March 11, 2008
To the Williams Community,
When we announced last fall that Williams would eliminate all loans from financial aid packages and replace them with increased grants, people asked how often the College reviews its financial aid polices.
The answer was “almost continually.” We do this based on the College’s financial situation, a sense of what’s most fair for students and their families, and the actions of institutions with which we compete for the most promising, diverse students.
Analysis since the fall has now led us, in consultation with the Board of Trustees, to make another change to our policies that for many families will further reduce what they pay and increase what they receive in grants. For families with assets that are typical for their level of income, we will now cap the amount of home equity that we consider in determining parent contributions at 1.2 times parent income.
Let me explain what that means.
The financial aid formula considers each family’s size, income, assets, and number of children in college. For a family that owns its own home its assets include the equity in that home. This is measured as the current market value minus the principal mortgage and other loans borrowed against the home. That equity is added to any other parent assets, from which the formula then expects between three and five percent toward the parent contribution.
Until two years ago there was no limit to the amount of home equity taken into account, though financial aid officers could use discretion to reduce it when doing so seemed to treat a family more fairly. This might be when a family long ago acquired a home in a market that has since boomed or when a family’s home equity is the only form of retirement savings.
Two years ago we set a limit on how much home equity would be considered at 2.4 times parent income, though aid officers still could make adjustments in circumstances that called for them. Last year we reduced this to 2 times parent income.
We’ve decided this spring to reduce it further to 1.2 times, with discretion to make adjustments when called for. This is the level suggested by financial aid directors at private colleges and universities that practice need-blind admissions, who meet to work toward a common understanding of how to measure financial need.
This change goes into effect in the coming academic year for students in all four classes. For returning students it will be reflected in the aid awards mailed this summer. This latest move will cost the College an estimated $800,000 and affect about 320 Williams families. Below is an example of the effect on one hypothetical family.
We’ll continue to review our policies for possible further changes in coming years. Williams is fortunate to have the resources to consider further expansion of financial aid and to have made this particular move. It will help a significant number of Williams families and further our goal of recruiting each year a talented and diverse entering class.
Best regards,
Bill Lenhart
Provost and Treasurer
Example
Family size: 4
Number in College: 1
Parent Income: $120,000
Home Equity: $300,000
Using the full home equity would result in a parent contribution of $24,400.
Capping the home equity at 2 times parent income would result in a parent contribution of $21,400.
Capping the home equity at 1.2 times parent income would result in a parent contribution of $16,600.
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