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Anya Kamenetz Generation Debt

Anya Kamenetz, Generation Debt

Getting an Ivy League Education -- on the Cheap

by Anya Kamenetz

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Posted on Wednesday, January 30, 2008, 12:00AM

"If Your Family Earns Less Than $60,000 a Year, Harvard University Is Free."

That's what it read, in bold letters, on the poster I saw hanging on a door at New York City's Legacy High School, where I was attending a planning meeting for community members involved in public schools.

Harvard announced this decision last March, and followed up with an even more generous adjustment in December, declaring that families with incomes below $180,000 a year -- all but the top 5 percent of U.S. earners -- would pay no more than 10 percent of their income in college costs.

Yale followed suit with a similar announcement a couple of weeks ago, and Princeton, the University of Pennsylvania, Swarthmore, Haverford, Dartmouth, Duke, and Bowdoin have all lowered the expected costs for families making up to six figures, in a new acknowledgement that middle-class and even upper-middle-class families can have trouble affording college.

The Skeptical Media

Most media coverage of the change has argued that these tuition policies, while good news for a small number of families, are unlikely to sweep the nation. More than 80 percent of American college students attend public colleges that don't have the same resources to cut tuition costs even if they wanted to.

The skeptical view is that these private colleges, with their multibillion-dollar endowments, are simply trying to get out ahead of government regulation.

In the past decade, many private colleges have hired professional investment managers and made risky hedge fund investments, earning an average of 15.2 percent in 2006 -- all tax-free, of course. Harvard has grown its endowment from $7 billion to $35 billion since 1991 by pursuing this strategy.

Sen. Chuck Grassley (R-Iowa) has been scrutinizing these practices and backing a new law that would require the 76 private colleges with endowments over $1 billion to pay out at least 5 percent of the money a year, a rule that applies to charitable foundations. Small coincidence then that Harvard and Yale's new policies happen to increase their endowment payouts to right around that 5 percent line.

Price Slashing Good News for All

Whatever the private colleges' true motivation, however, these new tuition policies are good news for all families and students who are struggling to pay for a college education. The reason goes back to that poster at Legacy School.

Harvard carries a disproportionate symbolic weight. An urban public high school like Legacy may send one graduate there every other year, at most, but knowing that an Ivy League education will be free or affordable for middle-class and working-class students who qualify can motivate millions of young people. In contrast to middle-class students with college-educated parents, low-income students, especially the children of immigrants or the first in their families to attend college, are more likely to be unfamiliar with the confusing student aid applications and to be daunted by high sticker prices.

Harvard's publicizing their free-tuition policy may help high-achieving students of few resources get the message that a private college may ultimately be able to offer them more assistance than the local public or community college. And more colleges may feel motivated or pressured to show that they care just as much about affordability as the big names do.

Luke Swarthout, a higher education associate at the U.S. Public Interest Research Groups, agrees that the decisions made by certain schools can have a real impact.

Harvard and Yale Setting the Tone

"Harvard and Yale clearly set the tone," he says. "They drive the market for students and for faculty. There's a real trickle-down effect.

"To the extent that they encourage states and other institutions to focus on addressing real challenges, like access by low-income students, [Ivy League schools] can be a real force for good and progress."

The trickle-down effect has already begun. At a recent meeting of the University of California Board of Regents, a research group headed by UC Berkeley Chancellor Robert Birgeneau cited the Harvard and Yale decisions when recommending that the public university system create a $2 billion fund from private donations and tuition, and dedicate it to reducing college costs.

The University of California system is one of the largest in the world, with over 200,000 students. It also does a better job than many other large state systems at helping community college students transfer in and complete their degrees. A decision in California to redouble the resources dedicated to access would have a positive effect on a large number of students who really need the help.

The study found that within 10 years, even with existing student aid, the cost of attendance for students from families making less than $40,000 a year will average $16,700 or more, an amount that the chancellor called "unrealistic."

