis, the official Harvard tuition rate would not reach the $22,000 mark until 1999, well past the period either of us is discussing:
This is getting silly. Why in the world would net cost be equivalent to tuition, without room and board? I said “net cost” in the quoted post, not tuition. Why would one compare cost with room and board included - grants in 2012 to costs without room and board included - grants in 1992 (the comparison you made in your earlier post)?
My post said " According to the 1992 factbook, the net cost was $22k in 1992, far more than the cost you used." The factbook lists a net cost of over $22k in 1992. Note that net cost does not equal tuition.</p>
The</a> important part is how alumni participation has changed since the new FA policies. The Stanford Fund rate was only 24% in 1991-1992, quite a bit lower than the recent annual report you linked to. Stanford’s giving rate is among the top 40 overall. It’s likely among the top 10 for non-LACs (see my comments below). I am a Stanford alumni. I did not receive any phone calls and did not receive any more mail than usual about the Stanford Fund. As I recall, it’s a few times per year. Also note that Stanford has many types of giving besides the Stanford Fund. The Stanford Fund only composed ~2% of the record donations in 2012.</p>
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The</a> link you listed showed 9 of the top 10 highest giving rate universities were LACs, suggesting highly ranked LACs tend to have higher alumni giving rates than highly ranked national universities. 6 of the top 7 were ranked among the top 10 by USNWR (either top 10 LAC or top 10 National). You do realize that highly ranked LACs tend to have generous FA combined with high sticker prices, just like high ranked national universities, don’t you? For example, Williams was ranked #1 by USNWR and was #3 on the giving list. It has a net cost of $62k, compared to Harvard and Stanford’s $60k. The CDS mentions that most Williams undergrads received need based aid, with an average need based grant of $41k among that group. In short, like Harvard and Stanford, they have generous need based FA with a high sticker price.</p>