Farm Aid

Photo: Peter Stember

In February, Stanford announced broad enhancements to its financial aid program. The biggest change: parents with incomes below $100,000 will no longer be required to pay tuition. In most cases, their parental contribution will not exceed the costs of room and board (about $11,000 for the current academic year). Parents with incomes below $60,000 will not be required to pay any costs, including room and board, books and travel expenses.

Students in all income categories will be expected to pay up to $4,500 from their own pockets through some combination of savings, summer earnings (estimated to be about $2,000) and work study jobs while at Stanford. At a pay rate of $11 per hour, students working 7.5 hours per week during the academic year could earn $2,500.

Shortly after the program was announced, Stanford invited dean of admission and financial aid Richard Shaw (left) and Provost John Etchemendy, PhD '82, to share their thoughts on the University's financial aid policies and the issue of affordability in higher education. This is an edited transcript of that conversation.

This was the third year in a row Stanford has expanded its financial aid program. What is driving the changes?

Shaw: It is part of a continuum. We reassess our program every February to see whether we are doing all we can. Our goal is to get to a place where students aren't encumbered by large debt loads in order to study here. If you have the capacity to do that, you should do it.

Etchemendy: We have been enhancing our financial aid for several years. For nearly 90 percent of all U.S. families, it is now less expensive to attend Stanford than to attend the University of California schools. That was true for about 70 percent of all families prior to this new program. That doesn't mean the cost doesn't pinch families in the middle class, however. We have tried to address that.

How much will it cost, and where did the money come from?

Shaw: More than $20 million just for this new program. Our total financial aid commitment for under-graduates is about $114 million.

Etchemendy: The cost is not coming out of the endowment, at least initially. It can't because we're already spending all of the financial aid money the endowment is currently producing. About half of it will be paid through an increased allocation to financial aid from the Stanford Fund. The other half initially will be paid out of other reserves that we have. Our goal is to raise additional endowment so we can pay for it in perpetuity out of the endowment.

The University has an endowment of more than $18 billion. Can't it simply designate more of that money for financial aid?

Etchemendy: The endowment consists of many, many past gifts donated to the University. Most of them have a specified purpose. If an individual provides an endowment gift to support cancer research, it would be illegal for us to use that for financial aid. If a gift is made to support an endowed professorship, it would be illegal to use that for financial aid. About 30 percent of the endowment payout is used for either graduate or undergraduate financial aid. The rest is used for endowed professorships, program support and so forth. If you actually look at the cost of providing an undergraduate education, it's about $60,000. Tuition is about $35,000. So in some sense every student—even if they are paying the full $35,000—is receiving financial aid. What covers the difference? The endowment.

What has been the reaction from students and alumni about the new policy?

Shaw: It's been exceedingly positive, especially from the families in the lower three quartiles [of family income]. I met a mother at a reception recently who was just beaming because she knew this was going to give her son a significant advantage and, maybe just as important, it meant the family would not be so stressed. The people who are most disappointed are those who graduated recently and weren't able to take advantage of this new program.

How many students will benefit?

Shaw: About three-quarters of undergraduates receive some form of financial aid. This includes those who get outside scholarships and athletic aid. Last year, 42 percent received need-based scholarships from Stanford, and this is the population that will benefit from our enhancements. On average, we think the savings will be 16 percent for students in this group.

How did you arrive at the $100,000 figure as a cutoff?

Shaw: It's important to understand that that is not a cliff. Somebody asked me, “What if I'm at $100,001? Does that mean I don't get aid?” No, it doesn't mean that. We have been very thoughtful about smoothing that process all the way up to $150,000.

Etchemendy: There are two problems we are trying to address. One is affordability, the other is the perception of affordability. We could have designed a program that was just as generous but was much more complex, and we would have failed to address that perception issue. One hundred thousand dollars is easily communicated.

Shaw: That's right. If I'm talking to a student in West Texas and I say, “Tuition is free for you,” he gets that very quickly. But if I say, “Let me show you this matrix I have,” that's going to go right over his head.

In some accounts describing financial aid programs, the practice of reducing tuition is referred to as a “discount.” Is that an accurate characterization?

Etchemendy: Calling it a discount is misleading because when we calculate a student's financial aid we look at the student's entire budget—the cost of tuition, the cost of housing, the cost of food, the cost of books, airfare to and from Stanford—and then we make sure we can cover those costs. In the case of students who need the most financial aid, we're providing them with far more money than tuition. It would be like saying I get a discount when I buy this car, but not only are they giving me the car, they're giving me enough money to buy gas, to stop at McDonald's for lunch on the way home, and so on.

