Admin to Recommend Modified Loan Policy to Board in February

Students filled a small auditorium Monday night to hear from Dean of Admissions Jess Lord and President Dan Weiss on their proposed changes to the financial aid policy, which currently replaces loan expectations with grant aid from the College.

Students filled a small auditorium Monday night to hear from Dean of Admissions Jess Lord and President Dan Weiss on their proposed changes to the financial aid policy.

The Administration announced to students Monday their recommendation to the Board of Managers to modify the “no loan” financial aid policy and reintroduce loans for some students starting with the class of 2019.

In an email to students Monday afternoon, Weiss said that their proposal for an income-contingent loan policy was presented to the full Board at their October meeting and would come up for a vote at their next meeting in February. The policy being put forward, which has been discussed and debated among committees and the Board for at least two years, represents a consensus reached by members of the senior staff.

A crowd of students packed Chase Auditorium later that evening for a presentation by Dean of Admissions and Financial Aid Jess Lord and the newly inaugurated Weiss. Lord and Weiss argued that the College’s financial situation and the increasingly burdensome cost of financial aid in general suggests the no loan policy will be difficult to sustain in the near- and long-term.

On the Table: An Income-Contingent Loan Policy

The income-contingent policy shown above determines loan burdens based on family income. The graph from Jess Lord's presentation above shows a projection of cost savings based on a breakdown of current students receiving financial aid.

The income-contingent policy shown above determines loan burdens based on family income. The graph from Jess Lord’s presentation above shows a projection of cost savings based on a breakdown of current students receiving financial aid.

Although students were attentive, the two-hour meeting was at times contentious as they questioned both the significance of the policy change and the financial details underpinning the Administration’s case.

The policy currently in place eliminates loan expectations from financial aid packages, meaning that rather than asking students to take out loans, the College replaces that expectation with grant aid. The no loan policy cost the operating budget $1.87 million this year, out of $23.6 million total grant aid awarded.

The modified loan policy that the Administration is putting forward would continue to eliminate loans for students with family incomes less than $60,000 a year and reintroduce loans for students based on their family’s income level. It is estimated to produce $820,000 in annual cost savings for the operating budget.

Screen Shot 2013-12-10 at 9.06.25 PMOther aspects of the financial aid policy will remain untouched, including the College’s need-blind policy, a cap on home equity, and special need-based scholarships.

View the slides from the presentation:Dec.9.13 No Loan Presentation

Weiss said the policy seeks a balance between three considerations: affordability for students, maintaining the college’s competitive edge over peer institutions and budget sustainability.

Lord defined affordability as “removing cost as a factor in a student’s choice” to attend. Prior to the no loan policy, he said the students at low and high family income levels tended to matriculate at higher levels, with a drop-off for students from middle-income families. Since the implementation of the no loan policy, those levels have evened out, Lord said.

The no loan policy also improved the institution’s competitiveness in terms of cost of attendance. Based on admitted student surveys, Lord said they found improvement against three schools which Haverford typically overlaps with, Swarthmore, Brown and Wesleyan.

Before the no loan policy, “Swat was destroying us, Brown we weren’t doing well against and we were about even with Wesleyan,” Lord said. “Once we made [the change]…we were about even with Swat, better against Brown and just about killing Wesleyan.”

But the question of cost looms large and remains the main driving force behind scaling back the financial aid policy.

A Gradual Recovery

This latest proposal comes only five years after the no loan policy was originally implemented starting with the incoming freshman class Fall 2008. Questions of the policy’s viability have been ongoing since then, especially after the market crash just months after the policy’s debut caused the College’s endowment to lose over one third of its value, falling from $521 million in July 2008 to $336 million in June 2009, according to tax forms. The following fiscal year, the College took measures to cut its operating budget by nearly 8% but left the newly implemented financial aid policy intact.

Since then, the endowment has been slowly recovering. The institution raised roughly $23 million in gifts during the 2012-2013 year, down slightly from the $24.9 million it raised last fiscal year. The endowment as of May 31 was worth $433 million, up from $387.5 million the previous year, according to figures provided by senior staff.

Haverford is not the only college or university to walk back on a generous financial aid policy. Princeton University was the first institution to implement a loan-free policy in 2001. A wave of institutions followed suit with policies either eliminating or reducing loan burdens, Lord said in his presentation.

