Harvard Hits The Rich-Poor Gap

The reaction from leaders at less-wealthy institutions, however, hasn't been nearly as upbeat. Some of their grumbling surely stems from Ivy envy. But they make a substantive point. Harvard has placed them in an untenable position—unable to match its munificence, yet facing families who've heard the news and now want to haggle. John Burdick, dean of admissions and financial aid at the University of Rochester in New York, says his "concern is the larger signal to the marketplace about what education should cost." At most schools, Burdick says, tuition doesn't cover the full cost of educating a student; universities make up the gap by using endowments and, at public schools, state funds. By boosting aid spending, Harvard created a bigger gap for itself, but one it could easily fill by tapping its massive endowment. Yet poorer institutions don't have that luxury.

Many speculate—and Fitzsimmons's own comments suggest—that by implementing its reforms, Harvard was trying to compete more aggressively with the flagship U.S. public schools. Indeed, for families in some income classes, Harvard is now the cheaper option.

Even schools that don't really compete with the Ivies have felt the pressure. Robert Massa, vice president for enrollment at Dickinson in central Pennsylvania, at first regarded Harvard's announcement as a distant phenomenon. Then he watched with growing alarm as Swarthmore eliminated loans, then Bowdoin, then Colby—a college that competes directly with Dickinson. Harvard's decision was "now at our doorstep," he says, and has created the unrealistic expectation that students should graduate debt-free. "The megawealthy institutions should have stepped back and said, 'We can afford to do this, but what's the right thing to do?' "

Other analysts question whether it's appropriate to focus so much effort on families earning as much as $200,000. "When you start talking about families above $100,000, they're not middle-income," says Tom Mortenson, senior scholar at the Pell Institute for the Study of Opportunity in Higher Education. "It's people in the bottom half of income distribution who are facing huge amounts of unmet financial need," he says.

What's especially troubling is that the percentage of poor American students in higher education has declined in recent years.

Other critics point out that Harvard's intentions behind its reforms weren't purely noble. In recent years, the Senate Finance Committee has stepped up its scrutiny of endowment spending at the nation's richest universities and the proportion devoted to student aid. There are now 76 U.S. universities with $1 billion-plus endowments, and Harvard tops the list at $34.6 billion (figures as of 2007). Displeased that some colleges appear to be sitting on such vast hoards of wealth while continuing to raise tuition, the committee has been dangling the possibility of passing legislation requiring the richest institutions to spend at least 5 percent of their endowments annually, as foundations are required to do (the average in 2007 was 4.6 percent). Against that political backdrop, says Lynne Munson of the nonprofit Center for College Affordability and Productivity, Harvard's new policies seem "largely a PR stunt meant to allay public concern."

More legislative action may be on the way. Among the measures in a bill just passed by Congress and awaiting the president's signature: a requirement that the government study how much endowment money colleges spend on financial aid, a directive to publish a list of institutions with the largest percentage increases in tuition, and the establishment of a Web site with details on college pricing. All that should ratchet up the pressure on universities to become more affordable and transparent. The wealthy schools "are in a position to do so much more than they're doing," says Munson. Perhaps, but for families like the D'Amicos, they've already made a good start.

© 2008