Harvard financial aid change may affect U.

While Penn must raise money to boost its aid program, other Ivies can rely on hefty endowments. Harvard University's long-awaited announcement last week that it was joining the elite-school race to increase student financial aid has drawn positive but cautious reaction from administrators at Penn -- which has yet to make its move. When it comes to offering competitive financial aid packages to students, Harvard upped the ante in a big way. The Cambridge, Mass., school announced it will increase financial aid by an unprecedented 20 percent and throw in an extra $2,000 annual grant for all undergraduate financial aid recipients. The race began last January when Princeton University announced sweeping changes to its financial aid policy, eliminating loans for students whose families make less than $40,000 annually and reducing the loan portion of the financial aid package for students whose families make up to $57,500 a year. For both groups, these loans are replaced with institutional grants. Although Penn Student Financial Aid Director William Schilling congratulated Harvard for "making it easier for students from low- and middle-income backgrounds to attend the college of their choice," he cautioned that financial aid competition may lead students to choose a college based on the price tag rather than academic and extra-curricular opportunities. "In terms of choosing the right school, the danger lies in the fact that the richer schools will be able to offer lower prices," Schilling explained. "That may negatively influence the students' decisions." Since Ivy League schools and some peer institutions do not offer athletic or any other type of merit-based scholarships, students who cannot afford the $30,000-a-year price tag must pay their way with the help of a mix of grants and loans. In an effort to decrease student indebtedness and maintain a competitive edge, the race is on to create attractive financial aid packages offering more grants than loans. Although Harvard is able to offer the most substantial aid with its $13 billion endowment -- the largest of any U.S. university -- its move is only the latest instance in 1998. Princeton, Yale and Stanford universities as well as the Massachusetts Institute of Technology have made similar strides this year. And Penn, likewise, is in the middle of an "aggressive" campaign, spearheaded by Board of Trustees Chairperson Roy Vagelos, to increase undergraduate financial aid that comes out of the school's endowment, rather than the operating budget. Schilling said he was "encouraged" by the results the fundraising has produced over the last 12 to 18 months, although pledges are still being secured and final figures are not yet available. With Harvard's new policy in place -- effective immediately -- the school will spend an estimated $90 million on financial aid in the upcoming year, compared to Penn's $50 million aid budget. But with nearly 3,000 more undergraduates than Harvard's 6,600, Penn must stretch its financial aid dollars further. Although Harvard Undergraduate Director of Financial Aid Jim Miller acknowledged that similar moves at peer schools may have played a part in the decision to bolster aid, he insisted that the main impetus was the "increasing concern about the issue of student loans." "We felt that our students were being asked to do a lot, and sometimes being asked to forgo extra-curricular and academic opportunities in order to juggle work-study jobs," Miller said. And Princeton officials were not hesitant to accept credit for paving the way in the quest to "make college more affordable." "Although the timing may have been coincidental for some of the colleges, it is safe to say that not nearly as much would have happened had not Princeton made the first move," Don Betterton, Princeton's director of undergraduate financial aid, said in a statement. The Princeton announcement did set off a cascade of similar initiatives at other elite institutions. In March, MIT unveiled plans to increase scholarship grants to students by 14 percent, as well as to reduce the loan and work-study component by $1,000 per student. And around the same time, Stanford's Board of Trustees voted to assist middle-income families by limiting the impact of home equity when calculating financial aid eligibility. The school also changed how it considers outside scholarships when determining undergraduate financial aid packages. Such scholarships often reduce a student's aid package, as is the current case at Penn. Although officials have not yet announced specific plans to change Penn's financial aid policy, administrators stressed that fundraising is high on the to-do list. Last week, University President Judith Rodin called it the "single highest priority for our fundraising this year." And Admissions Dean Lee Stetson expressed concern about the implications of Harvard's announcement on admissions at Penn. "This could become a trend and it's something that could affect us more than we might anticipate," Stetson said. "This is something we need to take a serious look at, honestly and aggressively." Daily Pennsylvanian staff writer Edward Sherwin contributed to this article.