Stanford drops tuition. Alot.

[SirNitram]

Link

In a radical change to its financial aid program, Stanford University will announce today that it will no longer charge tuition to students whose families earn less than $100,000 a year.

In addition, the university will waive room and board fees for students whose families earn less than $60,000 a year.

University President John Hennessy will make the announcement today on campus, university Provost John Etchemendy confirmed late Tuesday.

The university is making the change in the wake of published reports last month that its endowment had grown almost 22 percent last year, to $17.1 billion. That sum had begun to attract attention from lawmakers who want wealthy institutions to do more to reduce tuition costs.

Financial aid also will increase to families that make more than $100,000 a year.

"Thanks to our increasingly generous financial aid program ... attending Stanford will cost less than most private and many public universities," Etchemendy said.

To pay for the new tuition assistance, the university said it will increase its annual endowment payout to 5.5 percent. The new plan, which begins in the 2008-09 academic year, eliminates the need for student loans for qualifying students.

"We are committed to ensuring that Stanford asks parents and students to contribute only what they can afford," Hennessy said. "No high school senior should rule out applying to Stanford because of cost."

Stanford is among dozens of high-end colleges and universities where tuition has grown faster than the rate of inflation and where tax-exempt endowments have increased by more than 10 percent annually.

Last month, after a report from the National Association of College and University Business Officers called attention to the swollen tax-exempt endowments, a prominent U.S. senator began to question the practice.

"They're supposed to offer public benefit in return for the privilege of tax exemption," said Sen. Chuck Grassley of Iowa, the ranking Republican on the Senate Finance Committee. "If endowments increase by double digits from one year to the next, it raises the idea that maybe these schools aren't using enough of their endowments to help students afford college."

Stanford's endowment is the third largest of any university in the country, behind only Harvard and Yale.

In the past 10 years, tuition alone at Stanford increased from $21,300 to $34,800 - roughly $7,200 more than if it had held to the rate of inflation during the decade.

The university said 3 out of 4 students currently get some financial aid. The new program is expected to reduce the average bill paid by a student's family by 16 percent.

The university said it would continue to take into account a family's assets and overall situation, in addition to earnings, in determining the financial aid it could receive. The university said it would continue its "need-blind" admission policy, guaranteeing that students will be accepted to the university regardless of their ability to pay.
How families benefit

Stanford provided these hypothetical examples to help illustrate the impact of some of the changes to its financial aid program. In each of these cases, none of the families has assets of more than $20,000 beyond their homes.

A family of four in Massachusetts: This family has one child at Stanford, a 15-year-old in high school, a father who works as a teacher and a mother as a freelance graphic designer. The parents have a total income of $54,600, and have home equity of $275,000. The new financial aid program would eliminate the $3,800 that the parents would have been expected to pay in the current school year. Their son would no longer need to borrow $2,000, though he would still be expected to contribute his earnings from work during the summer and academic year. The total scholarship would be $45,550, an increase of $5,250 from this year.

A family of six in Nebraska: This family has one child at Stanford and three others younger than 12. The mother is a homemaker, the father an engineer, and they have a total income of $80,000 and home equity of $155,000. The new plan would cut the parents' payment in half, reducing their total payment to $5,450 from $10,965. Their child at Stanford would no longer need to borrow $1,600, though still would be expected to contribute earnings from school year and summer jobs. The total scholarship would be increased by $7,100 to $40,050.

A family of three in Silicon Valley: This family has one child at Stanford. The father is a software executive, and the mother works as a receptionist. The parents would be asked to draw less from their annual income of $120,000 total and home equity of $560,000. Their parental contribution would decrease by one-third - $8,180 - to $16,135 from $24,315. Their daughter would no longer need to borrow $1,600, but would be asked to contribute the amount equal to the earnings from part-time work during the school year and a full-time summer job. The total scholarship would be $29,400, almost $10,000 more than the previous year.

Coo'.

[Surlethe]

That's awesome. I wonder if other universities will follow suit, and, more importantly to me, if they will do things like waive graduate school tuition.

As an aside, I've never seen a good reason why tuition has generally increased faster than inflation. Have there been any given?

[Spin Echo]

That's awesome. I wonder if other universities will follow suit, and, more importantly to me, if they will do things like waive graduate school tuition.

I remember Caltech had this thought a couple of years ago. Of course, every so often Caltech considers (not very seriously) about getting rid of its undergraduates.

A lot of graduate school tuiton is a formality, from what I've seen; it gets included in your scholarship or it gets covered by TAing a class or so forth.

