Student loan debt reached $1 trillion last year. College costs continue to increase faster than incomes, while state government support for higher education is decreasing. Although income and employment opportunities are greater for college degree holders, many families believe they are being priced out of the market.
But college costs and debt vary significantly among institutions and sectors. Due to decreasing state support, public universities have had to increase tuition, with little means to offset increases with student aid. Although they remain lower in cost than many private institutions, the rapid increases in cost of attendance are worrisome. Many private institutions with smaller endowments find themselves in a similar dilemma.
The situation is different at Stanford. Sustaining the excellence of the University depends on the quality of our students, and we have worked to keep a Stanford education accessible to the best students. Stanford is one of only a few need-blind universities that meet a family's full demonstrated need.
As a result of our commitment, the cost of attending Stanford has effectively gone down in recent years. For example, over the past six years, net tuition (tuition minus all financial aid) has decreased and is now at its 1994 level (adjusted for inflation). Net total cost of attendance—tuition, room, board and fees minus all aid—is at 1999 levels after inflation.
This is possible because our financial aid program, enhanced in the mid-2000s, is one of the strongest in the country. In 1991-92, Stanford awarded need-based aid to 40 percent of our undergraduates, with an average amount of a little over $10,000 each. In 2011-12, we awarded aid to slightly more than half of our undergraduates, averaging more than $36,000 each.
Key to our changes was a simplified model for lower- and middle-income families: Stanford students whose family income is below $100,000 pay no tuition; parents with income below $60,000 pay neither tuition nor room and board. Students are expected to contribute a portion of earnings from summer and work-study jobs, but at a level low enough that they can do so without borrowing.
As a result, Stanford students incur far less debt: Of the students earning undergraduate degrees in 2011-12, 75 percent graduated debt-free. The average amount for the 25 percent with debt was $18,833 (less than the average for the 45 percent who carried debt in 2002, after inflation). Nationwide, 72 percent of students at private universities, 62 percent at public institutions and fully 96 percent at for-profit colleges graduate with debt, according to a 2007-08 study. Debt levels have risen further in recent years. In 2011 about two-thirds of all college students graduated with debt, and each had an average debt of $26,500.
Sustaining our program through the global economic downturn was essential, as applications for financial aid surged and the endowment dropped. Between 2008 and 2012, when average costs for an undergraduate increased by 17 percent, our need-based aid increased by 68.5 percent.
The Stanford Fund for Undergraduate Education has been invaluable. In 2008, it made up 7 percent of the University's need-based aid. By 2012, its contribution had more than doubled to 15 percent. Last year, The Stanford Fund provided support to more than 1,200 undergraduates. Fortunately, Stanford—with the support of our alumni and friends—can minimize our students' debt burden, but I am concerned about the impact on students across our country.
When Jane and Leland Stanford established our University, they expressed a wish that Stanford would remain accessible to the best students irrespective of personal financial circumstances. I think they would be very pleased with how we have remained committed to that vision.
John Hennessy is the former president of Stanford University.
