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/ October 21, 2009
Is NYU Squeezing Everyone But Its Neediest Students?

moneyAn extensive analysis of tuition data provides compelling evidence that NYU is giving more aid to its financially neediest students at the expense of its other students with significant need Scream 2 download. Additionally, a comparison of NYU and uptown rival Columbia’s financial aid data shows in stark terms how little NYU has done (until very recently) to make attending college more affordable.

It is easy to bash on NYU for its stingy financial aid department. Everyone has heard about the University topping the list of schools with “Students Dissatisfied with Financial Aid.” You may also recall that, last semester, the school began calling students with a large gap between their need and their financial aid award to make sure they really, truly could afford to come to NYU.

But something has been missing in all the yelling about how expensive it is: actual evidence (particularly since administrators have some good arguments on their side).

NYU has a huge student population and therefore a small endowment per capita, which makes meeting full financial need impossible. University Spokesman John Beckman writes me, “NYU is not among the relatively small set of institutions that ‘meet full need’ – meaning that our financial aid resources are not sufficient to fill the ‘gap’ between the expected family contribution (as determined by FAFSA) and the cost of tuition. That’s largely a reflection of our per student endowment,” which was 148th 184th in the country in 2008.

Beckman also frequently points out that we have one of the highest percentages of Pell Grant-eligible students among major research universities. (Since Pell Grants are generally awarded to low-income, very needy families, the previous statistic is often used as a proxy for economic diversity on campus).

But that last point raises a big question: why does NYU attract so many needy, low-income students if its financial aid is so bad?

It is useful to compare NYU to another school for this analysis. I chose Columbia because it has a nearly identical percentage of students receiving federal grant money (mostly Pell Grants). Take a look at these charts of the most recent and available public data:any aidinst aid

The first shows the percentage of first-time, four-year freshman receiving either federal, state, or “institutional” (college) grant money. The second shows what percentage of those students is receiving money from the school.

Pretty striking trends, no? A smaller percentage of NYU students are receiving financial aid and a lot fewer are getting any help from the school itself (compared to NYU in the past). Columbia’s trends are both upwards.

So what can we infer from this? It’s hard to say, really, without knowing a lot more about the internals of the financial aid department. At first glance, it would be easy to conclude that the student body is getting richer, since fewer students receive aid.

Beckman disputes that idea. He writes, “…we have been reducing the percentage of aid that is ‘merit’ – or non-need – based; we reduced it by 26% between 2005-06 and 2009-10. This was entirely intentional: given that students’ need is greater than our resources, we concluded this is the right thing to do.”

He concludes that the decline in students receiving aid is due to fewer students receiving merit aid.

However, if you look back at the charts, you’ll see significant percentage drops well before 2005, when Beckman cites the beginning of the reduction in merit aid. (Don’t get me wrong: it’s a good idea to move more money into need-based aid and I applaud NYU for its decision). (Ed. note: See Beckman’s response for an update on this point).

Here’s the rub: the percentage of students receiving federal aid hardly budged during the same time frame displayed on the charts. It dropped only 2 percent from 2001 to 2006, from 17 to 15 percent. This suggests NYU’s “economic diversity” is staying relatively constant.

Now look at this:

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You can see how much less money we receive in comparison to Columbia, but that can be chalked up to small endowment per capita. However, this cannot: from 2002-2006 (adjusted for inflation), NYU tuition rose 12.7%. Yet, across the same time period, average institutional aid for first-time, four-year freshmen only increased 7.0%. At Columbia, tuition went up 10.5% and average institutional aid went up 15.3%.*

Beckman again takes issue. He notes that the Department of Education data I used for these charts does not include all undergraduates, only first-time, four-year freshman (the typical out of high school student joining NYU). He writes (emphasis added), “Indeed, when we look at financial aid spending and cost of attendance for all undergrads over the period you examined – 2002-03 to 2006-07 – we find that cost of attendance increased by 21.7% and institutional aid increased by 28.6%.”

Unfortunately, Beckman doesn’t provide the average institutional aid increase, which I used. Nor are the numbers adjusted for inflation, rendering them meaningless. Indeed, if you don’t account for inflation, it appears as if average institutional aid increased nearly 19.9% while tuition increased 26.4%. Still not a good story for NYU, but not nearly as telling as the inflation-adjusted numbers above.