Stanford still requires students to pay a portion of their expenses themselves. What was the rationale behind that?

Shaw: We believe you ought to contribute to your education. There are two ways to do that—either you work or you take a personal loan. A lot of students will choose to work to make up that difference. Our students' average debt load last year was $10,000. That seems like a very reasonable amount for four years at Stanford. If students work and make the contribution toward their self-help over the next four years, they can leave without taking any loans.

Etchemendy: I worry about creating the perception that an education at Stanford is an entitlement. That's one of the reasons we believe students should contribute to the cost. What we are trying to do is make sure every student can afford to come. That's different than saying, “Here, your education is free.” That worries me.

What kind of competitive disadvantage would Stanford have faced had it not expanded its programs to these levels?

Etchemendy: We want to be sufficiently competitive with any other school in the country so that the basis of the choice is the quality of the educational experience rather than how many more thousands of dollars a student gets in financial aid from this or that institution. If you think long-term about the effect that choosing one college over another might have on a person's life, a couple thousand dollars per year is not a good basis for making that decision. But at times that is how those decisions are made.

How do you anticipate these recent enhancements will affect recruiting, particularly among students from lower-income families?

Shaw: A lot depends on our outreach. We are now actively recruiting in all 50 states. We have developed relationships with 200 nonprofits across the country, many in inner cities, to help us identify students. We are focusing attention on high schools that haven't sent students to us before. Those relationships and those conversations are not just about Stanford. We are talking to kids about going to college, influencing them to think widely about their possibilities, getting them to reach for the stars.

Etchemendy: What we don't know is how many students aren't applying to Stanford because they assume they can't afford it. We have to count on help from high school counselors to build awareness, and on our admission staff, especially in places that don't have counselors.

How do you overcome the perception that Stanford is out of reach for these students?

Shaw: When we go into communities sometimes we'll hear, “Stanford isn't the kind of school we go to.” And we tell them, “That's not true. This is the kind of institution that, with effort, you can go to.” That message still is not there. We need to work on the ground to help families understand what financial aid can mean for them. That first-generation family whose context is within 5 square miles is astonished when they hear that, if they're accepted, we'll pay all their costs. They just can't believe it. We recently sent out not only the admissions decision but also vouchers to fly to Stanford for lower-income students in our admitted class so that these kids, some of whom have never been on a plane, will be able to come here and see what the opportunity is.

Stanford is one of a handful of schools that retains a so-called “need-blind” admissions policy. Can you describe precisely what that means, and why you think it's important?

Shaw: It means that when you evaluate candidates during the admissions process, you do not in any way consider their ability to pay. That's a great principle, because it means every student can be evaluated on the basis of his or her academic and extracurricular background. We care deeply about what a student's educational experience has been. Every young person is considered in the context of where he or she learned, and what the life circumstances have been. We try to understand what we should expect of them. We think every student has every right to be considered, and we give each one full respect in the process. Some will arrive with unbelievable firepower and will be running strong from Day 1. Others will grow and develop once given the opportunity. We care about their preparation, but also what it means to them to be students here and what they would contribute to the place. Those are all important factors in crafting a class. Hopefully what you have at the end of the day are kids from all walks of life living and learning with you.

Etchemendy: As important or more important is the commitment to provide the resources that will allow anybody who is admitted to come. Being need-blind in the admission process is meaningless if you don't then follow it up with financial aid.

Shaw: Need-based is really a better term. That means we meet the full demonstrated need of any student after we offer them admission. Only about 30 schools in the country can do that.

What should Stanford's role be in helping promote access and affordability to higher education generally? Does this new program help or hurt in that regard?

Shaw: I think these kinds of public developments—and this one was very public—have an effect on all institutions in evaluating access and equity. I can tell you every one of my colleagues is thinking about this, taking a hard look at issues around affordability and even to some extent what it means to be middle-class in America. Questions about what capacity families have in sending their kids to college are on the table in a lot of places. Our kids should have the opportunity to attend college without the huge stress that goes along with heavy debt. The loan scenario across the country is pretty scary for a lot of students. If the impact of our decision is to help our kids but also to keep people thinking about access to higher education, I feel like we made the right decision. We're also trying to turn up the heat on the nation to confront the issue of preparation. There are many students out there, but are they qualified? If we're letting down kids in middle school and high school, we're walking away from the future.

Etchemendy: The top universities in this country—and I'm not just talking about Stanford and the Ivies, but also the Berkeleys and Michigans—are the great engines for social mobility. There is no higher priority than education. To the extent we can help make those opportunities possible for more students, either with our own programs or in influencing others, it's important for us to do so.