Harvard to boost aid for middle- and upper-income families

Dramatic new financial aid formula could prompt other colleges to follow suit.

In a move seen as likely to accelerate an ongoing trend among elite colleges, Harvard University announced Monday that it will sharply increase financial aid for undergraduate students from middle-class and wealthy families.

The Cambridge, Mass., university will overhaul its current financial aid program in favor of a relatively simple formula: Beginning next fall, families earning more than $60,000 will pay a percentage of their annual income for tuition and fees, rising to 10 percent for those earning between $120,000 and $180,000 a year. As of last year, families earning $60,000 a year or less pay nothing.

Harvard also announced that it would not expect students to take out loans and would no longer consider home equity in determining a family's ability to pay tuition.

"We want all students who might dream of a Harvard education to know that it is a realistic and affordable option," said Harvard's president, Drew Faust, in The Harvard University Gazette, an official magazine of the school.

"Education is fundamental to the future of individuals and the nation, and we are determined to do our part to restore its place as an engine of opportunity, rather than a source of financial stress," said Dr. Faust. "With no loans, no consideration of home equity, and a dramatic increase in grant aid, we are not tinkering at the margins, we are rebuilding the engine."

Harvard's initiative would increase the total grants to students to $120 million, up from the current $98 million. It will pay for the increase with its $35 billion endowment and from fundraising.

Harvard's move could prompt more efforts by other institutions, especially those that have already been contemplating ways to increase affordability, says Tony Pals, spokesman for the National Association of Independent Colleges and Universities (NAICU).

But Mr. Pals also notes that the trend has been accelerating over a number of years, particularly since Princeton announced in 2001 that all undergraduates eligible for aid would be given grants or work-study jobs so they could earn their degree without taking out loans. Since then, the number of low-income students attending the university has more than doubled.

"The interesting thing about Princeton back in 2001 was that the consensus was that it would have a limited effect on higher education, given that ... it has the largest endowment per student – and clearly, that hasn't been the case," said Pals.

As for how wide the ripple might continue to grow now, he says: "It's going to be difficult for the vast majority of the nation's 3,500 nonprofit colleges – private and public – to be able to match something like [what Harvard has done], however, efforts like this do have a trickle down effect. Schools have been redoubling efforts to enhance their affordability within their financial means."

In recent years, some universities have taken radical steps to cut costs, such as slashing tuition and capping student loans.

Part of the impetus to make college more affordable comes from Washington. In September 2006, a federal commission appointed by the Department of Education urged an overhaul of America's college financial aid systems.

But while some pressure comes from the government, Pals says that much of the motivation is based on "what we hear from the marketplace – students and families are increasingly concerned about their ability to attend the college of their choice."