Tuition Assistance for the Middle Class

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Pressure on All Schools

Under Harvard's plan, families earning between $60,000 and $120,000 will pay a small percentage of their annual income for tuition, room, and board, jumping to 10% for those earning between $120,000 and $180,000. At Yale, families with incomes below $120,000 will see their financial contribution slashed by more than 50%, while most families with incomes between $120,000 and $200,000 will see their costs drop by 33% or more.

But very few of the nation's private colleges and universities can follow this example, says Tony Pals, a spokesperson for the National Association of Independent Colleges & Universities (NAICU). Of his organization's 1,600 member schools, only 40 have an endowment of $1 billion or more. The remaining 1,560 schools have a median endowment of $14 million, he says, and only three of those schools have announced plans to replace loans with grants. "That tells you right there and then what the disparity looks like between the haves and the so-called have-nots," Pals says.

That doesn't mean that presidents of private colleges and universities haven't been following the financial-aid news with keen interest, wondering what it will mean for them down the road. Jackie Jenkins-Scott, president of Wheelock College in Boston, says it's nearly impossible for a small liberal arts college like hers—with an endowment of $50 million—to offer students financial-aid packages comparable to those announced in recent weeks. However, she plans to raise the issue of how to best allocate the school's limited financial-aid resources among low- and middle-income students at the school's next trustee board meeting in March.

"[W]hen parents pick up the newspaper and see these things happening, it raises the expectation of what all institutions will make available," Jenkins-Scott says. "And many of us don't have the resources to make that available, which is one way we get a lot of pressure."

Feds May Have to Intervene

Even presidents at private schools with endowments above $200 million, such as Ithaca College, which shares its hometown with Cornell, say they can't match the heavyweights. Ithaca President Peggy Williams says she could replace student loans with subsidized grants if she was able to get an additional $24 million in earnings from the school's $237 million endowment. But to do that, she would have to raise an additional $500 million in endowment funds from alumni and donors, a nearly impossible feat, she says.

"The impact on us will be people saying, 'Why do I have to take out a loan at your school when other schools are giving grants?'" says Williams. "We'll have to explain why to them. I think they'll look around and realize that it is less than 1% of the institutions in the country that are able to do any of these big headline strategies."

Ultimately, the federal government will need to step in and help address the inequities between the schools with large endowments and smaller ones, says Richard Kahlenberg, a senior fellow at the Century Foundation, a nonpartisan public policy group based in Washington and New York. The number of schools capable of following Harvard's lead will likely trail off in the coming months, but that does not mean demand for lower tuition at colleges across the country will fade, he says.

"Part of the reason that the Senate held hearings about the endowments is that they hope that even if legislation doesn't pass, it spurs some voluntary action," Kahlenberg says. "I think we've seen some evidence that this worked in this case."

Damast is a reporter for BusinessWeek.com.