Ambitious Reforms Come at a Steep but "Reasonable" Price

In Tuesday's announcement, Columbia University seems to incorporate aspects of each of the other recent Ivy League financial-aid reforms, charting an ambitious—and expensive—path forward.

The announcement comes on the heels of a slew of similar aid makeovers at peer universities including Stanford, Harvard, Yale, Dartmouth, and Brown. Among these schools, Harvard, Yale and Dartmouth's plans aim to ease the burden on middle-class families, while Brown eliminated the tuition burden outright for lower-class families.

Columbia's reforms touch upon each end of the spectrum: Need-based loans will be substituted with grants for families from all income brackets, and in addition, families making below $60,000 per year are not expected contribute to tuition, room, or board.

"This seems primarily focused on the lowest-income students, but again, what we're doing at the same time is spreading … the resources that we've made available for this across the full set of incomes that qualify for financial aid," Vice President for Arts and Sciences Nicholas Dirks said in an interview on Monday. "We're doing this because we recognize, along with all of our peers, that the cost of college education has just been going up so fast."

The announcement comes soon after statements from key administrators seemed to suggest that Columbia could not afford to make the financial-aid reforms of its peer institutions. Though the value of Columbia's endowment ranks among the top 10 in the country, it pales in comparison to that of Harvard, Yale, and Stanford.

At a December University Senate meeting, University President Lee Bollinger noted that Columbia's endowment trails significantly behind that of its peers, making it difficult to implement similarly large-scale changes. "We don't have the existing resources ... to maintain the financial aid presently offered," he said. "At the moment, we are stretched to the limit in doing all the things we do." Bollinger said that current policy—updated when the University announced September 2006 it would substitute grants with loans for families with incomes below $50,000—stretched Columbia's spending.

Bollinger’s explanations naturally lead to the question that Dirks asked rhetorically: "Why is it that all of a sudden we're in the position to say we can do this?"

Chief Administrative Officer of Arts and Sciences Scott Norum said that the need to increase financial aid now surpasses standard financial barriers. "We're so behind on our endowment campaign that one of our goals of our Capital Campaign is to raise endowment," he said. "But this [aid reform] is so important that we're actually going to eat into principal compared to what our normal spending rule would dictate in order to do this now instead of later."

Columbia seeks to raise $440 million for undergraduate financial aid. Last year, John Kluge, CC '37, pledged $400 million to the University, and earmarked more than half of his gift for Columbia College aid specifically. Once Kluge's gift comes in, the University will use the donation to finance the College's aid enhancement.

"We have another shore out there that we know we're going to get another infusion of resources specifically targeted college financial aid funds as endowment," Dirks said. "So the question is the bridge—how do we get from here to there?"

The bridge, Norum said, will come from increasing the payout rate on aid endowments by about 1 percent annually. The actual percentage is an average that will be higher now and decrease over time. "The 1 percent increase in the payout rate was provided by the funds that will ultimately be John Kluge's gift," he said. "By increasing the rate now, we're able to fund the enhancement before we actually get that principal into the endowment."

The spending plan, as approved by Columbia's trustees, is a setback as Columbia strives to increase its endowment across the board. "It comes at a cost: We'll be giving up all the investment returns on the extra money they're spending," Norum said. "The lost gain on the endowment is a reasonable price to pay in order to do these things now instead of having to wait for the actual gifts to come in, and especially because it's a solid pledge for a very specific purpose."

The regular payout rate is about 5 percent. Dirks said such a plan sets a precedent for the way Columbia uses its endowment. As such, it had to be scrutinized by multiple parties, in a process Bollinger said was "more consultative" in a phone interview on Monday.

"Once we did it, we had to figure out how much money it's going to bring in, that the bridge was adequate to do the things we wanted, and that in fact, we do come down to another shore, and be at a place where we can continue what we're doing, and not having to renege on commitments," Dirks said.

Norum added that while the School of Engineering and Applied Science cannot benefit from Kluge's gift, it is employing the same spending techniques to finance the enhancements. Dirks stressed the importance of keeping SEAS and CC financial-aid policies analogous. Interim SEAS Dean Gerald Navratil could not be reached Monday afternoon.

Since financial-aid policy at the School of General Studies is "diametrically opposite" to that of CC, as Norum put it, the new plan will affect about half of GS students currently receiving aid. GS financial aid is currently chiefly merit-based, but next year the distribution of the additional $1 million will be determined by demonstrated need, actual loan burden, and academic standing.

More than gifts or annual funds, unrestricted endowments pay for GS financial aid. "GS doesn't have the same endowment and the annual giving to be able to increase on an unrestricted base the amount of aid they are able to award," Norum said. "That's why the endowment component of their Capital Campaign goals is important. If they raise all that money, then they'll be able to approach the College’s level of fund-raising, and financial aid budget.”

"We're excited about this," Dirks said. "You do one set of things and there are lots of other groups that are concerned about what we're doing for them. We're thinking about the need to increase financial-aid support across the University."

joy.resmovits@columbiaspectator.com