COLUMN: Financial aid grants redistribute wealth unfairly

From Mark Fiore's, "The Right Stuff," Fall '99 From Mark Fiore's, "The Right Stuff," Fall '99Robin Hood would admire the way Penn handles financial aid, constantly taking more than necessary from the rich and giving it to the poor without strings attached. But because the operating budget is principally funded by tuition dollars, those who can afford Penn's price tag are subsidizing those who cannot -- and an unnecessary redistribution of wealth occurs. Of course, some redistribution, in the form of need-based loans to students, is necessary and appropriate. But by providing grants instead of loans to some students, Penn forfeits the steady flow of interest and principle payments that loans provide -- and instead forces students who can pay tuition to subsidize payback-free grants. Now, in the midst of its effort to raise new funds for financial aid, Penn should also abolish its practice of providing students with need-based grants and instead shift to loans and donor-funded scholarships. Such a system has scores of advantages. First, the University could lower tuition across the board -- an action that would benefit all students. For those who pay full tuition, the benefit is obvious. But those who do not would also benefit from increased spending on other University priorities, including more professors and better facilities. How? Because loans must be repaid, the University would be able to fund a portion of future financial aid packages -- themselves smaller because tuition would be lower -- with interest and principle payments from past loans. This would allow a greater percentage of the operating budget to be used for other purposes. Currently, by contrast, Penn overburdens tuition-paying students by giving their dollars to students in need without any expectation of repayment. That system punishes parents and students who have worked and saved money, while rewarding those who have been lazy. A student's parents, for example, who have worked most of their lives to save for their child's college education, will be penalized for having done so. Parents who perhaps chose not to work as much, on the other hand, are rewarded with free money. The same holds true for students. Knowing that the University expects them to hand over money they earn before or during their years at Penn, too many students currently spend their free time swimming at the beach instead of working in the office or the retail store. Such parents and students seem to think they are entitled to money with no responsibilities attached. During a campaign last year urging the University to increase its financial aid awards last year, statements like United Minorities Chairperson Chaz Howard's were common: "If you want me to come, I need more than $10." A bold statement, indeed. In fact, such exclamations suggest that some students believe they have an inalienable right to a Penn education. But in reality an education is a privilege that carries with it substantial duties. And there lies the inherent beauty of loans. They provide the opportunity to pursue otherwise unattainable goals, while simultaneously forcing people to take those goals seriously. Of course, some students truly cannot afford the cost of tuition, even with loans. As a result, the University should dramatically step up its efforts to encourage donations in the form of scholarships. Several such donations have come into the University's coffers in recent years. Just this fall, 1956 Wharton graduate Jay Baker agreed to donate $11 million to the University, $3 million of which will support the creation of scholarships for 12 incoming freshmen each year. And in 1998, University Trustees Walter and Leonore Annenberg donated $5 million toward the establishment of the Annenberg Scholars Program for top students with demonstrated financial need. As these gifts illustrate, Penn can -- and should -- focus on encouraging donations for both need-based and merit-based awards. Only then will Penn achieve a level financial aid playing field.