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Not Worth That Much

From the Wall Street Journal:

Facing shrunken savings and borrowing options, parents and students are making some tough trade-offs in choosing and paying for college, suggesting some shifting attitudes toward higher education may endure beyond the recession.

Old dreams of adult children earning degrees from elite, door-opening colleges or “legacy” schools attended by relatives are falling away in some families, in favor of a new pragmatism.

But now, “families are much more price-conscious and value-conscious,” Dr. Losco says. A soon-to-be-released Sallie Mae-Gallup study of 1,600 college students and their parents, conducted in March and April, says parents are increasingly anxious about tuition—and students are more skeptical about the value of a degree, compared with the survey from a year earlier.

Chelsea Thomas’s family was proud when she enrolled at Amherst College, in Amherst, Mass., and had an academically rich freshman year. Having a child at Amherst confers “bragging rights,” says Suzanne Thomas, Chelsea’s aunt who shares the college costs with the student’s mother.

When Chelsea’s scholarship expired after her first year, the family faced coming up with $26,000 to keep her at Amherst. That would have meant digging deep into savings that had been set aside for retirement, says her mother, Shelley Thomas.
Whatever It Takes

Relatives and friends pressured them, saying Chelsea “should do whatever it takes to continue” at Amherst, says Suzanne. Instead, the family decided that Chelsea would be happier as a financially independent young adult living close to family. Chelsea returned to the family’s home in Boulder, Colo., last year and became a partner in the real-estate-investment business that her mother and aunt own jointly.

Now 20 years old, Chelsea co-owns two rental houses and is working on a bachelor’s degree at a nearby public university. Chelsea says she misses her Amherst friends and the stimulating campus environment. Still, she adds, a degree from a top school “is worth a lot, but it’s not worth that much.”

True of Amherst, certainly!



Dartmouth Goes Loans Again

Is Dartmouth Following Williams’ lead?

We will continue to provide free tuition and no loan expectations for students with family incomes of $75,000 a year or less. For financial-aid recipients from families with incomes above $75,000, we will be re-instituting a loan requirement of approximately $2,500-$5,500 a year beginning with the Class of 2015, whose members will enter in fall 2011.

1) Exercise for the reader: Calculate the marginal tax rate of a family making $74,000. Will there really be a bright-shining line at $75,000 exactly?

2) $2,500-$5,500 is a huge range. Just how is that calculated? I thought (corrections welcome) that Williams, back when it required loans, just set a maximum. If you needed $1,000 — after accounting for your savings, EFC and so on — then that is what you borrowed. If you needed $10,000, then Williams gave you a grant of X to bring the loan down to the maximum, which was at around $3,000 (?) a few years ago.

So, describing a range rather than a maximum is interesting. Comments? It certainly provides Dartmouth with a lot “flexibility” in matching offers from other schools.

3) How do you think Williams will structure its program? How do you think it should? The more faculty members that I talk to (and I have communicated with almost 10 on the topic), the more responsive I become to their concerns about “rich” families getting a deal from Williams, about families “scamming” the system. The current mechanism is awful imprecise and suspect, as we have documented in great detail.

Up till now, I have been a big defender of the system purely on competitive grounds. I want the best students to choose Williams. If Harvard/Yale/Princeton/Stanford/Dartmouth/Amherst offer a better deal to student X, she is likely to take it. In that world, Williams would only win the yield battle among rich kids. Every non-rich student would turn us down for one of those schools.

Solution? Cut the Gordian Knot of need-blind admissions, which is a Big Lie anyway. No elite school is truly need-blind since all feature development admits. The whole scheme is sleazy and ripe for abuse. Instead, admit that Williams is family-income aware, but then match any financial aid offer from an elite school. This would focus our financial aid spending on precisely the students who deserve it. Students not talented/desirable enough to get an admissions offer from another elite school would still be offered a financial aid package, but it would feature 1990-levels of generosity: tens of thousands in loans.

What say our readers to such a plan?


Separately, I [Dartmouth President Kim] have joined Carol Folt, Acting Provost and Dean of the Faculty of Arts & Sciences, and Steven Kadish, Senior Vice President, in donating 10 percent of our salaries to be split between the Dartmouth College Fund and a hardship fund. The hardship fund will assist those with financial difficulties not met through our other programs such as layoff packages or our staff loan program.

Morty was never the sort of guy who would donate 10% of his salary. Is Bill Wagner?


Bowdoin Reaffirms No Loans

If Bowdoin can afford to be No Loans, then Williams can too.

Williams College announced plans to revoke its no-loan financial aid policy on Sunday, citing a $500 million drop in its endowment over the past three years, increasing financial aid expenditures, and unstable economic conditions.

In response, President Barry Mills said that Bowdoin has no immediate plans to eliminate its own no-loan policy. Speaking at Monday’s faculty meeting, he affirmed his commitment to the policy, stating that any changes would only be considered in light of economic conditions rather than peer schools’ decisions.

“The no-loan program is certainly among the things to look at if we decided we needed to make adjustments based on the economy,” he said in an interview with the Orient.

“But…we wouldn’t move back just because the competitors allowed us to move back, merely to save money,” he added.

Perhaps Williams is using this policy change as an excuse to solicit a major gift? Surely, there must be an alum willing to write a $50 million dollar check to guarantee no-loans forever . . .


International Admissions and Financial Aid

Is Williams a dramatic outlier in international admissions and financial aid? Perhaps:

Pomona and Swarthmore are not need-blind for international admissions. Their percentage of internationals qualifying for aid is roughly the same as the percentage for US students. More importantly, the average net price paid (after aid), is reasonably close for both US and international students. Amherst and Williams are another story. 89% and 93% of their internationals qualify for aid. The impact on net price paid is stunning. Amherst internationals pay, on average, $6255 per year. Williams is even lower at just $4996 per year. That’s not even enough to cover the cost of the food they eat in the dining halls!