Since then, however, a number of peer institutions have ended their no loan policies. Claremont McKenna College announced it would reintroduce loans earlier this year, after implementing the policy in 2008. Williams College announced it would pull the plug on their no loan policy in 2010, after only two years of implementation.

At Monday’s presentation, Weiss said approving the no loan policy was a decision made in a favorable economic environment that today is no longer viable.

“All these schools made these decisions in a different environment. There was an assumption that these conditions would continue, where we were getting 12  to 15 percent in returns a year,” said Weiss. “[Now] returns are only 5 to 8 percent a year.”

Weiss said the College’s budget is facing a number of competing needs, including deferred maintenance issues on facilities, much needed upgrades to technology and maintaining competitive faculty salaries.

“Financial aid is the largest growth factor in our budget every year. Our budget can’t manage that,” said Weiss. “None of you came here because you wanted to be at a place with the world’s greatest facilities – we came here for values. But eventually stuff falls down if you don’t invest in it. Our physical plant is underfunded, and if we ignore them now, we do a disservice to our successors.”

A breakdown of the College’s five-year operating budget: 5 year operating budget, 2008-12

Lord and Weiss also emphasized that spending on financial aid is the largest area of growth in the college’s budget. Tuition and fees have grown substantially over the last few decades for institutions across the board. While the 3.5% increase in student charges last year was one of the lowest rates of increase in the last decade, with tuition nearing the $60,000 mark, the College needs to spend more on financial aid in order to maintain the same level of affordability.

Between 2005 and 2013, the amount of grant aid given by the college has increased by 98%, from $11.9 million in 2005 to $23.6 million in 2013. The discount rate, or the proportion of grant aid coming directly from tuition revenue, has also increased, from 27.9% in 2005 to 40.3% in 2013.

The upcoming Campaign, which aims to raise $250 million, sets a target of $50-75 million for financial aid.

Still, some have been critical of recent building projects and priorities.

In a post on the Go! student message boards in November, Alison Marqusee ’16 questioned the value of the proposed Visual Culture, Arts and Media Center (VCAM) at the expense of other potential commitments.

“It seems like when students (and it does tend to be students) push for institutional changes in social justice areas like these, they are only able to do what is free or extremely cheap,” said Marqusee. She referenced a recent pledge of $7.5 million toward the VCAM project. “We are only getting composting in the DC because some dedicated students on campus found a way to make it cost neutral. So why is the VCAM the best use of the influx of money[…]?”

After the meeting, former Students’ Council co-president Patrick Williams ’14 noted that while $16 million could used toward new projects like Magill Library renovations or VCAM, that money could just as well go toward a “temporary patch” to endow the projected cost of the no loan policy.

“Past campus building projects have mishandled funds and functions and misinterpreted campus needs and priorities,” Williams said. “I think we just need to be very careful in the coming “Campaign for Haverford” to remember the college’s social function and commitment to its students and not give in to the desire to simply be cutting edge or technologically savvy for the sake of it.”

For his part, Weiss wasn’t convinced by the argument that walking back the financial aid policy is a violation of the community’s values and commitment to equality.

“I’m not sure there’s purely an ethical dimension…it’s how do we find a balance in the environment we create and how much we ask people to put in,” he said. “We could avoid doing this. Could we survive as an institution? Yes…but there would be a cost to the institution. Because in our budget, $800,000 a year is a significant amount of resources that we would have to find in another way.”

Many students who spoke felt the $820,000 in projected savings is an insignificant cost compared to the benefits of the policy. They asked what else could be could be sacrificed in order to continue supporting a no loan policy – scraping savings out of the College’s electricity bill, cutting wasteful spending, the salaries of senior staff. One student suggested the College admit more international students, who pay full tuition.

But both Weiss and Lord framed the decision as a long time coming due to ongoing budget reductions since 2008. And Lord believes the loans students are being asked to take on by the new policy will still be the lowest among peer colleges.

“Raising money philanthropically will help us offset those increases and do the best we can,” Weiss said.
“There is a sense that…this is the last cut. We held out as long as we could and this was the last one,” Lord later added.

Student Reactions

Many students at Monday’s forum felt their voice was being ignored and the policy is being pushed despite strong student support for the need-blind, no loan policy.