[Gerald Tarrant]

As an aside, I've never seen a good reason why tuition has generally increased faster than inflation. Have there been any given?

The best explanation I've heard is that the numbers of people attending college have increased dramatically, i.e. an increase in demand for a college education. For that you probably ought to blame the proliferation of Social Science and Humanities degrees.

I haven't found statistics on overall attendance, but a quick google search turned up this Link A PDF on Florida Community college attendance. These are some of the numbers of attendees of Florida's CC's through the years

1981 170k
1987 181k
1991 245k
1997 236k
2001 267k
2004 324k
2008 412k

over the last 7 or 8 years there's been a rapid increase. I've heard apocryphally that increased college attendance is a general trend in the US, which would suggest higher prices due to higher demand.

[Stravo]

If only this were a wave of the future, and good luck getting your kid in to Stanford now if you make less than $60,000. The waiting list is bound to be atrocious. This is a good way to generate massive enrollments and interest in your school.

[Spin Echo]

As an aside, I've never seen a good reason why tuition has generally increased faster than inflation. Have there been any given?

The best explanation I've heard is that the numbers of people attending college have increased dramatically, i.e. an increase in demand for a college education. For that you probably ought to blame the proliferation of Social Science and Humanities degrees.

That doesn't really make much sense. The private schools have been outpacing the public schools in tuition increase, though I don't think most of them have increased their class size significantly.

[Stravo]

I've always found Higher Education to me almost scammish in its ability to generate fees. Hello, why are textbooks so damned expensive? It's not like they don't have resell value or only single used or highly specialized. On the contrary it is a locked in asset since everyone has to buy the fucking thing.

I was always horrified by how much you had to spend on books and supplies just to take a class. Thousands of dollars a year. Not to mention weird processing fees and registration fees and such. The costs are so arbitrary and without any real basis, I mean what are tuition costs really based on?

[Coriolis]

Wow, that is extraordinarily good news to Stanford students. This is going around some of the big name schools too; Harvard and Yale lowered their tuitions by a good chunk. Of course, Cornell hasn't taken the hint yet and raised tuition by 4.9%.

[acesand8s]

A few schools have increased financial aid, but not many. (Beyond Stanford, Yale, and Harvard that have already been mentioned, Dartmouth has introduced a similar measure.) Not many schools, however, have the resources to enact such measures and are rather unhappy about what Harvard et al are doing. If they try to follow suit, they kill their endowment and punish future students. If they spend their endowment more intelligently (harvesting gains but keeping the principal growing at at least inflation), they have more to spend on future students but the best students are going to flock to schools with the ability to increase financial aid. This isn't going to become a general trend because schools don't have nearly enough resources to pay for this.

[Fingolfin_Noldor]

I wonder if this really makes a difference aside from symbolism. I won't be surprised if many of the students, some 2-3000 a year at most, are on scholarships awarded by the university or elsewhere. It is one of the most expensive schools around.

Back at the University of Michigan, falling state aid is given as the reason for rising school fees. Fees have been rising like 6% or more for the last few years. I believe last year saw the largest increase in many years.

[Master of Ossus]

A few schools have increased financial aid, but not many. (Beyond Stanford, Yale, and Harvard that have already been mentioned, Dartmouth has introduced a similar measure.) Not many schools, however, have the resources to enact such measures and are rather unhappy about what Harvard et al are doing. If they try to follow suit, they kill their endowment and punish future students. If they spend their endowment more intelligently (harvesting gains but keeping the principal growing at at least inflation), they have more to spend on future students but the best students are going to flock to schools with the ability to increase financial aid. This isn't going to become a general trend because schools don't have nearly enough resources to pay for this.

Pomona no longer issues loans as part of financial aid--all of the money previously given as a loan is now given as a grant or scholarship. The cost of college educations is increasing largely because the cost of equipment and professors is also going up faster than typical goods. Professors now have MANY, MANY professional options that they could go into, and the areas in which colleges and universities need professors are increasingly overlapping with private sector employees.

[acesand8s]

Pomona no longer issues loans as part of financial aid--all of the money previously given as a loan is now given as a grant or scholarship.

Yup...its nice to be a school with an endowment equal to $1.1 million per student. To put that in perspective, Harvard manages a measly $2 million in endowment per student.

My god, you can afford to pay the full cost of tuition for every student with just a 4% annual return on that endowment!

[Master of Ossus]

Pomona no longer issues loans as part of financial aid--all of the money previously given as a loan is now given as a grant or scholarship.

Yup...its nice to be a school with an endowment equal to $1.1 million per student. To put that in perspective, Harvard manages a measly $2 million in endowment per student.