It’s hard to imagine how their admissions offices could do so poorly in attracting tuition-paying internationals. Let’s face it, the international students who ace an IB program in a top feeder school and qualify for admission to these colleges are not living in grass huts. So either the admissions offices are intentionally looking for no-pay internationals (concealed athletic scholarships?) or there are serious flaws in the aid formula for wealthier (but less than full-fare) internationals. …

Pomona (2008-09)
    4%	% international students		
   48%	% receiving aid (international)	
   52%	% receiving aid (US)	
29,420 	Avg net price paid (international)	
32,131 	Avg net price paid (US)	
Swarthmore (2009-10)
    7%	% international students		
   57%	% receiving aid (international)	
   53%	% receiving aid (US)		
25,184 	Avg net price paid (international)	
33,569 	Avg net price paid (US)	

Amherst (2009-10)	
    8%	% international students		
   89%	% receiving aid (international)	
   54%	% receiving aid (US)			
 6,255 	Avg net price paid (international)	
31,035 	Avg net price paid (US)

Williams (2009-10)
    7%	% international students
   93%	% receiving aid (international)
   49%	% receiving aid (US)
 4,996 	Avg net price paid (international)
33,852 	Avg net price paid (US)

1) Stunning analysis. Read the whole thing. Does anyone know what is going on? (See UDPATE below.) Possibilities:

a) Williams takes its committment to Need Blind admissions seriously. Given that there are many more poor smart students than rich smart students outside the US, it is hardly surprising that the vast majority of the admitted applicants have no money. Key comparison: Difference of GPAs between internationals and domestic students at Swarthmore/Pomona versus the same differrence at Williams.

b) Williams does not do as good a job as it should it getting money out of international students. On occasion, one reads claims on College Confidential that students hide assets/income. That is obviously much easier for internationals. Do Williams policies/practices differ from Swarthmore/Pomona?

c) Williams, because of its shallow fixation on socio-ec 1 admissions, gives dramatic preferences among international applicants to those whose parents don’t have college degrees. In other words, the top of the international applicant pool is strong. But, instead of taking a reasonable cross section of the entire pool, Williams focuses on students whose parents did not go to college. They are just as (almost as?) strong as the other candidates, so why not? Morty gets to brag about how he has increased the percentage from 13% to 21%. Every feels all warm and fuzzy and inclusive.

The key problem is that there is a big correlation between parents-did-not-attend-college and poverty. So, even though Williams is not favoring poor internationals per se, it is ending up with an international student cohort that is dominated by students who need a full ride.

2) Speaking as the person who first exposed and then railed against the quota for international students at Williams, I hope that I can claim the moral high ground when I argue that this stinks. There is no way that Williams can, in good conscious, demand loans from US students while simultaneously (seeming) to offer a dramatically better deal to international students without also enrolling much smarter, more academically serious students. (If it turns out that Swarthmore/Pomona enroll a bunch of stupid but rich internationals, then I retract this complaint.)

3) Might this already be changing? Recall Joe Foster’s ’90 news that two of the 11 international students admitted early decision were from Daewon. The average student from there could afford at least $10,000 per year for Williams, and probably more.

4) My policy preference is the same as before. Dramatically increase the number of international students, but focus efforts on elite English-immersion schools like Daewon. This will, naturally, lead to an international student profile that, in terms of financial aid, matches the US student profile. Williams will a) Save millions of dollars, b) Increase the average academic quality of its student body, and c) Become a more global, and truly diverse, institution.

UPDATE: D’oh! I had assumed that Swarthmore and Pomona were need blind for international students. As HWC points out, they are not. My mistake! So, the obvious explanation has nothing to do with airports and warm weather. Swarthmore and Pomona let in a bunch of rich, but less smart, international students. Amherst and Williams are need blind and find, unsurprisingly, that if you ignore family income in admissions, the vast majority of the best international applicants are very poor. Apologies for not figuring his out sooner!

The key comparison: How much weaker are the international students at Swarthmore/Pomona compared to the international students at Williams/Amherst?


New York Times on Loans Again

The New York Times reports:

Williams College, which two years ago replaced all loans in its student financial aid packages with direct scholarships that did not have to be repaid, is rescinding the policy amid the fallout of the economic downturn.

Say it like that and it sounds pretty sleazy. We can afford to spend almost $100 million on new construction (Stetson/Sawyer and Weston) but we can’t scrape up $2 million a year to keep our No Loans promise? Pathetic.

Williams is one of several dozen colleges and universities, most of them private, that have removed loans from aid packages within the last three years in favor of scholarships. Such policies, similar to one announced by Princeton in the late 1990s, were a response to the steep loan debt accumulated by some students. Colleges often embarked on no-loan policies as a result of financial windfalls.

Jacques Steinberg, author of The Gate Keepers, is a smart guy. Why must he write so stupidly? Read more


This is just going to encourage him…

From BusinessWeek:

‘It’s a Shame’

The Williams cut drew criticism from David Kane, an alumnus.

“It’s a shame,” said Kane, a 1988 graduate who runs hedge fund based in Cambridge, Massachusetts, and writes a blog about his alma mater. “Williams ought to be cutting money elsewhere and financial aid ought to be the last cut it makes.”

The policy change will save families with the lowest incomes from taking loans as Williams adds to the debt faced by middle-class families, said Michael McPherson, an economist and president of the Chicago-based Spencer Foundation, which funds education research.

Williams, in Williamstown, Massachusetts, was among more than 30 top-ranked private colleges to adopt policies in 2007 and 2008 that replaced loans in aid packages with grants that students don’t have to repay.

Thanks to John Wesley for the link

And more from Inside Higher Ed:

David Kane, an alumnus and the founder of EphBlog, which is devoted to Williams issues, wrote Monday that he wasn’t surprised to learn that the college was being praised in some circles, given that “the people making these decisions and the people commenting on them travel in the same circles.” Kane also rejected the idea that taking out loans can have a positive impact by increasing the engagement of students who borrow.

“If you believe that X is a good idea for non-rich students, you ought to believe that it is a good idea for rich students. If taking out loans is good for Sue, coming from a family of school teachers, then it is good from Sarah, coming from a family of investment bankers. Do the rich trustees of Williams make their children take out loans? Hah!” he wrote. He added that “making students take on debt causes them to make choices that are different, and generally less desirable, then the choices that would have otherwise made. By re-instituting loans, the Williams administration has demonstrated its priorities.”

Despite that criticism, just about everyone who is part of the circle Kane criticizes thinks that the question has now shifted from “who will be first” to eliminate no loans to “who will be next?”

