In response to the rapidly increasing costs of attending college, several universities are substantially modifying their financial aid policies to help low-income families meet the cost of tuition. Harvard University, the University of North Carolina at Chapel Hill and the University of Virginia have all taken the initiative to ensure financial aid students may attend college without incurring significant debt.
Harvard
Beginning this fall, Harvard will implement a new financial aid policy which will no longer require families earning less than $40,000 a year to contribute to their child's cost of education, according to an article in the New York Times on Sunday. Students whose parents earn between $40,000 and $60,000 a year will also receive more financial aid.
This year Harvard reported that 16 percent of its students are in the lower half of the national income distribution and, of those, only seven percent are in the lower quarter of the income distribution.
Harvard's decision was made after holding a focus group with students from lower-income families last fall. Many of these students were working multiple jobs at school in order to pay for all of part their parents' tuition contribution.
Families with incomes below $40,000 contribute an average of $2300. Those with incomes from $40,000 to $60,000 typically pay $3500. Under the new financial aid system, these families will now only contribute $2250.
Harvard believes that it is the first selective college to completely eliminate the family contribution portion of low-income students' financial aid packages. University officials expect the new plan to affect roughly one in six students and cost $2 million over the next year. Harvard currently provides $80 million in financial aid every year, the Times reported.
Carolina Covenant
UNC was the first to take action in October with its Carolina Covenant — a policy which guaranteed full aid to students with substantial financial need through a combination of grants, scholarships and federal work-study but no loans — said Shirley Ort, director of scholarships and financial aid at UNC.
The Covenant offers full tuiton without loans to needy students — defined as those at or below 150 percent of the federal poverty line or about $27,600 for a family of four — willing to participate in federal work-study, Ort said.
"We went out to the public at large and made a promise," Ort said. The school cannot back down from its promise to meet the needs of less-fortunate students, since the Covenant is a binding agreement to the public that will affect aid decisions for decades to come, she explained.
Prior to announcing the plan, Ort and her coworkers in the financial aid office studied data from the students enrolled during the 2002-03 academic year, and found that 281 freshman out of a class of about 3400 would be covered by the Covenant.
Revenue sources
To pay for the plan, Ort said the university is drawing from four sources of revenue.
The first is a new campus-based tuition increase, of which the financial aid office receives 35 percent.
The second source is the five-year-old state grant program, which Ort said made a significant difference in UNC's ability to follow through with their plan.
The third and final source of revenue comes from sales of official Carolina and Tar Heel products. The financial aid office receives 75 percent of all trademark licensing revenue, which amounts to about $2.4 million in unrestricted revenue for lower-income students.
"The 35 percent from tuition, [the] student store, trademark [licensing revenue], and infusion of state grants, pays quite nicely," Ort said.
UNC also opened up the coverage to out-of-state students and ensured that it goes to needy students, as opposed to the prior commitment to only merit-based aid.
The impact of UNC's decision on other schools "surpassed expectations," Ort noted.
The 'Virginia plan'
The University of Virginia agreed that low-income students had a difficult time paying loans back because of a general lack of family assistance, said Yvonne Hubbard, UVA's director of financial aid.
Virginia instituted a program to meet 100 percent of the need for these students. The university also removed deadlines on the financial aid application because low-income students were the ones who usually had trouble meeting them, Hubbard said.
The university also eliminated loans for students whose family income falls below 150 percent of the poverty line, but does not require those students to participate in work study — "class loads are difficult as is," Hubbard said.
The university capped the amount a student can pay in loans at 20 percent of tuition, after which students receive grants.
Hubbard said she is most excited about the university's effort to educate its students on debt management. She said she wants every student to have a debt management session with the financial aid office.
The overall program is very feasible, she said. For full implementation of the plan, the university would require $16 million, of which it already has $9 million. The various aspects of the program will be phased in over the next four years.
A combination of general tuition and alumni giving will fund the program. She said she hopes that former "recipients will turn around and give back."
While acknowledging the examples of UNC, the University of Michigan, the University of California at Berkeley and Princeton — which has had a no-loan policy since 2001 — she said she was proud that her office was able to individualize the ideas to Virginia. The Virginia plan focuses on "how in debt the students are when they leave," she says.
Hubbard said her office feels a "real opportunity to educate not only students here now, but also to get the news out there that you can afford to come to Virginia."
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