The Calm After the Storm: Reevaluating the Future of Financial Aid

Four months ago, no financial aid officer would have believed the academic year could end so calmly. The 1983 budget proposed in February by President Reagan recommended some $2.3 billion in aid cuts for higher education and seemed to spell disaster for universities already strapped by inflation rates and dropping enrollments. Schools that could count on surviving--like Harvard, blessed with a plump endowment and the resources to raise more--expected painful soul-searching over whether they could maintain generous financial aid policies to guarantee equal access.

But the alarm sparked a lobbying movement unified and powerful enough to take both educators and congressional aides by surprise. Busloads of students and sacks of letters poured into the capital, university presidents testified before congressional committees and argued with Education Secretary Terrel H. Bell behind closed doors. Financial aid officials who once predicted the necessity of rolling back aid blind admissions and scraping together alternative loan plans this year now note, albeit cautiously, that congressional delays have made it almost inconceivable that sizeable cuts could take effect before October, when next year's final aid and loan applications are due.

All agree, though, that the reprieve is only temporary. Many, at Harvard, and elsewhere, have emerged from the initial panic feeling that the current situation cannot fast forever--and as a result are scrutinizing the long-range implications and philosophical underpinnings of present aid policies. Says Richard W. Black. University coordinator of financial aid, quoting a Washington colleague: "We've taken the bulkhead, but it's still a long way to Berlin."

Martha Lyman, director of financial aid for the College, divides the long-range questions unearthed by chaos into two groups. The first is practical: just how long can the College, and universities in general, expect to go on coming up with new grants and loans to finance the ever-growing costs of education? The second--uppermost in enough people's minds by March so that both President Bok and Yale's President A. Bartlett Giamatti devoted annual reports to the subject--concerns what responsibility, if any, the federal government actually bears to higher education.

Whatever they favor, educators are quick to credit Washington's ominous doings with one benefit. They have focused attention on massive aid programs which--though growing at a furious rate for the last 20 years--had never before been subjected to the kind of philosophical scrutiny that its defenders have recently had to summon up.

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Harvard's fight against the threatened cuts has proven to many administrators that the problem here is not primarily one of scraping up enough money to get by. Unlike the hundreds of institutions that rely on tuition. Harvard supplies about 70 percent of its aid budget itself from endowment income; when necessary, it also can draw on the Faculty's "unrestricted funds," according to Thomas J. O'Brien, vice-president for finances.

This year, the Faculty did come to the rescue, filling the gap left by departing federal funds, it voted to allocate almost $5 million in unrestricted funds to next year's financial aid budget. In fact, the average aid package offered to the Class of '86, admitted under aid-blind policies, actually increased in absolute terms, almost keeping pace with the rate of college costs increases.

Given the boost, College officials--even those who maintain there is still more cause for alarm than complacency--sound positively sanguine about the short-term dollar outlook for the fall. Long threatened more by what L. Fred Jewett '57, dean of admissions and financial aid, calls "erosion of fixed incomes" than by specific cuts, Harvard can hope for an easing of aid pressure as the inflation rate inches down; if the pattern continues, the income on the endowment may once again be able to keep pace with costs. The admissions office also stands to gain from the Harvard Campaign, now approaching $200 million. Aid officials say they have also been quietly assured that if the $250 million goal is increased, financial aid will claim a good portion of the addition.

"We're spending an enormous amount" on financial aid, notes Henry Rosovsky, dean of the Faculty, whom Jewett credits with pushing through the allocation of the extra $2 million. But while he is sanguine about the "forseeable future." Rosovsky suggests that "at some point we're not going to be able to do it any more--it depends on the Faculty's priorities." His concern echoes aid officials' assumption that any current funding innovations are little more than makeshift. Lyman and Jewett talk of "tinkering with the edges" and "belt-tightening" without altering the basic lines of College policy. But such modification in the short-run, they say, will not resolve any of the philosophical questions that eventually will demand scrutiny.

Rosovsky and O'Brien both cite faculty salaries as the only priority that could ever challenge financial aid in an ultimate economy squeeze. Given a choice between compromising the quality of faculty or of students. O'Brien says. "Both would probably give a little bit"; he does, however, cite the "special appeal" undergraduate financial aid has for alumni donors as a reason for some optimism.

Jewett, who took the year off from day-to-day admissions duties to study the chances and implications of adhering to the aid-blind approach, spent much of the spring going from House to House for dinner, talking to groups of students. One of his main questions was how much students felt it was worth straining to adhere to the ideal. How much more, he asked, could the available money be spread (in the form of work-study and loans rather than grants) before the pressure of a work-study job outweighed the benefits of being here at all?

On this question, Jewett says, he found undergraduates somewhat more resilient than he had expected. Accordingly, the average self-help package for next year has increased by some $500 in term-time earnings and some $100 for summer work.