(thanks to Yet another P’12)


Skin in the Game

In the coming days/weeks, expect the following:

1) Other colleges will follow Williams’ lead and add back loans for financial aid. Look for Amherst, Bowdoin, Dartmouth and Haverford in the first wave.

2) No meaningful criticism of this move from the constellation of “aid experts.” Why? First, the people making these decisions and the people commenting on them travel in the same circles. Why criticize your friends when you can praise them instead? Indeed, in many cases, they are the same people (Morty, Cappy Hill, Mike McPherson)!

3) Unjustified claims that instituting loans might have positive effects by causing students to take their Williams education more seriously. Poppycock! Recall Wick Sloane’s ’76 story from three years ago:

True story, from when Princeton eliminated loans. I called a Williams trustee I’d known for 25 years. Why did Princeton beat Williams to this? Williams can afford it.

“Oh, we talked about this,” said Trustee. “We think it’s wrong to give something away that’s worth $50,000 a year (cost, not price, of Williams back then) without any obligation, without ’skin in the game.’”

I sought clarification. I’m paraphrasing, but the answer was that it’s wrong to give anyone a Williams education for nothing. Students need to feel the investment, hence ’skin in the game.’ Trustee agree that whether Williams could eliminate loans was not a financial problem, given the endowment. The issue the board debated was whether “giving” a Williams education was the right move from a moral, not a financial, perspective. Several others at this trustee discussion, verified the use of the term ’skin in the game’ and the substance of the decision not to follow Princeton.

“Wait a minute, Trustee,” I said. “Your entire education, Williams and all, was a gift outright from your parents, as was mine. No one required us to have ’skin in the game.’ You mean that wealthy students don’t need skin in the game but poor students do?”

Thus was a friendship incinerated. Trustee had no answer.

Because there is no good answer. If you believe that X is a good idea for non-rich students, you ought to believe that it is a good idea for rich students. If taking out loans is good for Sue, coming from a family of school teachers, then it is good from Sarah, coming from a family of investment bankers. Do the rich Trustees of Williams make their children take out loans? Hah!

It will be especially annoying if “aid experts” suggest that this will have any good effects. There is, obviously, no scholarly evidence that increasing a student’s loan burden will cause him to take his education more seriously. If anything, the main effects would be problematic.

n the early 2000s, a highly selective university introduced a “no-loans” policy under which the loan component of financial aid awards was replaced with grants. We use this natural experiment to identify the causal effect of student debt on employment outcomes. In the standard life-cycle model, young people make optimal educational investment decisions if they are able to finance these investments by borrowing against future earnings; the presence of debt has only income effects on future decisions. We find that debt causes graduates to choose substantially higher-salary jobs and reduces the probability that students choose low-paid “public interest” jobs. We also find some evidence that debt affects students’ academic decisions during college.

Making students take on debt causes them to make choices that are different, and generally less desirable, then the choices that would have otherwise made. By reinstituting loans, the Williams Administration has demonstrated its priorities.

Perhaps Adam Falk will revisit this decision once he takes office in April . . .


Williams Ends No-Loans Financial Aid Policy

As predicted here, interim President Bill Wagner sent out a letter about decisions made at last week’s trustee meeting. The entire letter is below the break. Biggest news:

Williams is ending its no-loan policy.

It now seems prudent to reintroduce modest loans for some aided students, beginning with the class that enters in the fall of 2011. No current students will be affected; neither will those who enter this fall. As before, families below a certain income, and with typical assets, will not be expected to borrow at all. Others will be offered loans on a sliding scale up to a maximum size that will again be among the lowest in the country. After four classes have entered through this program, it will make available about $2 million per year.

Shocking and depressing news. Comments:

1) Note how the College buys off current students. If there really are any students interested in demonstrating some leadership when it comes to economic equality, they should fight this issue hard. Contact me if you want advice on how to challenge the powers-that-be. Williams could/should still cut millions of dollars from its budget. Why not make those cuts first before making this change?

2) If there are about 1,000 Williams students on financial aid, then this would suggest that each of them is taking out a loan of $2,000 each year, for $8,000 total over the course of their education. But some (many?) students will not be expected to take out loans. So, I expect the number to be closer to $2,500. Before Williams went no-loans, I think that the maximum expected amount over four years was around $12,000. So, this represents an improvement.

3) Now that Williams has made this change, you can bet that Amherst (and other schools?) will follow. Indeed, do you think that there were any discussions across schools ahead of time? Overlap anyone . . .

4) I am shocked that Williams would make such a change for such a (relatively) small dollar payback. $2 million per year is not a lot, in the context of the College’s total budget. And it sure seems that reversing this policy sends an unfortunate signal about what Williams really cares about. It would not be hard to gather stories from the graduates of 5 or 10 years ago about how having thousands of dollars of debt after Williams shaped, in unfortunate ways, their career choices.

5) Who is to blame? The faculty. When push comes to shove, they would rather maintain their various boondoggles like the Bolin Fellowships instead of allowing all Williams students to graduate debt free. On the good side: At least the rich kids will still graduate without any debt!

6) Sending this letter out in the middle of Dead Week, and a week after the Trustee meeting ended, is interesting. Had the Trustees not really decided everything as of last Sunday? I doubt it took a skilled writer like Bill Wagner a week to write this. I also doubt that it was specifically released while most students were away.

7) Running against this change would provide an interesting platform a two College Council co-president candidates, especially ones campaigning as outsiders.

Entire letter below. Full commentary later.
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Best Value

From the Eagle:

Williams College has been named the sixth best value in private colleges in the U.S. by Princeton Review magazine.

Princeton Review used 30 factors in academics, cost and financial aid in ranking colleges. Cost factors included tuition, room and board, and required fees. Financial aid factors looked at the average amount of aid students received.

Swarthmore College in Pennsylvania ranked first, and Williams’ rival, Amherst College, placed ninth on the list.

Including the cost of books, travel to and from home, and personal expenses, the estimated face-value cost of a Williams College education is just under $50,000 a year, or $200,000 for four years.

