New Formula Fine-Tunes Financial Aid Packages

Author: Joshua Carson

After a five-year process, Middlebury College has shown its resolve in recruiting and enrolling an economically diverse student body by refining the formula used to determine grant aid.

In consultation with other competitive need-blind schools, the College has taken steps to ensure the need analysis process fully considers the financial impact of a Middlebury education on middle- to upper-middle-income families.

The new financial aid formula debuted this year, as more students were awarded grants, which were, on average, larger than in years past.

While the numbers are not yet finalized, Director of Financial Aid Robert Donaghey estimates the College was able to offer 95 additional full year students grant aid, raising the total amount of aid awarded from $17 million to about $20 million this year.

"[The new formula] was successful in terms of what it accomplished," Donaghey said. "We recognized those families were feeling more of a pinch and we tried to do a better job of recognizing need while at the same time not hurting other families."

Donaghey said he was able to increase aid to some students without taking money away from others because of the increased budget that the trustees had awarded him.

The College Board creates and continuously modifies the basic formula used to compute grant aid. Middlebury then adapts that formula to its specific needs and financial allowances.

After years of research and consultation, the College addressed and modified three aspects of the financial aid formula to provide more aid to middle- and upper-middle-income families, including cost of living, home equity and student assets.

The committee charged with refining the formula recognized that it is more expensive to live in some parts of the country than it is to live in others. New York City has a higher cost of living than cities like Des Moines, Iowa, or Nashville, Tenn. Furthermore, students from states like Hawaii and Alaska also have a higher cost of living because many goods must be shipped from the continental United States.

The College did not, however, take into account that it was less expensive to live in some areas than others.

The new formula also looks at home equity and considers that rising property values may not correspond with rising levels of income.

Thus, while on paper it may appear that a family has generated more wealth through the appreciation of a home, the College understands that access is limited to equity when it is held in property.

The College will also adjust how it treats student assets when calculating the amount of money a family must contribute towards tuition. The College found that oftentimes, parents place money into a savings account under the student's name to secure various tax benefits. While these assets are technically registered to the student, they are really the property of the parents.

This nuance becomes important in the financial aid process because students are assessed 25 percent of their assets each year to pay for tuition, while parents are only assessed five percent.

Now, families are simply asked who had been placing money in the account. While the new formula did increase the number of students who received some financial aid this year, it also cost more than originally anticipated.

The College will have to reassess whether it will continue to use this formula, Donaghey said. He promised, however, that all students currently receiving financial aid would be grandfathered into any changes that occurred. This is a "continuing commitment," Donaghey concluded, "we have to look and decide: Is it something we can afford?"