Rises in Financial Aid Cause Deficits

Editor’s Note: This article is the first in a series that will examine the current financial state of the College. In recent years, the College has run budget deficits and has been forced to rein in spending in order to ensure long term financial stability. These articles will aim to inform the Middlebury community about the College’s financial situation, dispel rumors, raise new questions and, hopefully, spark new debates about how the College operates and spends its money.

An increase in the number of students receiving financial aid has contributed to the College’s recent financial woes, causing deficits and a need to rein in spending until greater endowment dollars can be raised.

At present, Middlebury’s current goal each year is to admit a class in which 42-43 percent of students receive financial assistance from the College. However, in recent years, due to its need-blind admissions policy, the College has admitted a far greater percentage of students who require financial aid.

For the classes of 2018 and 2019, roughly 48 percent of students currently receive need-based scholarship support. The blended average is 44 percent when taking into account all other classes.

According to Executive Vice President for Finance and Administration David Provost, who took over the role in January of 2017, the College will operate at a deficit if it continues to provide financial aid at current levels.

“If [the number of students on financial aid] ends up being, say, 48 percent in a given year, we will operate at a deficit, which we have in fact for the last four years,” Provost said. “We’re not covering our operating expenses with our operating revenue plus the endowment, so we’re losing money.”

Because the admissions process is need blind, the College does not know how many students will receive financial aid until the class has been admitted. The 42 percent mark is therefore difficult to precisely achieve.

“Need blind means you’re looking at the application based on what it is independent of financial ability to pay. Then, once you say you’re accepting that student, you deal with the consequences of whether or not a student does or doesn’t need aid,” Provost said. “That is why the number can fluctuate.”

The College’s decision to remain need blind and not compromise financial aid has resulted in the institution reining in spending where necessary in order to minimize the yearly deficit.

“My goal is to get us to live within our means, without jeopardizing the academic experience for our students,” Provost said. “Where can we as an organization, especially on the staff side, be more effective in what we do and how we do it so we’re not incurring these losses?”

According to Provost, the College plans to release five percent of its endowment, a number that is down from previous years and is a byproduct of making sure that the institution is spending within its means. Given the volatility of the market, the College does not project endowment returns, however, Provost said that this year’s returns do look positive.

President of Middlebury Laurie L. Patton has said that increasing the number of students on financial aid is one of her top priorities. The first step in doing so, according to Provost, is to get the College to a point where losses are no longer being incurred. Then, a fundraising campaign will have to be conducted to bolster the endowment and funds for financial aid. In 2015, Middlebury concluded its largest fundraising campaign in the College's history, during which it raised $535.5 million over eight years.