However, about 50 percent of the Class of 2012 received more than $9 million of Williams’ need-based aid in their first year, with financial aid packages averaging $37,000, and families picking up an average of $17,000 of the cost. And starting in 2008, the school no longer required students to take out loans; rather, it provided grants to them.

For the Class of 2013, those figures went up. About 53 percent receive Williams-based financial aid. The average aid package is $38,400 with the average family contribution for those receiving financial aid at $12,800.

“It’s nice to be regarded as one of the best in the country, but no methodology can support such numerical ranking,” said James Kolesar, a spokesman for Williams College. “It is nice though that it draws attention to financial aid at Williams and places like it.”

Lots of background reading on financial aid at Williams in this post.


Just Not True

There is an interesting discussion at WSO about the changes to financial aid with regard to book purchases. Previous discussion here.

With term bills due on the 15th of this month I am faced with paying $400 more than I expected (and budgeted for). Back in November when my financial aid package changed, I received an email saying that $400 was subtracted from my Williams Scholarship and replaced by a $400 estimated Book Grant. That sounded great, but as time passed and people continued to talk about getting free books, I was skeptical. Originally, the cost of books was not included in my aid package, so why would it be included now? The answer: it isn’t. I have to pay $400 for books and (this is my understanding of it) if I do not buy $400 worth of books I will be reimbursed for what I did not spend. That’s great if I go way over $400 for books I want to keep, but the estimated cost of my books is $406… This is the cost for books I do not want, will not use again, and will sell back for much less than I paid for them. I’ll spend maybe $100 on books I might want to keep. My plan is to shop online for books, but I still have to pay that $400 to the college and wait to be reimbursed. At the same time, I’ll be spending money buying the books elsewhere… That’s a lot of extra money to come up with because they decided to change the system 1/2 way through the school year. It wouldn’t bother me nearly as much if the email we all received didn’t set out to deceive. Here’s a quote from the email sent by William Lenhart: “I’m very happy to report that the Committee has found a way for all financial aid students to acquire all your books with no out-of-pocket expense. You’ll swipe your ID card at Water Street Books, the purchase will go on your term bill, and the cost of that purchase will be paid for by the Financial Aid Office as a grant.” This is just not true for all financial aid students and we probably should not have been told that before everything was decided.

Read the whole thing. In response, Will Slack claims that “This meant that financial aid students sometimes chose courses on the basis of book cost.” True? I have never heard of such a thing. How common was it that students chose courses based on book costs? What would be an example of a class that a student would not take because of costs?

The main problem with the change is the process by which it came about. The committee should have released the plan, including all the messy details and then solicited comments. That would have allowed students like Tyisha Turner a chance to make their opinions known.

Will also notes:

My biggest problem is that while finaid students are no longer paying for books (provided we use Water Street), $400 was suddenly charged to budgets that had already been made, and the college will be paying Water Street prices, which is probably going to be quite wasteful.

Correct. Who owns Water Street books?


Book Grant?

From WSO:

what’s up with this? I was under the impression that this grant would be beneficial to students, but it seems like they just reduced my need by $400 and now my books are free… i’ve never even come close to spending $400 on books so this seems like a financial aid cut! in which cases will this actually help students financially?

I just came to the same conclusion. I’ve never actually spent a penny on books but have still needed every freaking penny I’ve been given. Where the hell am I going to come up with an extra $400 between now and my bill????!!!

Good questions. See the thread for further discussion and sensible points from Will Slack. See here for background. My previous (slightly edited) comments still apply.

How does anyone know whether or not this change will be “cost-neutral?”

1) Even if it isn’t, it may still be a good idea.

2) Let’s just focus on financial aid students. This semester, the College budgeted $400 for each of them. Call that $400,000. Now, did $400,000 really leave the bank account of Williams in September? I am not sure. The students on full rides did get a check. (But isn’t that a very small percentage of the student body?) But even students who are expected to pay as little as $1,000, did not get money from Williams for their books. They were just charged $1,000 instead of $1,400 because the College assumed that they needed the $400 for books.

But, next semester, things change. Put students in two different groups.

a) Those who got checks from Williams this time. Those students will just get checks that are $400 lower, but they get to buy books. How can the College possibly know that they will spend, on average, $400 at Water Street? (I am happy to believe that smart Ephs like Finan and Winters can come up with all sorts of spreadsheets that estimate such an outcome, but I have real doubts about the accuracy of those forecasts. More below.)

b) Those students who send checks to Williams, every amount from $1,000 to $45,000. Those checks will rise by $400.

3) Let’s consider some reasons why the 1,000 students on financial aid might spend much more than $400 per student now that books are free.

a) Why not buy all the recommended books as well as the required ones? They are free! Program only applies to required books.

b) Why not buy new books rather than used books? They are free!

c) Why wouldn’t professors significantly increase the number/price of required books and reclassify some recommended books as required? Right now, I (and other Williams teachers) try to take care in selecting books. We don’t won’t to screw students, especially students on financial aid. (Although we know that the College is supposed to provide enough aid to cover textbooks, we recognize that the aid may not be enough and, more important, that any leftover money can be used by students for whatever they want.) Now, books are free to half the students. And the other half of students almost all come from extremely rich families, at least relative to Williams professors. No need to worry about their book expenses! And if making a book (officially) “required” rather than just “recommended,” makes it free for half the students in the class, then I will be sorely tempted to do so.

In fact, does this apply for Winter Study? I suspect that a majority of my students are on financial aid. Why not just order up some books, call them “required” and help these students out? I may just do that . . .

4) To be clear, I have no opinion yet as to whether this is a good idea. I just have serious doubts about its cost-neutrality.

I would not be surprised if the 1,000 students on financial aid spent much more than $400 on books next semester. Anyone want to bet?

It would be fun to compare the forecasts which were made a few months ago with what actually happens. If anything, it looks like the program might save the College money since it is taking $400 away from students who have not in the past (and won’t in the future?) spend anywhere near $400 on books. And, to reiterate, I am sure that Ephs like Winters and Finan did a much better job in constructing a forecast than I could have in their place. I just think that these sorts of specific problems in management and estimation are educational for all concerned.


NYT article on free textbook policy

Nothing new that you don’t already know from reading the Williams Record and EphBlog, but, hey, free publicity in the Times!


