Covering need-based aid bills “a true struggle” for Duke, prof says

Don Taylor, incoming chairman of Duke University’s Academic Council, says financing need-based aid for the university’s undergraduates is “a true struggle” for the institution
Don Taylor, incoming chairman of Duke University’s Academic Council, says financing need-based aid for the university’s undergraduates is “a true struggle” for the institution Duke University

Paying for need-based student financial-aid programs at Duke University is “a true struggle,” one that will “never go away” because of the fiscal constraints facing the institution, the incoming chairman of its Academic Council told colleagues.

But while the effort’s costly, to the tune of about $115 million a year, “we also can’t afford not to have it if we want to keep the types of student we have,” said Don Taylor, a public policy professor. “So what that means is we do afford it. We figure out how to do it.”

Taylor’s recent comments to the Academic Council came as he reported on the year’s activities of the University Priorities Committee, a panel of administrators, deans, faculty members and students that directly advises Duke President Richard Brodhead about budget issues. For now, he’s its chairman, but he’s stepping up to lead the council come July.

Covering the cost of need-based aid for students is one of the “two perpetual topics” the advisory group has faced in the past five years, the other being the “economics of research” at a top-level research university, he said.

Need-based aid is the term of art in higher-education circles for the array of scholarship and loan programs that enable students from low- and even middle-income families to attend an institution like Duke that has an all-in sticker-price of $72,710 a year for tuition, fees, room and board, books and other expenses.

Administrators say more than half of Duke’s students don’t actually pay full price, for an assortment of reasons that include benefiting from need-based aid programs.

But the problem with need-based loans and scholarships at Duke is that, even with high-profile gifts like one from trustees Chairman David Rubenstein announced on Monday, only about 30 percent of them are endowed.

For the remaining 70 percent, that means that instead of collecting and deploying interest from past donations, Duke has to come up with cold, hard cash. By and large, that means dipping into tuition revenue, reducing the institution’s flexibility to cover other things in its budget, Taylor said.

And Duke is more willing to do that than many of its peers. In recent years, it’s “been returning on the order of 23, 24, 25 percent of the tuition we take in for undergraduates and returning that directly to the class, to live up to the need-based financial aid commitment that we have,” Taylor said.

Some of Duke’s private-university peers, Cornell University and Dartmouth College, dip more heavily in their tuition base, redirecting about 30 percent of it into need-based aid. On the other end, Harvard and Yale “are in the teens of percentages,” while MIT and Stanford University “are returning less than 10 percent of their tuition received.”

Taylor limited his comparisons to private universities. In North Carolina, though, UNC-Chapel Hill and other institutions in the public UNC system are under orders from its Board of Governors to cap or reduce diversions of tuition revenue to need-based aid at 15 percent.

At Chapel Hill, that means diversions are frozen at $66.2 million a year until tuition receipts grow large enough to put the institution under the percentage cap. That likely remains a couple years away, as officials there reckoned this year’s subsidy would be about 19.8 percent.

The board decision was controversial at the time, but some members argued it would reduce pressure on campuses to raise tuition. Others indicated they consider the use of tuition revenue to support student aid as an improper form of income redistribution.

Duke officials, by contrast, don’t have a philosophical problem with the idea of pricing their product for the high end of their market and applying the ensuing revenue to cross-subsidized discounts.

A recent econometric study led by researchers at Stanford, Harvard and Brown University supplies evidence that as of the past decade or so, Duke was doing a somewhat better job than UNC-Chapel Hill, or most of the UNC system’s historically white campuses for that matter, of prompting upward mobility among its graduates.

About 50 percent of Duke students who come from the bottom fifth of the country’s income distribution eventually reach the top fifth of it, versus about 33 percent of UNC-Chapel Hill students who arrived from similar economic circumstances.

But the Stanford-led team didn’t necessarily see either showing as good. They said low-income families remain under-represented at “Ivy-plus” institutions like Duke — and their data suggest that’s also true at UNC-Chapel Hill, as bottom-quintile families are barely more common there than on the Durham campus.

Ray Gronberg: 919-419-6648, @rcgronberg

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