Guaranteeing Accessibility

"Our ultimate goal is to guarantee accessibility for the indefinite future, not only for students from the poorest families but also for those from the middle class," he said in a statement. "It is urgent that we act now to avoid a crisis of accessibility in the near future."

With tuition rising at two or three times the rate of inflation, the college accessibility "crisis" has many causes, and it will take many different types of reform to address it. The cause that's gotten the most attention of late in Congress and on the presidential campaign trail has been the role of the federal government -- the largest provider of tuition assistance -- and the need to use taxpayer resources more efficiently so we're subsidizing students, not just student loan companies.

The recent decisions by a few private colleges raise the stakes for  other educational institutions to show that they're dedicated to holding down costs for students. I believe it's now time for families and communities to push for more accountability and transparency on the part of public institutions. Colleges need to show that they can be efficient in their use of resources and do more with less. Competition and smart consumer choices by students and families will ultimately be just as important to holding down college costs as contributions from the public and private sector combined.

Find the Princeton Review's list of the Best Value colleges here and US News and World Report's list of Best Value colleges here.

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82 Comments

Showing comments 6-35 of 82<< PreviousNext >>
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  • kibbles - Sunday, February 3, 2008, 12:58AM ET  Report Abuse

    • Overall: 3/5

    The prior poster is wrong about top undergrad being unimportant for grad. Most faculty who make admission decisions at top graduate schools (Ph.D.) put a lot of weight on undergrad school reputation. I know this firsthand. Another point: look at the Ph.D. students in any top school and where they went to college. Generally, a very disproportionate number are from top schools. Lastly, there are differences in caliber across schools. I went to a top undergrad, and I worked with this first year Ph.D. from a mediocre school. He got in based on his undergrad profs stating that he was clearly the best student there in 20 years. In working with this guy, I could believe this, but he confessed to me that he was nearly overwhelmed by some math classes that I was also taking. He managed to get through it by sheer intelligence, but he also mentioned that he felt that huge difficulty he was having was because his undergrad education simply did not prepare him for it and that the transistion was a huge eye opener.

  • Yahoo! Finance User - Saturday, February 2, 2008, 8:18PM ET  Report Abuse

    • Overall: 1/5

    Most of the info in this article can be found in newspapers from a month ago. Everything here is old news and poorly reported on. I would like to add a comment about people interested in graduate school. I got a free ride to a good public university in my hometown and went on to interview and was accepted at every top graduate school to which I applied. Fellow interviewees were from all types of schools: Public, private, top, mediocre... Basically, if you are interested in graduate school, it doesn't matter where you do your undergraduate. My advice: Go to the cheapest (with aid factored in) decent school and work hard. People who think that students at Ivy Leagues don't party just as much as people at other universities are naive.

  • Michael H - Saturday, February 2, 2008, 7:18PM ET  Report Abuse

    • Overall: 4/5

    What they are doing makes sense. Anya's commentary on universities of all kinds being more efficient with their use of funds is also on target. Why is is that college tuition has far outpaced the inflation rate for the last 30 years. The cost of education, like health care, is outstripping our collective ability to pay for it. Real change besides the government throwing more money at the problem is needed.

  • Yahoo! Finance User - Saturday, February 2, 2008, 10:57AM ET  Report Abuse

    • Overall: 1/5

    who needs Ivy? The Ivy Leaguers I've worked with and for have done nothing but show me "what not to do" in business. Its not what you pay (or what someone else pays) its what you make of it.

  • Yahoo! Finance User - Saturday, February 2, 2008, 10:19AM ET  Report Abuse

    • Overall: 5/5

    This is great news for a father worrying how he is going to afford to educate his family. I hope many other wealthy schools do the same.

  • Yahoo! Finance User - Friday, February 1, 2008, 4:24PM ET  Report Abuse

    • Overall: 4/5

    5% of US population is making more than $180,000 per household? Wonder, where does this statistics come from?

