Princeton expands financial aid system

A Princeton education is about to become a lot cheaper. On Friday, the Ivy League university decided that it would no longer require undergraduates to take out loans to help pay for their education. Instead, Princeton will replace all loans with grants and scholarships -- an initiative that could make the school more accessible to low- and middle-income students. The decision, estimated to affect 25 percent of Princeton's current undergraduate population, will take effect this fall. The funding for these grants will come from the university's endowment, which posted double-digit gains in the past fiscal year, reaching over $8 billion. At a meeting on Friday, the Princeton Board of Trustees approved a plan to add $57 million of the university's endowment income to its operating budget -- with $16 million of this amount earmarked for undergraduate financial aid. According to Princeton Director of Financial Aid Don Betterton, the decision to end loan requirements is the latest and boldest step in four years of changes to the aid system. "This is the fourth year of changes that we've made to relieve the pressure [on students] that we felt was becoming too great," Betterton said. Princeton, whose endowment was up 36 percent at the end of Fiscal Year 2000, was one of several universities that cashed in on the bull market of the late 1990s. And though the now-cooling market has caused some speculation as to the stability of these endowments, Betterton expressed confidence in the viability of the new financial aid plan. "I think we've allowed for slowing down," said Betterton. In an e-mail statement, University President Judith Rodin offered congratulations to Princeton, calling the end of loan requirements "another step towards diversifying their student population." Rodin noted creating diversity among the student body has been a problem for Princeton in the past. "They have had difficulty doing so over the last several years," Rodin said. Princeton officials claim that the decision to replace loans with grants is a dramatic deviation from most financial aid policies. "In eliminating required loans, Princeton is acting against a national trend in which loans make up an increasing portion of student aid packages," school officials said in a statement, adding that 60 percent of student aid in the nation is accounted for by loans. The cost of undergraduate tuition, room and board at Princeton is expected to be $33,613 next year, an increase of almost 3 percent from last year. According to Betterton, the new policy was not intended to draw students away from other competing universities. "We've not said 'OK, let's get students from Yale, Harvard or whatever," he said, explaining that he believe competing institutions would probably try and match the aid that Princeton gave on a case-by-case basis. Yesterday, Rodin pledged that Penn would continue to analyze its financial aid system. "We will continue our aggressive efforts for Penn's financial aid endowment and expect to continue our competitive financial aid program for years to come," she said. However, Penn's current situation may not allow for a change as drastic as Princeton's. Rodin admitted that the rival Ivy simply has more money in the bank. "On a per student basis, Princeton's endowment beats everyone," said Rodin. "That's a fact." University Treasurer Craig Carnaroli projected that as of now, Penn probably can't implement the same change as Princeton. "The short answer is no," he explained. "I'm sure we'll take a close look at it, but we're not in the same financial aid situation as Princeton." While many of Penn's peers have seen their endowments skyrocket in the past year because of venture capital success, Penn's relatively conservative investment strategy led to a 1.8 percent loss during FY 2000. The endowment has since posted modest gains in the first quarter of FY 2001, according to University officials. Penn's Office of Student Financial Aid didn't respond to repeated requests for comment.