Original Article: http://dartreview.com/archives/1998/02/11/princeton_buying_the_best.php
Wednesday, February 11, 1998
Two years ago, Aindrais O'Callaghan had to make an enviable decision: whether to attend Darmouth College or Princeton University. Though O'Callaghan, the salutatorian of a suburban New Jersey parochial school with near perfect SATs and the son of nuclear physicists, liked the social atmosphere of Dartmouth and the ski slopes near Hanover, he also recognized that in his intended major of engineering Princeton was stronger. He now studies the finer points of quantum mechanics at Princeton not Dartmouth because of one decisive factor. When he compared each school's financial aid package, Princeton's offer included a thousand dollars more in grants. 'It basically came down to who gave me the better deal,' O'Callaghan, a sophomore, explains, 'Princeton just gave me more money.'
Under Princeton's proposed changes in its financial aid policy, this scenario, currently anecdotal, may become increasingly common in future years.
On January 24, Princeton's Board of Trustees gave final approval to a budget committee's recommendations that the University hopes will, according to its press release trumpeting the changes, 'significantly increase Princeton's affordability for lower and middle-income students,' dissuading them from the 'major state universities' they might otherwise choose.
But the changes, slated to take effect beginning with the class of 2002, will also make Princeton substantially more generous to students with financial need than the rest of the Ivy League, including Dartmouth. Princeton is set to enjoy a tremendous advantage over its main competitors in the annual intercollegiate scramble to secure the most desirable students, an advantage that no Ivy has possessed in the past.
Until recently, the eight Ivy League schools awarded financial aid in much the same fashion. Scholarships were meted out based solely on need, not according to merit or athletics. And though the Ivy League signed a consent decree with the government in 1991 to desist from alleged price-fixing in financial aid packages, the schools have continued to use fairly similar formulas in calculating what students and their families could pay for a college education.
Depending on the specific nature of a student's family's assets and income, variations between awards do occur — but no one Ivy League college has consistently offered better packages than the others. Princeton's changes in its aid policy drastically upsets this dynamic.
As adopted by the Board of Trustees, the new plan lays out three main initiatives. First, Princeton will entirely replace the loans currently given to students with family incomes under $40,000 with grants.
For students with family incomes between $40,000 and $57,000, the loans will be reduced and replaced with grants.
Second, in determining the amount a student's family can afford to pay, Princeton, for most families with incomes below $90,000, will no longer include home equity in its calculations.
For all other families eligible for financial aid, the contribution expected from home equity will be reduced by one-half or one-quarter.
Under these new guidelines, Princeton boasts, families with more than one child in college may receive aid at the university even with incomes of up to $150,000.
Third, Princeton will increase its funding for international students by a third. In considering foreign applicants, Princeton, fully need-blind for students from the United States and Canada, links its admissions decisions to the money available in a specific scholarship budget.
Princeton has released the following case studies to demonstrate the impact of the new financial aid policy (Each case study assumes there are two children in the family, with one in college) :
For a student from a family with an annual income of $30,000, savings of $10,000, and home equity of $ 40,000, Princeton will award a total scholarship of $28,200.
The remainder of the more than $33,000 cost of a year of study at the University would come from the family's contribution and a summer job. The $28,200 represents a $4,380 increase over what Princeton, and what other competing schools, currently provides.
For a slightly more affluent student from a family with an annual income of $50,00, saving of $15,000, and home equity of $60,000, Princeton will award $22,500. The package would also include a campus job as well as a $2,500 loan. This student would receive $3080 more under the new plan.
A student from a family with an annual income of $64,000, savings of $20,00, and home equity of $90,000 would be awarded a total scholarship of $16,240. In addition to a campus job, the package would require a $4080 loan. This student's scholarship would be increased $3,500.
The wealthiest student in the case studies, who has a family with an annual income of $85,000, savings of $40,000, and home equity $110,000, would receive $7,090, a scholarship increase of $2,700.
Among these lower and middle-income students will be some of the best scholars and athletes in the nation, students in demand who generate publicity for their school through achievements such as Rhodes scholarships and conference championships.
With its new measures, Princeton will almost invariably offer more lucrative aid packages to them than its competitors.
At this point, the response from the rest of the Ivy League is unclear.
Twelve years ago, Princeton started a similar program that granted some merit-based awards to students, but was quickly forced to discontinue the practice under pressure from the rest of the Ivy League.
Unlike that situation, however, Princeton's new policy does not alter the nature of its financial aid, only the size of its awards, as the packages will remain completely need-based.
Some experts suspect Princeton's rivals will respond by increasing their own financial aid programs. 'I imagine others will be quick to jump on this,' John O. Harney, editor of Connection, a New England journal on higher education, told The Boston Globe, 'A competitive advantage can't remain with one institution for long.'
Indeed, Duke director of financial aid Jim Belvin , while calling Princeton's new plan 'an awfully nice gesture,' admitted that Duke may consider offering a better financial aid package to some students in order to compete with Princeton.
Harvard, for its part, is more sanguine. A University spokesman, Alex Huppé, praises Princeton's plan as 'deft' and 'populist' but is confident of Harvard's position. 'Our system of financial aid has been quite successful getting just the kind of student that leading schools want,' he notes.
Dartmouth's administration, with its characteristic intransigence, has refused all comment on Princeton's new policy, claiming that the consent decree with the government prevents it from speaking on such matters.
Despite the silence from Parkhurst, Dartmouth, which President Freedman has during his tenure attempted to move into the elite company of Harvard, Princeton, and Yale, may, in fact, be most affected by Princeton's plan.
Ever hopeful to compete with its fellow Ivy for students but hampered by its location and a less prestigious reputation, Dartmouth cannot begin to also offer less competitive financial aid.
Yet in its current fiscal state, Dartmouth is not in a position to duplicate Princeton's aid overhaul.
As Princeton Provost Jeremiah Ostriker said of his University's new plan, 'These are expensive changes in policy.'
Princeton itself could not afford the estimated $6 million annual cost until the recent success of fund-raising drives associated with the University's 250th Anniversary and its endowment of $701,000 per student was already highest in the country.
By comparison, Dartmouth's endowment per student is less than a third of that, at $220,000. In order to approach the financial muscle of Princeton, the new President of Dartmouth would be compelled to mount a massive fund-raising campaign, soliciting donations of almost Ted Turner-sized proportion.
Currently, Princeton is retroactively increasing the financial aid awarded to the early decision applicants it accepted last December for the Class of 2002, students already committed to the University.
This spring, however, some of the students Dartmouth prizes most — i.e. those with academic and athletic records of achievement strong enough to also be accepted at Princeton — will sit down like Andy O'Callaghan and make their college choice.
In all likelihood, more of those students than usual will pack their belongings and head down Route 1 next fall into Mercer County and the idyllic college town of Princeton, NJ. And it won't be for an away game.