  • golfmate - Friday, February 1, 2008, 11:35AM ET  Report Abuse

    • Overall: 4/5

    Have you been on a college campus lately, everyone goes to college. This creates a need for more resources and more money, I guess this could be a good thing??? I have young children and I want them to go to the best school possible and whatever cost, and graduate school. Because I think there has been a total dilution of just having a degree.

  • Yahoo! Finance User - Thursday, January 31, 2008, 2:20PM ET  Report Abuse

    • Overall: 2/5

    I'll try to remember this in ten years when my daughter is ready for college.

  • Yahoo! Finance User - Thursday, January 31, 2008, 1:31PM ET  Report Abuse

    • Overall: 4/5

    Does this apply to graduate school too?

  • Yahoo! Finance User - Thursday, January 31, 2008, 1:18PM ET  Report Abuse

    • Overall: 3/5

    This is an interesting article, but I'd really like to see an examination about the skyrocketing cost of college, and why the public just seems to accept it. I have a 6-month-old daughter, and the amount I need to put in her college fund from birth for the AVERAGE cost of a private college is $605/month. This is to cover the cost of a college that is currently $25k/year, and we all know that there are many colleges that currently cost more than that. Does anyone else find this somewhat insane? I worked my way through state college, and I am certainly not opposed to her working during and paying for some of her school costs, but I would really like for her not to graduate with tons of debt. Sure, maybe she'll get scholarships, and maybe she'll get into a great state school (although even most state schools are not exactly cheap anymore), but I have to plan for the worst-case scenario. That's fine (if painful), but most people can't sock away $600/month per child, and most middle-class people will have to go into serious debt. We need to re-examine the cost of college in this country, and imo, we also need to make community colleges a better alternative. (We need to upgrade our entire educational system, but that's another rant, as is the need to create training opportunities for people who do not go to college.) Society as a whole (and our economy) can only benefit from a better educational system that is not accessible only to the well-off.

  • Joseph - Thursday, January 31, 2008, 10:45AM ET  Report Abuse

    • Overall: 1/5

    You don't have to spend a fortune to obtain a good education and you don't have to go to an Ivy league school to be successful. Both my wife and I graduated from very small colleges in Kansas and we each make over $150K a year (we are both age 46 and are not doctors or lawyers). Just work hard, show up to work, and learn everyday.

  • robert c - Thursday, January 31, 2008, 7:25AM ET  Report Abuse

    • Overall: 1/5

    The enigma that surrounds the clan with which people of this world try to associate with but can not because of thier obtuse natures escapes me. That said, "education" is an eighty billion dollar a year industry. Learning, teaching are not what it's about, although there is so much to be said about this and everything else gone amiss on planet earth.

  • suavamente - Thursday, January 31, 2008, 2:54AM ET  Report Abuse

    • Overall: 1/5

    This advise doesn't help us College kids in California with fees being raised yet again, it just mentions it! I guess this article is more for ivy leaguers than the average gen "debt" as she likes to call us. Your still hot though! show some cleavage.

  • Bull007 - Thursday, January 31, 2008, 1:18AM ET  Report Abuse

    • Overall: 3/5

    Im impressed with all the comments. A lot of people have either a weak argument or an unreallistic point of view. It is true that top schools have a hefty tag price on them. If you wondered why..... Its not because they have the answers to all questions or because they give you knowledge nobody else has. Its because Its really hard to get in( which pretty much accounts for some of the brightest minds youll encounter) people that get in excell not only in academics.. they are activists, volunteers and athletes.Hard workers, per se.Plus they have the resources to hire great faculty. Marketing and branding definetly acount for something too. So lay off the author, shes not saying if youre poor youll get in. So if you want to get in work hard, and these schools will lend a helping hand. For people ranting about working for someone else and being rich with their own business. They are neglecting the fact that most small businesses fail during the first 2 years, the rest will struggle for a few years before paying off. Which implies little free time, getting a second mortgage to jumpstart your business and the risk of loosing even if you work real hard. Being an entrepreneur is not easy. Im both a small business owner and an employed consultant. That is my perspective.

