Haverford College has decided to end its costly policy of meeting all needed student aid with grants rather than loans, in the latest of several liberal arts college walkbacks on generous aid policies.
Approved by Haverford’s Board of Managers in February, beginning with the class of 2019, Haverford’s aid packages will include loans for students from families making more than $60,000 per year. Depending on the family’s income level, the loan levels range from $1,500 to $3,000 per year. Students from families making fewer than $60,000 per year will continue to receive financial aid packages that do not have a loan component. Haverford’s change in loan policy does not impact Haverford’s admission policy, as Haverford will continue to offer need-blind admissions.
“Our decision to modify our loan policy came out of long-term budget planning discussions,” said Jess Lord, dean of admissions and financial aid at Haverford. “It reflects an effort to bring into equilibrium our deep commitment to access and affordability with the long-term sustainability of the budget.”
Over the course of the past decade, a number of institutions implemented a policy of omitting loans in their financial aid packages for their students, but because of financial sustainability concerns, some institutions have retracted their no-loan policies.
According to Swarthmore’s Vice President for Finance and Treasurer Suzanne Welsh, Haverford’s change in its loan policy does not affect Swarthmore’s no-loan policy. In 2007, the Board of Managers decided to stop including loans in financial aid packages, using grants in the place of loans. Families can still take loans on their own, and many do.
Swarthmore’s endowment was at $1.634 billion at the end of fiscal year 2013, nearly four times as large as Haverford’s endowment of $434 million at the end of fiscal year 2013.
“Swarthmore is well-endowed, so the endowment provides a significant portion of our budget,” Welsh said. “As our endowment has grown and performed well, it has enabled us to provide for growth in our financial aid budget.”
Swarthmore has two primary sources of revenue: student revenues and endowment spending. For the 2013-2014 school year, gross student revenues are $86.4 million, and total financial aid is $30.0 million. Net student revenues comprise $56.4 million, or 44 percent of Swarthmore College’s revenues. Endowment spending comprises $58.8 million, or 46 percent of Swarthmore College’s revenues. Gifts, grants, and other sources of funding comprise the final 10 percent of the college’s revenues, equal to $12.9 million.
At Haverford, gross student tuition revenues are $54.1 million, and total financial aid is $22.1 million. Including room and board revenues, net student revenues comprise $46.7 million, or 56 percent of Haverford College’s revenues. Endowment spending comprises $22.1 million, or 27 percent of Haverford College’s revenues. Compared to Swarthmore, Haverford receives a considerably smaller percentage of its revenue from its endowment, and as a result, a comparatively higher percentage of its revenue from student revenues.
Lord emphasizes that Haverford’s decision to end its loan-free policy is based upon future projections of need for financial aid.
“This decision does not reflect issues with the current Haverford budget or with the health of the endowment,” Lord said. “The financial aid budget has doubled over the past ten years, and the trajectory for all of higher education suggests that this pattern will only continue.”
Welsh anticipates Swarthmore’s financial aid policies to be sustainable as long as the growth in demand for financial aid does not exceed the college’s projections. According to Welsh, sustainability is a primary concern of the finance committee.
“We worry about that a lot,” Welsh said. “Every year, we prepare long-term projections and test them with all sorts of assumptions so that we do as much contingency planning as we can for unforeseen events. But we do not think the sustainability of our financial aid policy is threatened in the near-term absent any major shifts in the economic environment or in the mix of students who apply to Swarthmore.”
The sustainability of financial models is a concern for schools nationwide, especially for institutions with smaller endowments than Swarthmore. For over a decade, the cost of higher education has increased more quickly than family incomes, resulting in an increasing demand for financial aid.
“That is not a sustainable situation, and at some point that will have to end,” Welsh said. “Hopefully family incomes will start to grow again as the economy recovers, but I think there is a lot of pressure on institutions going forward to hold down their tuition increases, which will put pressure on their programs.”