Even if students' parents earn less than $50,000 a year, they are not guaranteed any financial aid under Penn's new financial-aid policy, which was announced last week.
University officials said last Thursday that families earning less than $50,000 a year will receive loan-free financial aid packages, meaning that none of the money given need be repaid.
But that doesn't mean that these families will get financial aid, only that any aid they do get will likely not include loans.
Officials will examine a family's entire fiscal situation before allocating financial aid, and it is possible that families that appear to qualify under the new policy might not and could instead be saddled with loans.
The main purpose of the new plan is to send the message to low-income families that attending Penn is affordable regardless of fiscal background, officials say.
"$50,000 is a rough first indicator of the low- and middle-income ranges," said Bill Schilling, director of student financial aid.
The package is designed for socioeconomically disadvantaged families that typically -- but do not always -- earn $50,000 or less.
This may mean that some students who think they qualify for the new program actually don't.
For example, a family that has an annual income of $50,000 that comes from capital gains like interest from investments would probably not qualify for a no-loan aid package, Schilling said.
But a student whose parents each earn $25,000 a year would be more likely to qualify.
Students receiving Penn's new aid package could also choose to take out a loan in order to lighten the financial burden on their parents, Executive Vice President Craig Carnaroli said.
Still, a main impetus behind the new policy is the reduction of student debt.
He noted that parents and students are often concerned about high student debt.
"We thought that eliminating the loan would really eliminate that psychological barrier to thinking [disadvantaged students] could come to Penn," added Bonnie Gibson, vice president of the Office of Budget and Management Analysis.
Some of Penn's Ivy League peers have also taken the no-loan route with their financial aid initiatives.
Princeton's aid packages never include loans, said Robin Moscato, Princeton's senior associate director of undergraduate financial aid.
Still, the choice to cut back student debt instead of targeting parental contribution -- as other Ivy League schools have done -- is also a result of Penn's relatively smaller endowment.
Harvard and Yale universities -- which have respective endowments of $25.9 billion and $15.2 billion -- each offer a financial-aid package that entails zero parental contribution for students whose families earn under $40,000 and $45,000 a year, respectively.
Penn's endowment, however, is $4.4 billion, which is significantly smaller than Yale and Harvard's.
"We don't have the endowment they do to support financial aid," Carnaroli said.
Officials speculate that a larger endowment might eventually lead to larger financial-aid packages.
"If we had a huge undergraduate financial-aid endowment, we might have been able to do even more," Gibson said.
And getting rid of parental contributions at Penn may not actually solve the problem for low-income families.
"We should not be eliminating parental contribution [in a case] where all the information suggests that parents can make a contribution," Schilling said.
Who gets grants?
- Not all students with an annual family income of $50K or less will qualify for loan-free financial aid
- Some students in this income bracket will still receive loans as part of their aid packages
- Officials said each student's need is evaluated on a case-by-case basis