Some are already planning to organize and lobby the Board in favor of keeping the no loan policy. One group called Fords for Affordability met Sunday night in preparation for Monday’s meeting and plan to be engaged in the issue until it comes to the Board in February.

At the Spring 2012 Plenary, students passed a resolution stating their support for the existing need-blind, no loan financial aid policy and “firmly calls upon the Board of Managers to maintain the aforementioned policies, even in light of an unfavorable economic climate.”

In the Fall 2011, Students’ Council conducted a student survey about the financial aid policy. Over half of respondents said the financial aid policy influenced their decision to attend Haverford, with many saying they would not have attended if their aid package had included loans.

Read the full results of the survey: 2011 SC Financial Aid Survey

“The question is one of decision-making,” said Kate O’Brien ’14 at Monday’s forum. “Why is the student voice still being ignored and why is it still being presented to the Board if there is such overwhelming student support?”

Weiss replied that the decision was a difficult one to make.

“The question is not whether students find this policy to be objectionable, it’s what’s the right answer for the community. This is very hard for [Jess Lord] to do … and it was hard for me to,” Weiss said.

“Is $6,000 in indebtedness not acceptable? (…) I think some students understand we’re trying to accomplish a balance,” he added.

Ian Gavigan ’14, a member of the Admissions Committee who co-authored the Plenary resolution and is among those organizing to keep the no loan policy, argued that student opposition to the proposal did not stem from a lack of understanding of financial details; rather, it’s an ethical stance.

“The student plenary resolution stated unequivocally that both the need blind and no loan policy sit at the center of our identity as an ethical institution,” said Gavigan in reply. “I would hope that you would take more seriously that this is more than just an uninformed knee jerk reaction.”

Later Gavigan said in an email that he was “disappointed by president Weiss’ dismissive tone, especially when reacting to emotional student comments and questions. It reminds me that the financial aid decision-making process has been a flawed one in which the administration has failed to adequately integrate strong student voices into the mix.”

Former Students’ Council co-president Daniel Gordon ’14 said in an email after the forum that while he supports the no loan policy, he believes the proposed changes are reasonable.

“All things considered, there is a compelling argument that this change is the lesser among many evils. I don’t like the proposed change, but I understand why the administration reached this decision,” said Gordon. “I have talked to many students since the forum, some of whom are on financial aid and some of whom are not, who share this view…I know several students who refrained from speaking for fear that they would be judged for not being vehemently against the proposal.”

Gordon disagrees with those who say the Administration is ignoring student opinion.

“Students are the reason this school exists, but we are not the only important voice in the room. The fact that a policy decision doesn’t align with student opinion does not mean we were not considered during this process,” said Gordon. “The Board has to think about more than just our views.  Of course students support no-loan financial aid — they do too!  But we don’t have to balance the budget every year.”

Many other students, if not for or against the new proposal, were frustrated by the meeting and wanted to hear more from the Administration.

“I thought the presentation lacked specifics as to what exactly would happen if no loan policy were to stay in place,” said Robert Homan ’14 in a comment on The Clerk Facebook page. “It also presented the existing aid policy vet favorably in a way that may gloss over the experience of many students who must take out loans regardless of the no loan policy.”

Damon Motz-Storey ’16 felt the presentation sent mixed messages.

“Often I felt like we were being told that the money the college would save by scrapping the no loans policy was small potatoes, but that there is absolutely no way that we can come up with enough money from cutting back elsewhere in order to cover what we’d save from instituting loans,” he commented.

Samantha Shain ’14 asked the Administration to put together a plan for addressing the inequalities that might arise from admitting a new freshman class that may have to work more to deal with having a larger loan burden than most of their peers.

Lord said that because the College certifies student loans his office is “very aware” of levels of student indebtedness. He also said both Williams and Claremont McKenna “haven’t seen any meaningful change in their applicant pool” since scaling back their no loan policy.

“I don’t know if the price of modifying less than one percent of the budget [is worth] student distrust of the administration,” said Madeline Durante ’16.

Lord told students that their opinions will be taken seriously.

“I am hearing that and taking that very seriously. And it may be a matter of semantics…but the survey and resolution weren’t ignored,” Lord said. “And you don’t have to be happy about that…but they were represented.”

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