So, where are we? We can see that NYU has become quantifiably more unaffordable and yet it still attracts the same percentage of highly needy students. I think Occam’s Razor suggests that a higher percentage of financial aid dollars are flowing to the school’s neediest students, making it harder for “middle-class,” but needy students to attend and driving down the number of students receiving aid.

If indeed this is the case, it could be because NYU knows that highly qualified but highly needy students will be offered great financial aid from other top universities, so they seek to match their offers. It could be because they have found they can maximize enrollment by asking less needy students to take on more debt than the neediest. It may just be that they think it’s the fairest allocation of the funds available.

What makes this more interesting is parsing John Sexton’s emails. He wrote back in May that one of the University’s major goals is to:

Enhance financial aid for our neediest undergraduate students and improve the quality of student life and wellness.

Not all of our students, just our neediest.

Now I should give credit where it’s due: NYU increased financial aid 7.8% this year – twice the tuition increase. And Beckman notes, “Using FAFSA’s criteria,…need-based aid at NYU has increased 64 percent over the last five years (2005-06 through 2009-10), while (as noted above) undergraduate tuition and fees increased by 22.3%.” This is encouraging (though I would like to see these numbers adjusted for inflation).

But then we read that this is NYU’s biggest enrollment ever – how can they expect to offer decent financial aid if they keep increasing the pool of students who need money?

John Beckman is quoted heavily in a piece in WSN that was published today that attempts to rebut this question (see correction) that addresses this question. There are some good defenses, read the piece, but think critically about Beckman’s arguments there, particularly that average aid packages increased this year by almost $1500. (That is not institutional aid, that is overall aid, which includes student loans. I imagine the large bulk of that increase is in loans, particularly considering this year’s recession). Beckman writes that this is wrong – the average grant increased $1500 this year. The WSN article says “financial aid package,” which refers to grants, work study, recommended student loans, etc. I should have fact-checked this myself – sorry for the confusion.

He wrote to me on the topic as well, saying, “Additional [enrolled] students do mean additional students who need aid; however, it also means additional tuition from those who do not require aid, some of which is used for financial aid for needier students.” Good point, but Beckman is missing the big picture.

If we continue to expand the student body, NYU will never significantly grow its per capita endowment, which is what really makes meeting need possible, according to Beckman himself.

The real issue is that financial aid is a zero-sum game. If you give more money to the neediest students, it comes directly out of the awards to needy students who still have to take out loans. So if NYU is serious about affordability for all of its students, they will limit enrollment and continue to increase financial aid more than tuition.

Beckman writes that the University wants “to make NYU as affordable as possible to as many as possible, and to make the education as excellent as possible.” Yet the average indebtedness of an NYU student at graduation is $34,850, over 33% higher than the national average. Does that statistic reflect NYU making NYU as “affordable as possible to as many as possible?”

New research found that it doesn’t matter where you go to college – you make the same amount of money regardless. That knowledge is bound to hurt good universities like NYU that just aren’t offering good value.

And now we’re back to what I wrote about last month: NYU’s exploding tuition costs and rising student debt levels. It just can’t last. If you continue to leave students with insufficient financial aid, they’re going to stop enrolling. And it will be ugly when that happens.

John Beckman responds, and I respond to him, here.


Data from the Department of Education, Columbia’s Institutional Research website, NYU’s Institutional Research website, and the NYU Archive. Photo courtesy of Flickr user AMagill (CC).

4:15 – Updated for clarity.

4:25 – Updated to reflect that the WSN article wasn’t written to “rebut” the question I raised. The article does, however, contain arguments that address that question, as I note above. The two articles are not related, other than that they cover similar material.

4:50 – Facts corrected regarding grant money increase from last year to this year.

10:50 – Chart titles corrected. Minor edits for clarity.

* 10/22 6:45 – Basic math error fixed. To calculate percentage, I was dividing (b-a)/b when I should have done (b-a)/a. The mistake does not change the point, only the numbers. The original sentence sentence read: “from 2002-2006 (adjusted for inflation), NYU tuition rose 12.3%. Yet, across the same time period, average institutional aid for first-time, four-year freshmen only increased 6.6%. At Columbia, tuition went up 9.5% and average institutional aid went up 13.3%.”