14 July : The Lesson …

Servis compris

Artist: Susan Cox


Opened Wide

Latest news on financial aid.

To many student loan providers, President Obama’s proposal to end the guaranteed student loan program is pretty close to apocalyptic, and to many advocates for student aid, his plan to use the savings to ensure a permanent and growing stream of funds for the Pell Grant Program would represent a long-awaited dream come true.

But despite the proposal’s seeming grandiosity, it is actually very narrow in the overall scheme of the student aid system, and excessive focus on it will represent a missed opportunity, several policy makers and financial aid experts suggested Tuesday at a symposium on simplifying the student aid system.

The event, which was held by the Brookings Institution’s Brown Center for Education Policy, was in many ways designed to show just how much consensus has emerged — from a diverse array of perspectives — around the idea that the system for delivering financial aid to college students is very broken, and around a basic set of principles and approaches to fixing it. In the last year or so, student aid simplification has been on the agendas of the past and current presidential administrations, and the focus of major reports by a College Board-affiliated panel and the National Association of Student Financial Aid Administrators.

Unlike at any time in the past 30 years, “the possibility for change in student aid [has] opened wide,” said Michael McPherson, president of the Spencer Foundation and co-chair, with Skidmore College’s Sandy Baum, of the College Board’s Rethinking Student Aid project. “Real change is on the table, and the resources and energy seem to be there to make a difference.”

McPherson is also a former professor of economics at Williams.

The more student aid that you provide, the higher colleges will raise their prices. The less intrusive the financial aid forms you use, the more that families (especially smart, rich ones) will be able to game the system.


Financial Aid Changes

A student writes:

I thought I’d fuel you some financial aid news. I just received an email from Williams about financial aid next year, and they’ve boosted the expected earnings contribution from financial aid students for sophomores juniors and seniors to $2100 a year. It used to be about $1700 I think. (I’m not sure of the exact numbers without digging through my past fin-aid awards).

The fact is that most students earn less than the amount theyre expected to (as a personal choice, as they mostly get to set their hours), and TAs are paid a fixed $1050 per semester, and not allowed to hold other jobs. I think what you’ll find is that this has bumped down financial aid budgets by about $400,000 and the increase in “earned” wages will be slight cause earned amounts are self-selected.

So it should qualify in your list of things that will save the college at least $250,000.

Hmmm. I don’t know enough about financial aid to comment on what this means. Perhaps this is just the sort of changes that happen every year, regardless of the broader economy. Perhaps this is a major change. Perhaps it is, in fact, being driven by the College’s desire for more revenue.

Can anyone provide some context?

Full e-mail below the break:
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Bad Financial Aid

When a school gets into financial difficulty but wants to maintain appearances, it will fail to fully honor its commitment to meet the “full need” of admitted students. Make it hard enough for poor students to enroll, and you’ll have more space for rich students. Is that happening at Williams? I hope not.

bad financial aid – can’t attend Williams =(

After hearing such good things about financial aid for internationals at Williams, I was really disappointed by the aid package I received today.

My family has an annual income of ~35k, which is considered middle class here in Thailand. But regardless of social standing here, it’s just an impossible deal that Williams is asking for: a 17.5k family contribution in addition to 4k from me (student assets).

This strikes me as the worst news since April 1st; I won’t be able to attend my first choice college because of financial issues. =(

Has any of you received a similar deal? How should I go about appealing to their decision?

sorry if this may sound dumb, but is 120k really a lot (for an American family) in terms of combined assets for my whole family.

as far as i checked, they should meet full need for internationals, so i’m sending in a letter and also having my father write another one to explain why we cannot afford 22k…really. if we do that for four years, my parents’ life savings would be down to some 40k, which is certainly not great security considering that they plan on retiring soon.

1) Don’t people read EphBlog? The worse thing you can do is to have assets in your own name. Spend that $4,000 on a computer, clothes, really anything that you need to buy. Or “give” it to your uncle. Cash in your own name is cash that Williams (or any school) will take. (Morty mentioned some changes in this regard — making it less detrimental for a student to have money in his own name — but I am no expert on financial aid.)

2) This student should appeal. I would recommend claiming to have made a mistake by failing to mention that the $120k in family saving is for retirement in the Thailand equivalent of IRA and 401-k savings accounts. (I think that the College does not count retirement savings in its calculation of EFC — expected family contribution.)

3) I am unaware of any evidence that the College is being less generous with financial aid this year than last year, despite some chatter on College Confidential. But who knows? The Record ought to investigate.

4) What is the mechanism by which the College deals with financial aid requests from abroad? How much can it possibly understand about tax forms and financial statement in dozens of other countries, written in so many languages?

5) How is the whole system made honest? If this student had “forgotten” to note that $120k, would Williams ever have known? What about for a US student?


A Report From Williams 2008

Thanks to Rob White and Brooks Foehl ’88 from the Alumni Office for providing copies of A Report From Williams 2008 and its insert. Normally, this report includes information on the endowment and the budget, but that data was distributed via EphNotes this year.

FYI, this is the report that the College sends out each year to Alumni (and parents?). If readers have questions, please ask them. I think that the College does an amazing job with these reports but some alumni find them excessive. I am not sure why they did not include the budget and endowment information in the main Report. I hope that they will next year. I’ll highlight a different aspect of the Report each day this week.

Most important sentence?

In planning budget cuts, our first commitments are to meet the full need of all current and admitted students and then to avoid layoffs.

That’s from lead trustee Greg Avis ’80. It is always dangerous to read too much into a single sentence, but Avis is a smart and careful Eph, so here is my take.

a) Lay-offs will come before cuts financial aid. Rarely has “then” implied so much. Wow! If you are a Williams employee, this should make you worried. The financial aid budget at Williams is around $40 $30 million. If Avis and/or the trustees is really committed to keep spending at that level, then lay-offs are inevitable. There are a lot of Williams faculty (most? all?) that would rather cut financial aid back to say $30 $20 million (which is what Williams spent just a few years ago) to avoid making $10 million in cuts elsewhere. Since the most important input to a Williams education is the quality of the students, I agree completely with Avis’s priorities. Cut everything else to the bone before you cut a dime from financial aid.

b) “current and admitted” is not the same thing as “future.” Avis leaves open the door to changing the financial aid policy for students after the class of 2013.

c) “meet the full need” means different things to different people. Williams met the “full need” of many of my classmates by forcing them to take out tens of thousands of dollars of loans. Is Avis (or the Trustees) committed to a no-loan policy? I don’t know but I hope so.

d) Glad to see (consistent with previous reporting) that no distinction between domestic and international students is being made, despite (because of?) Morty’s floating a trial balloon last fall.


