Student aid fundraising: is it the answer to the loan/grant imbalance? (Special section: the economy).

The escalating imbalance between availability of financial aid grant money and reliance on student loans is now a serious point of pain for higher ed administrators, as well as for the college students cowered by unprecedented financial burdens. Colleges and universities are scrambling for ways to make post-secondary education more affordable to prospects--or lose them to institutions with smaller price tags. And although The College Board's study, Trends in Student Aid 2001, indicated a record $74 billion in aid from federal, state and institutional resources was available to students and their families in 2000-2001, it was a reliance on loan programs--not an increase in grants--that was responsible for the 3.5 percent increase in financial aid.

Various measures. Some states (notably North Dakota and West Virginia) are pushing for income tax breaks which would give young people a leg-up of sorts, in college loan repayment. In Nebraska, the state's Coordinating Commission for Post Secondary Education is proposing increased scholarship money be made available to low-income college students who attend public schools. And on the federal level, Congress has increased the maximum Pell Grant to $4,000 for the 2002-2003 school year, an increase of $250 over the current level (and still woefully behind a decade of rising cost of living, according to legislators pushing for an additional increase). In January, the House of Representatives approved a bill to move the federal student loan interest rate from a variable to a fixed 6.8, as of 2006.

Raising funds for grants. Some private universities, however, are taking matters into their own hands. Using fundraising as their primary tool, they have increased their institutional grant aid, allowing for lower loan expectations and the reduction of student loan debt.

When Wesleyan University (Middletown, CT) recently underwent an extensive strategic planning process, increasing financial aid emerged as one of the school's top priorities, going forward.

According to Justin Harmon, a Wesleyan spokesperson, "The decision reflected the institutional commitment to enroll, an economically diverse class, as well as a commitment to the principle of providing access to all students with the requisite academic qualifications to attend." Moreover, Harmon disclosed that the university's study of its competitive marketplace revealed that Wesleyan's financial aid formula required a higher reliance on loans (as opposed to grants) than its chief competitors. So, the school has put into place a new policy that substitutes grants for loans in order to enable a $20,000 loan ceiling (down from $24,000) per student, over four years.

The university's $250-million fundraising campaign (originally launched in October of 2000) is now considered the well-spring from which will come the funds to pay for Wesleyan's new grant policy. "The single highest priority in the campaign is student aid," says Harmon. "We are seeking both term and endowment support to improve our ability to give grant aid."

And at Dartmouth College (Hanover, NH), where fundraisers constructed a particularly healthy financial aid endowment, the school last year reduced expectations for loan repayment and financial aid work/study, white adding $1.6 million to its scholarship resources. Says Karl Furstenberg, dean of Admissions and Financial Aid, "Now, one-third of our financial aid students have no loans based upon income: and anyone whose family makes less than $45,000 a year has zero loans."

School administrators adjusted Dartmouth's fundraising strategy to enable these measures after conducting a capital campaign five years ago, and subsequently realizing financial aid was the single most successful driver of the campaign.

"We raised $55 million for financial aid endowments alone," Furstenberg reports. "After the campaign, we decided that financial aid was the one item people would continue to give to annually, if they could give on a restricted basis." He explains that most schools approach annual giving differently; They want most of funds to be donated on an unrestricted basis, because that gives the institution flexibility to move funds where they see fit.

Furstenberg suggests that schools not targeting financial aid directly, rethink their fundraising strategy. "For schools newer to the fundraising challenge--and looking to develop options for raising money--financial aid should be at the top of the list," he says. "I'm not saying it's easy to raise money for financial aid, but right now, it's certainly easier than some other areas. There's been a lot of publicity about how expensive college is, and in this day and age, people like the idea of supporting young people. Donors like to know their money can impact the life of a real student."

Personalize, and publicize. Furstenberg says the key to raising money for financial aid lies in "personalizing" the relationship between financial aid and the quality of the student body.

"We made it clear to donors that their contributions weren't just going into some big financial aid 'pot.' We provided opportunities for donors to meet financial aid students and read profiles, so that we could put a 'face' on their donations."

Dartmouth also makes sure that donors connect the financial aid fundraising to the school's ability to remain a leader in attracting talented and diverse students to campus. "Many of our donors want their gifts go toward diversity programs. And much of our financial aid fundraising appeals to our donors' desires to preserve the institution's leadership position," Furstenberg says.

At Wesleyan, administrators use the media to highlight the priorities of their financial aid fundraising campaign, and connect it to the issue of higher education affordability. That kind of publicity is critical, he says. It's marketing.

"We also market our financial aid initiatives in our admission materials, emphasizing our commitment to need-based aid and to meeting families' full demonstrated need," Harmon says. "We don't think applicants are deciding against Wesleyan on the basis of its financial aid offerings, but these days, we want to avoid a scenario under which they might."--NR