Similar questions of "straining" students have taken on startling urgency in the controversy over guaranteed student loans, in some ways the program most victimized by Reagan's proposals. The president's budget called for a rules change that would bar all graduate and professional students from the low-interest loan program, while increasing starting fees and interest rates and tightening eligibility requirements for undergraduates. While some lobbyists and legislators considered the proposal so ridiculous as to be Reagan's "red herring," a bargaining chip in case outraged interest groups wanted to bargain, others viewed it as a threat touching on the troublesome question of just how much students can realistically be loaned in the first place.

Of all the assistance programs, most educators agree, the GSLs are the most in need of some sort of control. Ever since the Carter administration dramatically expanded eligibility for the loans and removed the maximum income ceiling altogether, the governmental cost of financing the loans has rocketed.

The result of several months of legislative maneuvering has been the adoption of a maximum family income of $75,000 a year for GSL users--a restriction which can be waived if professional scholarship-computing services find that a family incurs enough other costs such as that of other children in college. The new maximum would affect only about 25 undergraduates here, Lyman says.

But Lyman says her office is receiving a different variety of panicked phone calls this year--ones from families which, though not qualifying or not even applying for aid, are aghast at the heights to which tuition has risen. She describes frequently panicked freshman parents who "have many other expenses, a whole lifestyle, and here they are three months before making a substantial payment. It's not a good time to be planning."

But the automatic recommendation many would make--that the alarmed family seek a loan--highlights for Lyman the problem of the "lend 'em $5,000 bucks and send 'em out the door approach," a strategy graduate students particularly rely on. "Whether a student can borrow an infinite amount of money is a real problem," Lyman says.

Heavy borrowing is equally problematic for the unprepared middle-class family with expenses, and for the student with no resources at all. Aid officers calculate that, with rising interest rates and with the new GSL stipulation that students start repaying the loans while still in school, a student relying on them through both college and grad school could amass tens of thousands of dollars in debt.

Neither the loan program nor the Pell Grants--direct grants for needy students, targeted by Reagan for nearly $1 billion of cuts--will have suffered substantially by the time next year's aid applications go through. But the College has already seen some disturbing signs of the deeper problems that officials cite.

William R. Fitzsimmons '67, acting director of admissions and financial aid noted a significant percentage drop in the number of applicants to the the Class of '86 whose parents did not attend college. Interpreting the drop as a communications gap--students from working-class backgrounds wrongly assumed they could not afford Harvard and eliminated themselves from the applicant pool without finding out that Harvard had maintained its aid-blind policy--Fitzsimmons echoes the its aid-blind policy--Fitzsimmons echoes the alarm voiced by the Coalition for Student Aid (CSA), a newly formed student group to combat the cuts threat.

"You can't really go back to your hometown anymore and tell people to apply and not worry, not when you don't know what's going to happen," says Christina Spaulding '83, incoming president of the Democratic Club and a CSA member, who helped organize an April rally supporting equal access to education and protesting the cuts. The coalition also publicly stressed equal access as a broad goal for higher education when it sent a letter to President Bok criticizing his annual report, which examined what the federal government's role should be in higher education. That issue, most officials say, underlies the current cuts controversy and will make it crop up again every few years until it is resolved.

Bok's 32-page report drew harsh local criticism but considerable attention in Washington, as it endorsed higher education principally because it makes students more productive members of society. That philosophy led Bok to suggest that, if necessary, the federal government could target aid only to those students-deemed most likely to finish college.

Bok says the practical suggestions that caused such controversy--like using SAT scores and high school records to determine which students are "likely" to finish college and thus qualify for aid--were only "meant to generate discussion" and not intended as actual proposals. But his perception of education as a benefit primarily to society, rather than the student, drew the most violent objection from the CSA. Its letter criticizes Bok for failing "to stress the importance of maintaining equal educational access for all students" and accuses him of valuing education not "for its own sake, but because a diploma may make a person a more productive economic unit."

Officials here, however praised Bok for having directly addressed the issue they say underlies all other arguments about financial aid, regardless of whether or not Harvard rides out the storm. Bok opens his report with an anecdote of meeting with Education Secretary Bell for a much-sought-after 15 minutes of lobbying time, only to have the secretary ask, almost casually, what he thought the role of the federal government in education should be. O'Brien, in defending financial aid as a priority for university money, similarly sticks to that level of discourse, calling aid-blind admissions a symbol of "the promise that higher education has assumed as its burden--the promise of democracy, that able people can get ahead."

"Of course we're doing a job for ourselves too," O'Brien says of aid-blind's benefits, "Our faculty likes to have bright students, they like to have diversity. But if we fail to make the more fundamental argument. I think we are missing the best reason of all." Direct Aid Given by Harvard and Radcliffe Colleges Year  Pell Grants (federal)  Faculty Unrestricted Funds  Radcliffe Funds  Mass. State Grants 1979-80  $1,375,000  $1,953,000  $430,000  $162,000 1980-81  $1,228,771  $2,134,000  $381,000  $215,000 1981-82 (estimated)  $1 million  $2,938,000  $400,000  $301,000 All figures compiled by the financial aid office.