February 8, 2001

Princeton Announces Plan for Loan-Free Financial Aid

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Two weeks after the Princeton University announcement that effectively ended mandatory loans in the university’s student financial aid packages, no other Ivy League university has followed in step with the change.

The Princeton plan, announced last week, will direct the university to spend some of its $8.4 billion endowment to increase financial aid funding. As a result, students receiving financial aid will no longer be required to accept loans beginning next fall.

Endowments are stocks, bonds, cash and real estate held by colleges and universities, which can then be invested by the schools.

As Cornell students apply for financial aid next year, they can expect to receive a similar package to the aid currently distributed, because the University has made no plans to adopt the loan-free aid program.

The latest policy change at Princeton marks the second measure in three years that the university has approved to make its rising tuition costs more manageable for incoming students. In 1998, Princeton substituted loans with grants for students determined to be from low income families.

Princeton drew from the University’s endowment payout — typically between four and five percent — to cover this program. A 36 percent increase in endowment funds over the past year eased the burden of adding $57 million to Princeton’s financial aid budget. The university had previously maintained a payout similar to the standard held by peer institutions, including Cornell.

Cornell has not authorized a larger payout from its $3.4 billion endowment, according to Senior Investment Officer Donald Fehrs.

“Some markets are up more than others, but there’s nothing really significant,” Fehrs said.

He noted that the Investment Board met to discuss a possible change in the endowment’s dispersal but decided that the University would be better suited if matters are left as they are.

“It’s a long-term policy, and we think it’s a good policy,” Fehrs said.

Like Princeton, Cornell has continually increased its student tuition during recent years, but professors and administrators maintain that financially, Princeton and Cornell are too different to compare.

“We don’t have a prayer in the world, financially, to compete with Princeton,” said Ronald G. Ehrenberg, the Irving M. Ives Professor of Industrial and Labor Relations and Economics.

Ehrenberg focused on Cornell and Princeton’s endowment funds versus the student population as the main difference between schools.

Yet according to Thomas C. Keane, director of financial aid and student employment, the differences between the universities may not be as dramatic as they seem.

“You can’t think about it in terms of average grant per Cornell student because you take the grants and divide it by 13,000 [undergraduate students], that doesn’t really make sense,” Keane said.

He noted that the actual number of students receiving financial aid is considerably less than 13,000, because Cornell Tradition, Presidential Research Scholars and outside scholarships limit the amount of Cornell students eligible for endowment funded financial aid.

In short, financial aid is actually distributed to a smaller population than the entire Cornell student body.

Henrik N. Dullea ’61, vice president of University relations, said that while Cornell has added $170 million to the endowment, those gains still may never compete with Princeton.

“Does [the recent endowment increase] mean we’ll ever have an announcement as large as Princeton’s? No,” Dullea said.

Cornell administrators contend that the University offers enough financial aid to be attractive to incoming students who may also find Princeton a prospective choice.

“It would definitely be nicer to get grants than loans, but I don’t think it would affect my decision to come here,” said Bradley Kondracki ’03.

Keane commented that the statutory colleges also provide an excellent option for New York residents looking toward Cornell.

“A lot of students are looking at that statutory college tuition and saying, ‘See, there’s $12,000 I can save.’ If I can find the right academic program, it makes sense to go for Cornell,” Keane said.

Some find the measure good for Ivy League students, in general, but they also do not focus on tuition often.

“I’m just trying to get through [the present], and whatever I have to do later, I’ll do later,” Kondracki said, about paying back Cornell financial aid bills.

As reported in The Daily Pennsylvanian, Duke University and the University of Pennsylvania also have no current plans to follow Princeton’s lead in eliminating required loans from their financial aid policies.

Archived article by Carlos Perkins