Fast Facts 2008

fast-facts-2008 For the benefit of future historians, here is a copy of the Fast Facts for 2008. I have saved this document at least once before on EphBlog, but can’t find it now. So, perhaps future historians will curse me! So it goes.

There is nothing too surprising here for those of us who follow Williams closely. Ask questions, if you have them. Note:

1) The 312 voting membership of the faculty. I think that this includes 250 or so tenure/tenure-track professors. Does that imply 60+ coaches? Yes, I think. (I don’t think visiting faculty have voting privileges.) If that seems like a big number, note that Williams has 32 sports teams, most of which have a head coach that is not the head coach of anything else, although many/most head coaches also assist with other sports during the school year. The remaining coaches are junior assistants who stay at Williams for just a few years. Do they attend faculty meetings? Do they vote? Does anyone encourage them to attend or vote? Perhaps our faculty readers could enlighten us.

2) Williams has become increasingly bloated during Morty’s tenure. Do we really need 299 administrative staff or 476 support staff? No. (Note that we occasionally read about Williams having 800 non-faculty employees. This may be a round-up from the 775 implied by these numbers or, more likely, a reflection of the difference between counting every employee (including part-timers) and just FTE (full-time equivalents). Even if you think that Williams really needs 800 staff, the College can no longer afford them.

3) Many faculty will look at the fact that we are giving money to families making over $200,000 per year and say, “It’s fine to be generous, but Williams should cut financial aid to such families significantly before cutting any spending that would decrease the quality of a Williams education.” And that is a reasonable view! But I bet that those families feel very differently . . .

The big debate at Williams this spring, mostly conducted behind closed doors, will be between those who want to cut financial aid and those who do not. I know which side I am on. Do you?


Need-Blind but Hard-Pressed

There’s a new hyphenated term in town. Let’s hope it doesn’t hang around long enough to get the better of need-blind.

(Thanks to Jeff Z. for posting the link to this article from today’s New York Times)

Hard-Pressed Colleges Accept More Applicants Who Can Pay Full Cost

Published: March 30, 2009

In the bid for a fat envelope this year, it may help, more than usual, to have a fat wallet.

Institutions that have pledged to admit students regardless of need are finding ways to increase the number of those who pay full fare in ways that allow the colleges to maintain the claim of being need-blind —taking more students from the transfer or waiting lists, for instance, or admitting more foreign students who pay full freight.
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Comprehensive Fee Set for Next Year

Tuition — $39,250
Board — $5,110
Room — $5,280
Activities and Residential House Fees — $240
Total — $49,880

For the letter from Morty to current students, click Read more


Applications Drop 20% at Williams

From Bloomberg:

March 9 (Bloomberg) — Applications dropped at seven of the top eight liberal-arts colleges in the U.S., led by a 20 percent plunge at Williams College in Massachusetts.


Swarthmore College in Pennsylvania, ranked third-best among liberal-arts institutions by U.S. News and World Report, drew 10 percent fewer applicants than last year, and there was a 12 percent drop at fifth-ranked Middlebury College in Vermont. Amherst College in Massachusetts said applications fell 1 percent for the next school year. Amherst and Williams are tied for first in the ratings.

Applications also fell at Carleton College in Minnesota, Bowdoin College in Maine, and Pomona College in California. Only Wellesley College in Massachusetts reported an increase among the top eight liberal arts schools ranked by U.S. News. Wellesley said applications rose 2 percent, to about 4,200.

Applications at all eight Ivy League universities in the Northeast U.S. increased. Harvard College received about 29,000, a 5.6 percent gain from a year earlier, while Yale University in New Haven, Connecticut, got 26,000, 14 percent more. The increase at the University of Pennsylvania in Philadelphia was just four applicants.

The Massachusetts Institute of Technology in Cambridge, Stanford University in California and Duke University in Durham, North Carolina, also attracted more applicants.


Feeling Squeezed

Families that once could afford private college are feeling squeezed during the economic meltdown, as many don’t qualify for financial-aid packages. While Yale provides aid for families earning as much as $200,000 a year, more than three times the median income in the U.S., the limit for aid eligibility is often lower at other schools.

The small liberal-arts colleges, like the larger Ivy League institutions, have enhanced financial aid in recent years. Williams eliminated loans in November 2007, instead giving students more grants.

Williams received 6,024 applications. Last year, applications at the school increased 17 percent to a record 7,552.

“Certainly the economy has to have an effect,” said Richard Nesbitt, director of admissions at Williams. “Some of these kids might have applied to 14 schools last year. Instead of 14, they’re applying to 10 now and maybe the last four are lower- cost public institutions.”

‘Extraordinary’ Applicants

Perhaps the “bigger-name research universities are being kept on the list” and smaller liberal-arts colleges are being dropped, Nesbitt said. Williams continues to attract “extraordinary” applicants, he said.

“We still have the third-highest number we’ve had in the history of the college,” Nesbitt said. “It’s not like were suffering for lack of quality.”

Perhaps now we can finally recognize that demand for a $180,000 college education is not immune to economic reality. The reality of falling demand should be kept in mind when discussing ways for Williams to address its own fiscal crisis (hint: raising effective prices / cutting discounts in this environment is a terrible idea).

We, of course, predicted this, more or less, in December.


The Coming College Crash

This WSJ article should serve as early warning. When the household recession (rising unemployment + falling household wealth) is taken in conjunction with the losses in endowment assets (which restricts the ability of colleges to expand financial aid), the absurd loan-fueled run-up in prices, the drying up of said loans, and the tight fiscal situation at most state governments, I don’t think it’s too hard see where this is leading.


