Although the University Board of Trustees recently announced that total student charges for the 2002-2003 academic year would increase by 4.6 percent, Penn is also allocating more money to help students pay for the rising cost of tuition.
The University's total budget for undergraduate financial aid rose 9.2 percent over the course of the 2001-2002 academic year.
Overall, the budget has risen from $52.7 million to $59.3 million between Fiscal Years 1999 and 2002 -- a 13 percent increase in total.
Additionally, the average freshman grant has risen by 33 percent over the last four years, whereas the average loan required of incoming students who receive financial aid has declined by 24 percent during the same period.
"What these numbers show is that Penn is serious about our commitment to need-blind admissions," Vice President for Budget and Management Analysis Michael Masch said. "We have determined that if a prospective student is accepted to the University, we will do everything we can to make it possible for a student to attend."
Administrators attributed these changes largely to success that the University has had in increasing the percent of the financial aid budget coming from gift and endowment income.
During Wednesday's University Council Meeting, Provost Robert Barchi reported that since FY 1999, the University has seen a 92 percent increase in the amount of financial aid funding received from endowment and financial gifts. In total, this funding has risen from $3.6 million to $6.9 million over the last four years.
"We've almost doubled the amount of our financial aid budget coming from the endowment," Barchi said. "That may not seem like much, but for us it makes a huge difference."
The remainder of financial aid costs are covered by the University's $3.2 billion operating budget -- the same pool of money that pays for faculty salaries, utilities and the library's budget, among other expenditures.
However, Barchi also noted on Wednesday that Penn's endowment -- which was approximately $3.38 billion as of last June -- is not nearly as strong as some of its peer institutions. For example, Harvard's current endowment is approximately four times larger than Penn's at $17.95 billion.
Likewise, the degree to which income from endowment can be spent on each student is considerably lower at Penn than it is at peer institutions. While Penn can only expend around $160,000 per student from the returns on its endowment, Princeton University can allot more than $1 million.
And last year, Princeton ended all loan requirements for undergraduates.
Penn, however, must depend on its operating budget -- financed largely from tuition and fees -- more heavily.
"The difference between us and some of our more well-endowed peers in regard to undergraduate financial aid is merely that while they take their aid from income generated from their endowments, we take it from our operating budget," University President Judith Rodin said.
Rodin was quick to add, however, that the level of aid that Penn gives is the same as most of its peer institutions.
Over the next few years, the University's operating budget will face additional constraints due to the continued demands of undergraduate housing and dining.
In addition, Penn will lose funding as a result of the decrease in Indirect Cost Recovery reimbursement for the University's research overhead and a proposed 7.2 percent decrease in the University's monetary appropriation from the state.
Despite the combination of projected budget constraints and Penn's dependence on its operating budget for financial aid, Barchi said it will be important for Penn to make itself especially attractive to prospective students over the next few years.
"The real question is how we attract students at a time when we're resource constrained," Barchi said. "What we need to do over the next five years is to show how Penn fosters an environment superior to its peer institutions."
University Treasurer and Vice President for Finance Craig Carnaroli noted that the University's continued efforts to provide need-blind admissions will help Penn remain competitive with other private, research-based universities in its sector.
"I believe that the Trustees' endorsement of need-blind admissions is not something that people want to change," Carnaroli said. "To do that, the University has to have sufficient resources that will keep attracting a high quality student body."
Looking ahead to the future, Carnaroli said that it would be imperative for the University to continue with its fundraising efforts in order to meet the needs of the financial aid budget.
"We need to continue the trend of enlisting donors to help raise the endowment, but financial aid needs increase every year," Carnaroli said. "The question is whether we can expand the size of the endowment at the same rate as the need is growing."
Additionally, Carnaroli said that programs such as the Summer Savings Waiver Program, which allows financial aid recipients working in the not-for-profit sector to receive additional grants, represent the University's continued support of its students.
"These programs are obviously not as good as having direct grants, but we're trying to do what we can," Carnaroli said. "I don't see in the future a need to curtail the level of commitment that we have today."