  • Camille - Wednesday, January 30, 2008, 10:14PM ET  Report Abuse

    • Overall: 1/5

    Didn't you cover this topic, previously?

  • tom - Wednesday, January 30, 2008, 8:02PM ET  Report Abuse

    • Overall: 1/5

    This article is ridiculous, I would respectfully request Yahoo find a new "Gen Debt" writer who is accurate, informative and communicates worthwhile & newsworthy information to young minded (and older) investors. It would be a tradegy to see a young person derive any kind of financial plan/strategy based on this author.

  • Rod S - Wednesday, January 30, 2008, 7:30PM ET  Report Abuse

    • Overall: 2/5

    Anya starts this article with a decent premise, making a college education available to many who may not otherwise be able to obtain one. However, like all of her other articles, the piece just turns into yet another one of her pieces where she whines and cries about the difficulties and challenges in life. It would have been a better piece if she had continued along the theme of access to higher education and possibly listed some resources readers could use to seek out financial aid programs, colleges that offer tuition discounts, and similiar types of information. Anyone can whine about how hard life is but apparently they can not use their forum to educate and inform. How unfortunate.

  • misterblue - Wednesday, January 30, 2008, 4:53PM ET  Report Abuse

    • Overall: 4/5

    The spoon fed rich will obviously have a problem with this encouraging development. And, don't forget, "W" would have never made it into Yale on grades alone. Economic achievement of your parents shouldn't be the determining factor for deserving students. Good job reporting on what is, probably, an intentionally under-reported story.

  • Sergio - Wednesday, January 30, 2008, 4:25PM ET  Report Abuse

    • Overall: 1/5

    This article is incorrect and a bit ridiculous. Just because your income is less than $60,000 doesn't mean that you are going to get into an Ivy League school. Is it all about money? WRONG. What about grades, extra curricular activities, etc...? Give me a break. Download a Harvard application and let me know if it is just related to your family income.

  • Karen - Wednesday, January 30, 2008, 4:23PM ET  Report Abuse

    • Overall: 4/5

    If college students intend on pursing a graduate education, go to a state university with a good reputation. For one thing, you don't want to pauperize yourself if you need another 4 years of loans, and second, going to a top school where everyone is as smart as you are changes the bell curve -- average is no longer average and this can be crushing. Secondly, the top business schools (Wharton (UPenn), Harvard, et al) don't always accept from their own graduates. But don't let others opinions stop you from living your dream. If going Ivy League is what you desire, go for it. I went to Yale and I had a good experience (except for that one year when I had to get another loan because the previous year my dad was employed, but the current year he wasn't (and Financial Aid is based on the previous year), and the value of the house went up and my financial aid packet went down), but in retrospect, what I got out of it wasn't what they were selling to the students. It can be a great experience (and remember, when everyone else is in the top 2 or 3% nationwide (and at the time I was at the top 1% based on the SATs), it can be very difficult to keep up the A average you are used to in high school) but at the same time very pressured. On the otherhand, once you learn to deal with the pressure and figure out what you want to study (your job will not always be related to your area of study, unless you go to grad school), things will be fine.

  • Yahoo! Finance User - Wednesday, January 30, 2008, 4:14PM ET  Report Abuse

    • Overall: 2/5

    Not so much a gripe with the article as with the program is lauds unquestioningly. It's just more intrusive government regulation (or threatened regulation) to screw people as a result of their having achieved economic success... once again. This cheap populist crap (from people who really know better) is really going to be the death of us all someday.

  • Yahoo! Finance User - Wednesday, January 30, 2008, 3:53PM ET  Report Abuse

    • Overall: 1/5

    Poor, poor Ania from watching TV for free at the bar to free Ivy League education! How long Yahoo keeps on publishing her?? Or she does it for free??

