A Revolution in Financial Aid

Harvard has once again vaulted ahead of its peers in eliminating socioeconomic barriers to attending college. This time, the University made three different improvements that totaled to a $22 million per year increase in Harvard College’s financial aid budget. The headliner was a vast increase in aid to middle and upper-middle class students. But just as important are Harvard’s termination of loan-based aid and the exclusion of home equity from aid calculations.

The new policy will limit annual tuition payments to no more than 10 percent of income for families making between $120,000 and $180,000 annually, reducing tuition payments for families in that bracket by several thousand dollars per term. The University also announced that it will increase financial support for graduate students in order to make Harvard more competitive with its peer institutions, a step that will no doubt increase the quality of undergraduate teaching fellows while also making a graduate degree more affordable.

All in all, these new financial aid policies represent a huge step forward. In past years, Harvard has pioneered one of the most generous financial aid programs in the country via the Harvard Financial Aid Initiative, which made attendance at the College free for students whose families earned less than $40,000 (later raised to $60,000). But with the full four-year cost of a Harvard education approaching $200,000, many families in the upper-middle class struggle to send their children to school—a point underscored by surveys conducted by the Financial Aid Office. By limiting the cost for many of these families to 10 percent of income, Harvard is helping to ensure that no student should have to choose to go to a different school due to financial considerations. The University is also taking a significant step toward no student having a different Harvard experience because of financial constraints.

One of the new program’s most promising features is the elimination of loans as a part of aid packages. Studies have shown that high levels of debt cause students to choose more lucrative career fields, often forgoing opportunities in the public and non-profit sectors that they might have otherwise explored. Students should not have to choose between pursuing their passions and servicing their debt. The removal of student debt in aid packages will go a long way towards leveling the playing field between privileged and underprivileged students.

Similarly, the decision to stop considering home equity in the calculation that determines a family’s ability to pay—which will cut out an average of $4,000 per year in payments—is a wise one. Houses are not liquid assets, and a family should not be penalized for increases in housing prices that do not affect a family’s short-term financial situation.

All in all, this program appears to be one that has been well thought through and will certainly help to increase Harvard’s diversity on campus. However, as with any program, the key will be implementation. In its press release, the Financial Aid Office states that the 10 percent policy will only apply to those families with assets typical for their income levels. Such a clause is understandable, since it is certainly not fair for a family with an income of $120,000 but with a large nest egg to receive financial aid. At the same time, we hope that Harvard will carefully think about what level of assets it defines as typical so as not to punish prudent saving for college.

This concern, however, is fairly minor. Given the amount of planning that appears to have gone into this proposal and the tremendous benefit it will have for students across the financial spectrum, we are confident that this latest expansion of financial aid will be a roaring success.