Growth of college tuition quadruples Consumer Price Index

Growth rate of tuition vs. other expenses, over 15 years

Growth rate of tuition vs. other expenses, over 15 years

Today’s Washington Post has a report on growth in college tuition with a nice graphic, something we all at least vaguely know. Highlights include:

Researchers said the percentage of an average family’s income needed to pay for a public four-year college has risen from 20 to 28 percent, after financial aid. For community colleges, the burden has risen from nearly 20 percent to nearly 25 percent.

Borrowing for college has also doubles. And while the U.S. is second only to Canada in per capita advanced degrees in the working age population, we are tenth in the world for degrees among those aged 25-34.

I don’t know if the stats only include public schools but all the commentary seems to. Obviously Williams pricing works differently.


Raising prices, now? You must be joking

Much of the recent discussion about the impact of financial losses on college endowments has focused on ways in which colleges can make up the shortfall. Since no one really likes to contemplate layoffs and cutbacks, most of the suggestions tossed around in forums both high (the pages of the NYT) and low (EphBlog threads) have been about some combination of less financial aid, more full-price enrollments, and modest tuition increases. Some of our readers seem to positively relish the thought that the financial crisis can be used to cut back on those noisome “diversity” and “international” recruits who typically cost more money, and it would seem that administrators at Williams and elsewhere have been somewhat receptive to such a course of action. In general, the consensus seems to be that Williams must find a way to cut its “discount rate” and increase the average effective tuition being paid by students.

I have been trying to articulate for a while why this idea strikes me as absolutely insane, but the Epicurean Dealmaker has saved me the trouble of composing a lengthy post. His response to this idea of raising tuition (as expressed by Harvard’s President) is an entertaining and necessary screed. Some excerpts follow, but please, read the whole thing (and while reading, keep in mind that Williams, which charges nearly identical tuition to its much more well-known brethren on the Charles River, has, if anything, even less pricing power because of its utter lack of name recognition.): Read more


Morty in the NYT on financial situation

The Williams alumni office sent this article to class agents: Colleges struggle to preserve financial aid. The picture is from Amherst, but Morty is widely quoted:

Morton Schapiro, president of Williams College in Massachusetts, which has long had a commitment to accepting students without considering their financial situation, said he doubted that all colleges with such full need-blind policies would be able to hold to them.

“The major dial you turn for most financial crises is that you admit more students who can pay, as a way of increasing revenues,” Mr. Schapiro said. “With the tremendous decline in wealth, I think fewer people will hold on to needs blind.”

Williams and Amherst are both staying need-blind, of course, and are cutting back on renovations instead.


Williams Admissions: Boston Globe

Nice article in Monday’s Boston Globe highlighting Williams’ outreach to low-income applicants.

UPDATE from DK: For those too lazy to click, I added the picture above. See below for some highlights from the article.
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Notes on Morty’s Minutes II

More comments on Will Slack’s ’11 excellent summary of Morty’s talk on the College’s financial situation. Part 1 here. Part II below. (By the way, is anyone reading these? Are they valuable/interesting?)
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Financial Aid

In response to a question on financial aid, Morty told a story about an alum who is a college professor. Her son had been accepted by Williams and by an Ivy. [Morty did not so say directly, but the school was almost certainly Harvard, Yale or Princeton.] The alum told Morty that the Ivy was charging her family $20,000 per year less than Williams proposed. She just thought he ought to know. [EphBlog readers already know this and also know that Morty does not like bargaining.]

Morty used this anecdote to highlight some of the, in his view, absurdities in current financial aid packages at elite colleges. Morty had no problem with many of the recent changes. He thought that it was fine to allow the families of “poor” students (meaning families from the bottom half of the income distribution) to pay nothing for their child’s education. He seemed comfortable with eliminating student loans. But he felt strongly that HYPS were going to far, that offering financial aid to a family making $180,000 (and who had been making similar amounts for years) was ridiculous and that it was absurd to describe such aid as “need-based.” Morty also worried that, if Williams were to match the generosity of HYPS, it would set off a chain-reaction among other schools. Amherst, Swarthmore, Brown, Dartmouth would have no choice but to match us. Morty felt strongly that this would be a bad outcome, that these rich families ought to pay for the college education of their children. He implied that the current equilibrium, with HYPS being much more generous than other schools, was somewhat stable.

Morty also pointed out that much of the news coverages of these aid policies missed some of the juicy details. [I am embarrassed to admit that I missed these details as well.] For example, the family contribution for income levels from $120,000 to $180,000 is around 10% at Harvard. If your family makes $180,000, Harvard will only charge you $18,000. Morty pointed out that this was true but highly misleading. What happens if your family makes $181,000? Does Harvard charge you the full $48,000? Wouldn’t that make for a pretty horrendous marginal tax rate? Make an extra $1,000 and, not only does Harvard take all of that money, but it takes an additional $29,000 (post-tax!). Imagine the fellow offered a bonus at the end of the year and telling his boss, “No! Don’t give me the extra money!”

Morty explained that, of course, this is not the way things work. [I have never seen anyone point this out before.] Instead, the family who makes $181,000 still gets a huge break from Harvard, as does the family making $182,000, the family making $183,000 and so on. They may have to pay more than 10% of their family income to Harvard, but not much more. Morty said [not sure if he was estimating or claiming this as fact] that financial aid at places like Harvard actually goes to families making up to $280,000 because there is a smooth slope as you move above $180,000. In other words, the only families that pay the sticker price at Harvard are those with family incomes above $300,000 or so.

Below are highlights from an article which outlines Harvard’s new policy and my comments.
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Financial Aid for International Students

In the ever increasing category of Things-That-I-Was-Wrong-About, today’s entry is international financial aid. In discussing the Korean prep school story, I had speculated that the increasing wealth in countries like Korea, coupled with the high (relative) income of the sorts of families who would send their children to English-speaking high schools, meant that many of the international students would not be as expensive, in terms of financial aid, as their peers in the past. HWC suggested that I was wrong about this. And, as so often happens, he is right. Consider the College’s 2007-2008 Common Data Set document:

If institutional financial aid is available for undergraduate degree-seeking nonresident aliens, provide the number of undergraduate degree-seeking nonresident aliens who were awarded need-based or non-need-based aid: 127

Average dollar amount of institutional financial aid awarded to undergraduate degree-seeking nonresident aliens: $43,484

Total dollar amount of institutional financial aid awarded to undergraduate degree-seeking nonresident aliens: $5,522,437

Those are big number. Since there were a total of 132 international students at Williams, only 5 are paying the full price, as opposed to around 50% of US students. Moreover, I think that the maximum possible award is not far above (?) the $43,484 given to the average aid-receiving international students. So, HWC is correct. International students are, still, very expensive.