  • Scott - Wednesday, January 30, 2008, 3:21PM ET  Report Abuse

    • Overall: 2/5

    Ways to get into top schools and get scholarships: 1. Good grades, 2. Volunteer 3. Work or other activities 4. Score high on SAT and ACT. 5. Write a top notch essay on college application. My son did all of the above and has had several top private and public schools offering him scholarships covering from 1/3rd to 3/4 of their tuition to attend. I don't know what his mom makes, but my salary is above $50k. While it is nice to know the Ivy league schools are cutting tuition for low income students, it should also be important for people to know that you can "earn" your way in to top schools the old fashioned way by "hard work" good grades and still get the school to foot the bill. Regardless of the parent's income or abilty to pay.

  • MikeT - Wednesday, January 30, 2008, 3:05PM ET  Report Abuse

    • Overall: 4/5

    How abhout international students? Will this rule apply to them?

  • Yahoo! Finance User - Wednesday, January 30, 2008, 3:04PM ET  Report Abuse

    • Overall: 1/5

    To the person who thinks Lehigh is Ivy-ish, we all appreciate the laugh. Anya went to Yale, which is why she wrote the article...

  • Yahoo! Finance User - Wednesday, January 30, 2008, 3:02PM ET  Report Abuse

    • Overall: 2/5

    Personally, I do not think that Ivy league schools are better. The only two reasons people go there are Branding and Connection. People who graduate from them are not necessarily smarter or better. There are many ways to be successful in life without an Ivy league education.

  • Smart A - Wednesday, January 30, 2008, 2:55PM ET  Report Abuse

    • Overall: 4/5

    I commend these institutions for allowing bright children from lower income families to have a chance at a coveted ivy league education. Wish this opportunity existed in my time...not to say I would qualify academically. Secondly, this reporter is HAWT!!

  • felishaD - Wednesday, January 30, 2008, 2:35PM ET  Report Abuse

    • Overall: 1/5

    This article by Anya, Harvard, and other higher education institutions is pure BS. My daughter was accepted to Swarthmore and Dartmouth and I make in the low 50's annual income. Neither college gave me one cent of free money. They looked at the house I live in, my bank account, IRA and my ex husband's assets and said---you can afford this yourself. So do not think that it is as simple as earning less than 60K.....much more is taken into account, including assets. I hate this promo because it is not accurate, and gives one the wrong idea. Sure, lots of fellow students did get scholarship money based on need, but don't think the middle class got very much of it. Those who scrimp and save and are in the middle class have a very hard time getting any free money. I just hope it does pay off, because although I did not mortgage my house to send her to school, I did take on an extra job, and scrimp and pinch on many things. Time will tell if it's worth it.

  • Mr. Main Event - Wednesday, January 30, 2008, 2:34PM ET  Report Abuse

    • Overall: 5/5

    I am a West Point graduate, and I didn't have to pay a penny for my Grade A education. Thank you. BTW, for all of you people who think that the name of your school doesn't matter, guess again. The name of your school is everything unless you are well connected or you are studying a subject/major that is in great demand.

  • Yahoo! Finance User - Wednesday, January 30, 2008, 2:28PM ET  Report Abuse

    • Overall: 4/5

    Umm, hate to tell you but Lehigh isn't in the top 30 in US News and World Report's latest rankings. Congrats on your position and salary, but the NESCAC or Ivy League are in a class by themselves.

Showing comments 6-35 of 82<< PreviousNext >>

More from Anya Kamenetz

Read the Generation Debt Book

According to economics professor Laurence J. Kotlikoff, Generation Debt offers "a truly gripping account of how young Americans are being ground down by low wages, high taxes, huge student loans, sky-high housing prices, not to mention the impending retirement of their baby boomer parents." Generation Debt will inspire you to take charge of your financial future.

Read more from Anya Kamenetz here and here.

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