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Friday, June 12, 2009

Letter from Reed College Prez Colin Diver and a Primer on Financial Aid

Poor Reed! People really don't understand how college financial aid works, so President Colin Diver sent a clarifying letter to all alum. Like me. And Mr. FS.

Diver explains that the college meets DEMONSTRATED FINANCIAL NEED of all who are admitted. NEED is the same whatever college you choose: it is based on a combination of family income, assets, etc. If your family is determined through the formula to be able to contribute $10,000, then that is what your family will contribute, whether you go to a state institution or to Harvard. Hence, if your family is low income, you can choose the most expensive college you get into.

Then there is MERIT aid. Most of the top colleges do not give MERIT aid. This is because they don't have to. Harvard, Williams, Reed--no MERIT aid. Schools that DO give MERIT aid do so not because they are NICE, but because they want to attract better students. The young woman featured in the Times essay got $13,000 (as I recall) from Reed. That was NEED. She got more from Willamette. That, no doubt, was a combination of NEED and MERIT. Most people don't know this.

We do. That is why our children ONLY applied to colleges that give MERIT aid. Indeed, they got substantial merit aid at all the colleges to which they applied. Some are famous: Tulane, for instance, throws MERIT money at applicants with high test scores. Some of the comments on the Times site urged Steve Jobs (!) and other rich alum to fund the young woman's education. Reed, as Diver points out, meets all NEED. My children would have loved Reed or Amherst or Swarthmore . . . but we did not want them to be enticed by colleges that cost so much. The student featured in the article was enticed by Reed; she was more enticed by the substantial merit aid she got from Willameete (also a fine college, by the way). She is doing what my children are doing; she just didn't know about it beforehand.

Another problem is that most families think they are NEEDY. My brother-in-law was shocked at the price of Reed. We told him that $50,000 is about what most private colleges of that caliber cost. Many families of our acquaintance tell their kids to apply "wherever they want." Then, these engineers and lawyers, who consider themselves "middle-class," are shocked that they don't qualify for NEED-based aid.

Reed is not, by the way, a very wealthy college, Grinnell, which does give merit aid, has an endowment that is twice as big as Reed's. That is why my son applied to Grinnell and not to Reed.

Reed, as Diver notes, is not entirely need-blind; that is, it does not admit students without regard to need. Only the very richest schools can be need-blind and, I suspect, some that were need-blind last year are no longer so.

Dear alumni:

I am writing to provide some additional information and context for the discussion of Reed College's financial aid policies contained in a June 10, 2009, article in the New York Times. The article was based on extensive research and interviews and open access to Reed's budgetary decision-making process and used Reed College as a case study to explore how American private educational institutions are coping with the economic downturn.

Some who have read the story were left with the impression that Reed has changed its financial aid policies or awarded less grant support to prospective and continuing students for the coming year. In fact, the opposite is true. Reed increased its financial aid budget by 7.8 percent for next year; we were able to offer aid to 14 percent more applicants for next year's incoming class compared to last year. For continuing students, we have increased financial aid awards as necessary to meet any adverse changes in their families' economic circumstances.

Reed's financial aid policy has been, and continues to be, based on three firmly held principles:

1. We award financial aid solely on the basis of financial need. Unlike many of our peers, we do not award "merit aid."
2. We meet 100 percent of the demonstrated financial aid need for all admitted students. Unlike many of our peers, we do not practice "gapping" (i.e., awarding less than 100 percent of need as a way to stretch financial aid dollars).
3. We guarantee that we will meet 100 percent of the demonstrated financial aid need of all continuing students by re-evaluating financial aid packages on an annual basis.

There is a fourth principle that we aspire to achieve, namely, to be fully need-blind. Ideally, the ability to pay should never enter into a decision of whether to admit a particular student. In recent years we have come quite close to attaining this ideal. The vast majority of applicants are admitted without consideration of family resources. But, compared to a handful of truly need-blind colleges and universities, we have had to put a limit on the number of students we could admit on a truly need-blind basis. The troubling news about the current recession--and the central message of the Times article--is that demand for financial aid has increased this year even faster than our sizable increase in the financial aid budget.

This does not mean that Reed is ungenerous in providing financial aid. Indeed, the case is quite to the contrary. Over the past 10 years, our financial aid budget has more than doubled. In the upcoming academic year, we expect that 51 percent of Reed students will receive financial aid, with the average annual grant awarded being $32,630. Of this amount, more than $30,000 comes directly from Reed's endowment and operating budget, with the remainder coming from state, federal, and other private sources. The percentage provided by these external sources has steadily diminished over time.

Nor does this mean that Reed has had to make compromises in the quality of its educational program. The college continues to attract a student body of uncommon intellectual passion and talent, and it maintains the academic rigor and intensity for which it is justly famous.

The recession has set us back in our longstanding aspiration to become fully need-blind. But it is, we hope, only a temporary setback. With the generous support of loyal alumni and friends and the momentum of the recently announced $200 million centennial campaign, we intend to redouble our efforts to build the endowment to the point of never again having to make the painful choices forced upon us by the current recession.

Sincerely,

Colin S. Diver
President

7 comments:

vossron said...

"NEED is the same whatever college you choose"

No, many colleges, including Reed, make their own calculation of what a family's need is, often based on Profile. The possible exception is for colleges that use only FAFSA; they may all end up with the same calculated need.

Meredith@MerchantShips said...

I loved this post and will think about it as we guide our own children through school.

My husband and I both had 100% tuition + covered by choosing colleges which gave us merit funds; however, I didn't realize that this much disparity exists between colleges like Reed and Tulane.

Duchesse said...

Diver writes: "Over the past 10 years, our financial aid budget has more than doubled." How much has the cost of attending increased in that period?

For what it's worth Jobs is not an alum- he never graduated from amy college.

Frugal Scholar said...

@vossron--Thanks for the correction. Any further info would be appreciated.

@Meredith--Thanks for stopping by. I read your blog a few times (loved it!) and then drifted away. I will return! Tulane is richer than Reed and perhaps must offer more merit aid to get the students they want--I'm just guessing on this.

@Duchesse--College costs have gone up beyond rate of inflation. In my efforts at saving, I always felt I was chasing a moving target.

Re Jobs--Reed has a very high attrition rate (it's HARD to do well there and tends to attract idealistic/crabby students like myself). They claim everyone who ever attended as an alum.

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Shelley said...

I remember reading a long time ago an article that looked at the income level attained by graduates from universities across the 'prestige spectrum'. It concluded that with respect to income, it didn't matter where one went to university; what mattered was how well one did at whatever university. People who barely scraped through an Ivy League university didn't do as well as people who were at the top of their classes in state universities. I dont' know if it was true and no doubt there are exeptions. I probably remember the article because I liked the sentiment.

omelight said...

I wouldn't be too quick to knock need-based financial aid. Merit based financial aid is, in most cases, a discount. Many similar tiered colleges offer the same amount of merit financial aid to compete with other schools. So, as an example, you'll find that Beloit, Lewis & Clark, and Clark University will come in at almost exactly the same tuition level. So, are you paying the true cost of college...likely not. Is this practice inflating the cost of higher education...likely yes.