Editorial: Well Endowed
What business does a barely-employed, 21-year-old student have financing a $25,000 new car?
Probably none.
Yet, in the last 20 years, the same doubts about that student's ability to pay for a new car would not be voiced if he or she were taking out $25,000 a year in student loans for four years running.
We applaud Harvard University's recent decision to cut loans from its financial aid package and replace them with grants, and we hope other colleges and universities, regardless of resources or endowment size, also realize that poor and middle class students are taught a more valuable lesson by avoiding debt than they are by taking it on.
Harvard is still a very expensive school, and the grants don't relieve students of all financial responsibility. But students can now graduate with a small fraction of the debt they would have accumulated by taking on a loan.
Budgeting 101
For at least the last two decades, colleges cleverly chalked up student loans taken as part of college financial aid packages to part of the educational experience. The higher education line was that by taking out loans to cover tuitions that were becoming more and more expensive and further and further from the grasp of the middle class, students were not only learning the classics or biology or electrical engineering, they were learning financial responsibility as well. Not only that, the student loan bills students get for what seems like the rest of their natural lives were a monthly reminder that they went "to a high quality college," as one Tufts University administrator recently told the Boston Globe.
That, of course, is hogwash. And it's no more true for cars or cookware than it is for education.
A college education has no inherent worth. It's not a commodity or a manufactured good. Its product is abstract, and its worth lies as much in the connections students make there, and simply having the name of the institution printed on a diploma, as it does in completing the curriculum. One doesn't "get what you pay for" in college, one gets what he or she makes of it.
Any student from any family of any income is capable of making the absolute most of a college education without a disingenuous lesson in debt financing or financial responsibility taught by the school's financial aid office. For many students, college isn't the first place they'll learn about personal sacrifice.
Harvard is not alone in realizing this. It is joined in its elimination of loans from student aid packages by Princeton, Haverford College, the University of Pennsylvania and other schools willing to keep students out of severe debt and leave the teaching to the faculty.
To an extent, Harvard has done this because it can. Its endowment is $35 billion and dwarfs that of most colleges and universities.
Local private colleges have much smaller endowments, ranging from $640 million at the College of the Holy Cross, to $404.7 million at Worcester Polytechnic Institute to $289.3 million at Clark University and $67.1 million at Assumption College.
Harvard can afford to simply give the money to students who need it, while local universities would have a much more difficult time affording that level of largesse. College costs have risen beyond the reach of the average family, and have outpaced inflation. And like health care costs, there seems to be no end in sight.
Institutions of higher learning must realize that they cannot continue to simultaneously put tuition and costs beyond the reach of most students and push them into loans in order to secure the college's cut.
WBJ Web Partners
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