Continued: What's good for Harvard isn't so true for Carleton

When Harvard University announced in December that its middle-class students would receive an Ivy League education at a public school price, it set off a race among elite private colleges and universities to sweeten their financial aid.

More than three dozen schools -- including Yale University, Williams College, Pomona College and Stanford University -- have said that they too would limit or eliminate loans from their aid packages while expanding the number of students eligible for assistance.

Schools with smaller endowments, including Minnesota's top private colleges, feel new pressure to change their financial aid, but they doubt they can compete with their wealthier cousins.

This fall, Carleton College will eliminate loans for students from families making less than $40,000, but it doesn't have the money to make broad changes.

"When Stanford announces no tuition for families making $100,000 or less, that's the megarich acting in a way that we can't emulate," said Carleton President Robert Oden. "It's scary. They really have redefined the landscape, and I don't think any of us really know what the next few years is going to bring."

The changes come as Congress is wanting colleges and universities to use more of their growing endowments to counter rapidly rising tuition. Tuition and living expenses at a top-flight private university can reach more than $45,000 a year.

"Tuition has gone up, college presidents' salaries have gone up and endowments continue to go up and up," Sen. Charles Grassley, R-Iowa, said in January. "We need to start seeing tuition relief for families go up just as fast. It's fair to ask whether a college kid should have to wash dishes in the dining hall to pay his tuition when his college has a billion dollars in the bank."

Minnesota is different league

While U.S. News & World Report's rankings of the nation's top liberal arts schools has Carleton at No. 5, Macalester College at No. 26 and St. Olaf College at No. 54, the elite institutions are in another world financially.

Harvard currently has an endowment of more than $34.6 billion. Yale has more than $22.5 billion and Stanford $17.1 billion, according to the National Association of College and University Business Officers. The University of Minnesota's $2.8 billion endowment is the largest in the state, dwarfing those of No. 2 Macalester (almost $676 million) and No. 3 Carleton ($663 million).

"The negative is that it creates a certain expectation in the minds of the public that's very difficult for most colleges and universities to meet," Macalester President Brian Rosenberg said.

Another challenge for Minnesota's colleges and universities is that they have a greater percentage of students receiving financial aid than some of those elite schools.

"There's a dramatic difference between the posted price and what most people pay," Rosenberg said. "We have very, very few students from very, very wealthy families."

While it might be ambitious to think that a student would pass on Harvard or Yale or Stanford to attend one of Minnesota's top colleges, Rosenberg and Oden said that the ramping up of financial aid has reached institutions that they consider competitors.

"When what followed Harvard was Bowdoin, Colby, Pomona, Brown and a lot of others, it does make it tougher," Oden said.

Beginning this fall, Carleton students from families with incomes of less than $40,000 will go to school loan free. Students from families making between $40,000 and about $85,000 will have more grants and fewer loans.

"That's what, right now, is realistic," Oden said. "Going tuition free for below $100,000 and going completely no loan is a wonderful aspiration, but it's not realistic."

Colby College and Bowdoin College, both in Maine, and Davidson College in North Carolina are the only schools with endowments of less than $1 billion that have announced broad financial aid changes, according to Tony Pals of the National Association of Independent Colleges and Universities.

"It will be very difficult for too many more institutions to follow through," he said.

The unknown impact

This spring may provide a quick glance at what the new landscape will look like.

"I fully expect that as we get into this spring season when financial aid awards are provided to students ... they're going to be comparing our financial aid award to others," said Michael Kyle, vice president for enrollment at St. Olaf. "I believe we can be competitive, but we have no intention of going to a no-loan policy, particularly within the next couple of years. We simply can't afford it."

The real test, however, will come when the Class of 2009 -- this year's high school juniors -- begins applying to college.

Because of the timing of the announcements, many current high school seniors were well on their way to deciding where to apply. In addition, many colleges and universities already had their financial budgets for next year already set.

For those institutions that have done away with most loans, students still have to get in. In 2006, Harvard accepted only 9 percent of more than 22,000 applicants.

But will there be a subset of top-flight students that simply rule out private schools that don't have a no-loan policy?

"We hope that it will not have an impact on our number of applications or our ability to enroll tremendous students," Rosenberg said. "But it does impact the perception."

And one of the perceptions that concerns him is that loans are inherently bad.

"When [elite schools] eliminate loans, they're also creating a unrealistic set of expectations that there's something wrong with borrowing for higher education," Rosenberg said. "People don't think twice about taking out a loan for a car or a boat or a home or sometimes even a second home. Unlike a car or a boat, an education doesn't depreciate.

"While the loan burden should be reasonable, I don't see anything wrong with taking out loans. They're creating the impression that there's something almost immoral about taking out loans."

Jeff Shelman • 612-673-7478