And, at the end of the day, this is one reason why I constantly rail against all the money that the College wastes of local pork. Instead of spending millions on these boondoggles, the College should admit another 25 international students. Having the best students in the world at Williams is much more important than the marginal increase we get in faculty recruitment/retention by spending money on local services.


CC Minutes 2008-04-09

Another amazingly detailed set of College Council minutes from Emily Deans ’09. Morty was at the CC meeting and answered all sorts of interesting questions. Here are some of the highlights (and my comments) but read the whole thing.

Thomas Rubinsky (Class of 2010 Rep) asked whether the college was doing anything about the loss of the rectory as a co-op?

President Schapiro responded that he did not know whether the college was going anything but made several comments about how much he likes co-ops. He said that there may be some opportunities to turn buildings into co-ops once the North and South buildings are completed.

Good news! Co-ops are indeed one of the very best parts of student housing at Williams, and it is good to know that Morty agrees. One of my concerns about Neighborhood Housing was that the inevitable failure to create meaningful neighborhood community would lead the Administration to try to salvage the project by pulling seniors back into the neighborhoods, mainly by attaching co-ops to neighborhoods or by decreasing the number of seniors allowed to live off-campus. Perhaps there is no need to worry about that now.

Yet it is still a shame that the Administration take the obvious next step. If co-op housing is wonderful and popular (more than 1/2 of all juniors applied), why not create more co-ops? Genius, eh? Someone from Gargoyle or College Council ought to look into this, ought to come up with a plan that increases the number of co-ops even if it means taking nice senior housing away from the clusters. Such a plan could, if anything, make senior housing in the neighborhoods more equal than it is today.

Narae Park (Dodd Board Rep) then asked about the 2020 Committee.

President Schapiro said that the idea for the 2020 Committee is that we are supposed to look ahead about a dozen years to see what kind of challenges are going to confront Williams. Some examples he gave were improving the public schools and being competitive with our peer institutions in terms of financial aid packages. Williams keeps changing the financial aid packages but it is hard to compete with Harvard, Stanford, Princeton, etc. and we are competitive but part of discussion is financial aid and part of financial aid is trying to create a more inclusive society. He also mentioned the 1.5 million dollars the college has for next year for environmental initiatives. Then President Schapiro talked about globalization and bringing the world to Williams and Williams to the world. He said that part of the 2020 effort is to position the college to be a more attractive place that does a better job of educating students.

It would be nice if the College were to be more transparent about the 2020 planning process. We can’t all be invited to the special retreat in Oxford, but why not share 90% of the material that was passed out at those meetings? (Redact anything particularly sensitive.) A College Council member ought to ask to see this stuff.

Spending more money on the public schools is about the most inefficient means possible of making Williams a better college. But it does make the faculty happy!

Is it just me or is the number one most obvious priority matching the financial aid packages of Harvard/Yale/Princeton/Stanford? I am not arguing that the College needs to be more generous than these schools, just that we shouldn’t force an applicant to pay $10,000 more to choose Williams.

Rachel Ko (Wood At-Large) asked about bringing the world to Williams and Williams to the world. Some students have been trying to push for experiential learning on campus and a lot of classes aren’t using local resources to really allow students to learn in the field.

President Schapiro said that faculty are very skeptical about giving credit for experiential things because it is very difficult to do it right. Most professors like what they teach and how they teach it and are skeptical about giving up control. Bringing the world to Williams means having a more globalized student body, faculty, and staff (increase international students) and that has made a difference. He thought that the curriculum and student body were in a pretty good place and want students to have a lot of experience outside of classroom but thought that it would be a tall order to ask faculty to give up control.

Exactly right. Although it is tough to know the exact meaning of “experiential learning” in this context (and I am a fan of Rachel Ko), no course credit should be given for anything outside of faculty control. Students should, of course, be encouraged to do all sorts of activities outside of classes and if someone wants to call this “experiential learning” all the better. But each semester you take 4 classes which Williams faculty judge important and rigorous. Many of those classes will involve work outside of the classroom, whether it is field observations in Hopkins Forest or studying paintings at the Clark. But a member of the Williams faculty is always in charge of the syllabus and evaluation.

President Schapiro was then asked about changes in scholarships. He said that the good news is that colleges are competing to be more affordable but he thought that some recent changes are things that aren’t necessarily fair. There are a lot of schools that have rich kids paying sticker price who aren’t as smart as the rest of the class and that is what need-aware admissions means. Williams does a good job and has a decent distribution of students with families all the way up the income ladder and the way to improve that distribution is to improve aid packages. He said that the new changes in aid are creating a bizarre incentive to put wealth in to home equity.

Good advice to all the Williams applicants among our readers. Indeed, there are probably dozens of current Williams students who could improve their financial aid package if their parents emptied the family (non-retirement?) savings accounts and put that money into home equity. If the money is in the bank, the College demands a piece of it. If the money is in your house, maybe not.

But Morty is being either naive or disingenuous to imply that this is some “problem” with the financial aid system that could be fixed via better policy, and/or collusion via the 568 group. The central issue is that very rich schools (H/Y/P/S) want to get the students they want and they have, for years, competed on price to do so. Williams is forced to either follow suit or have no non-rich student who could have attended HYPS choose us instead. The home equity “incentive” derives from this competition because HYPS found it convenient to cut price via the mechanism of ignoring home equity. Williams is forced to go along, not because it finds home equity a more sensible way to save but simply because of peer competition.

And the next steps in this competition are fairly obvious (and perhaps HYPS have already started in this direction). Soon, elite colleges will not even ask you for your savings. Your family’s wealth (whether stored in bank accounts or home equity) will play no part in your bill. Instead, they will just ask to see you 1040 and base the family contribution on your income.

Full minutes below and more commentary tomorrow.
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