My god, you can afford to pay the full cost of tuition for every student with just a 4% annual return on that endowment!

Well, if you had no operating expenses.... which isn't remotely true. Pomona's annual budget per student is three times its full tuition+room and board, and that doesn't count all of the massive financial aid the school offers. Colleges are just that expensive to run. Also, it's not like public schools (I'm looking at you, UC's) shouldn't be able to have those sort of endowments--they've just been UTTERLY irresponsible about their spending programs, knowing that the state will consistently bail them out.

[Alan Bolte]

All I can say is, I almost spit out my drink.

[acesand8s]

Well, if you had no operating expenses.... which isn't remotely true. Pomona's annual budget per student is three times its full tuition+room and board, and that doesn't count all of the massive financial aid the school offers. Colleges are just that expensive to run. Also, it's not like public schools (I'm looking at you, UC's) shouldn't be able to have those sort of endowments--they've just been UTTERLY irresponsible about their spending programs, knowing that the state will consistently bail them out.

Quite right. It was a very simple example (it ignored inflation as well, after a few years, the school wouldn't be able to fully fund tuition on such a small return), but I was rather impressed by the endowment the school managed to assemble. It does show though that not every school is going to be able to enact similar measures, not the way things currently stand.
And after checking wiki, I'm utterly astounded at the small size of the UC system's endowment given its student base. Only $7.3B with 160K students? On a per student basis, that's almost nothing.

[Master of Ossus]

Quite right. It was a very simple example (it ignored inflation as well, after a few years, the school wouldn't be able to fully fund tuition on such a small return), but I was rather impressed by the endowment the school managed to assemble. It does show though that not every school is going to be able to enact similar measures, not the way things currently stand.
And after checking wiki, I'm utterly astounded at the small size of the UC system's endowment given its student base. Only $7.3B with 160K students? On a per student basis, that's almost nothing.

My family is loosely associated with the UC's, so I donated money to them. Once. They were soliciting donations for a new building somewhere, and so I gave them some money. Six MONTHS later they called me, again, saying that their project had gone over-budget and that they were "going to need more money from their generous [sic] donors to complete the project on-schedule." Needless to say, I did not remain one of their generous donors after that incident. I've also heard absolute horror stories about how they've mismanaged their budget more recently (e.g., RETROACTIVELY raising tuition to graduate students because their facilities were falling apart--as if they couldn't have foreseen those types of issues and planned for them), and keep in mind that these are the UC's. Not only are they ginormous institutions that get taxpayer money, but they also have enough leverage to solicit donations even from outside of their alumni pool. Frankly, I object to California taxpayers footing the bill for such an aloof and fiscally irresponsible organization, even though I generally support public education matters. They're just not as good as equally expensive private colleges and universities would be.

The stat about the UC's endowment is incredible, even given the above, though. I mean, Pomona is literally one one-hundredth as large as they are, but has an endowment that is one fifth theirs?

[Hawkwings]

Hey, I applied to Stanford, and I'm sending my financial aid documents right now. Let's see what kind of offer they make me.

[Guardsman Bass]

So they're one-upping Harvard, eh (I think Harvard doesn't charge tuition for anyone from a family making under $60,000)? I'm glad, although this will make the application numbers go even higher per school.

[Netko]

Why are application numbers a problem? Do an entry test that tests for knowledge relevant for the wanted programme (major), make a ranked list, and then let the top students that fit into the available capacity enrol. If any decline, shift the list downwards. Its a simple system that works in a lot of countries.

[Fingolfin_Noldor]

Why are application numbers a problem? Do an entry test that tests for knowledge relevant for the wanted programme (major), make a ranked list, and then let the top students that fit into the available capacity enrol. If any decline, shift the list downwards. Its a simple system that works in a lot of countries.

The US system works such that it is up to you to work towards a major of your choice and for you to decide what major you are best at. Getting admitted is a matter of GPA, recommendation letters, SAT scores and what not. No decision on Major made then.

[Master of Ossus]

Why are application numbers a problem? Do an entry test that tests for knowledge relevant for the wanted programme (major), make a ranked list, and then let the top students that fit into the available capacity enrol. If any decline, shift the list downwards. Its a simple system that works in a lot of countries.

The US system works such that it is up to you to work towards a major of your choice and for you to decide what major you are best at. Getting admitted is a matter of GPA, recommendation letters, SAT scores and what not. No decision on Major made then.

Actually, that depends on the school. Many colleges require that applicants apply for heavily impacted majors, and make acceptances on that basis.