What about the little guys?

Top colleges—Harvard, Yale, Davidson, University of Virginia—have all made great headlines in the past year by dramatically expanding the financial aid they offer to students and eliminating or significantly shrinking the debt students will graduate with. Yale announced Monday that it will be spending another $307 million from its endowment for increased financial aid and research. This is great, but what about all those colleges, especially the small, private ones, that don’t have the endowment money to keep up with Harvard and Yale?

InsideHigherEd reported this week (The Harvard Trickle-Down Effect) on a session at the Council of Independent Colleges’ Presidents Institute which focused on exactly this question. Despite the fact that most of these schools—small, liberal arts colleges—don’t compete directly for students with Harvard-type schools, they are still worried about the ripple effect from Harvard’s aid announcement, primarily the pressure from students and parents to provide similarly generous aid packages.

While Harvard’s aid plan is great for Harvard students, it’s just not a realistic way to address the problems of rising tuitions and rising student debt at most institutions. And, as we’ve shown here and here, generous aid policies at the most elite institutions can have a negative impact on need-based aid because lower-tier institutions respond by offering tuition discounts to recruit high-performing students. Or, as InsideHigherEd summarizes:

C. Brent DeVore, president of Otterbein College and the session’s moderator, briefly and cogently laid out the financial aid picture leading up to and including Harvard’s announcement. He described how many small private colleges turned to financial aid based on students’ academic or other merit (as opposed to purely financial need) to compete for students’ attention, both against the prestige advantage of the elite colleges and the price advantage of most public colleges. That trend was exacerbated as states, particularly in the South, embraced lottery-driven scholarships that in some places have made an education at a public university virtually free.

As parents’ have become increasingly accustomed to such tuition breaks, merit-based aid has often been replaced by “want-based” aid, “demand-based” aid, and “match the scholarship down the street” based aid, DeVore said, to knowing nods from the presidents in the room.

The presidents’ concerns about the new trend in super-aid policies from elite institutions ranged from lowered expectations about how much financial responsibility a family should bear for a college education to even higher tuition increases and more competition for faculty. Presidents’ ideas for countering this competition ranged from broadening the recruitment pool of students to doing a better job of promoting the academic advantages of a small institution.

But there was no mention of what kinds of budgeting changes schools could make to keep their tuition increases down and make them more price competitive. It seems like a budgeting response may be just as important as a PR response. What I'd like to know is whether there are any small, independent colleges without gigantic endowments that are doing innovative and smart things to keep tuition increases and debt-levels reasonable and maintain need-based aid, but without hurting the institution's bottom line.