Pittsburgh Catholic Column: Feb. 1, 2008
Financial aid at Catholic universities has evolved
by Dr. Charles J. Dougherty
Financial aid has a special importance at American Catholic universities. Many of these universities were founded in the 19th century, when Catholics had the jobs other Americans did not want. They were the working poor. It was clear that education, particularly higher education, was the way out of poverty. But how could they afford it?
Religious congregations of men and women stepped in to help. Many of them immigrants themselves, they founded and ran Catholic colleges for the benefit of the working poor. Most had some lay partners, but at the beginnings of Catholic higher education in America the faculty and staff were vowed religious.
Since members of these congregations lived simply and in community, the personnel costs of running the colleges were modest. Moreover, “technology” at the time was simple and relatively inexpensive. There was little government regulation. There were few costs associated with competition; students mostly lived at home and commuted to the nearest Catholic college.
As a consequence of this religious commitment and the simplicity and efficiency of education at the time, many Catholic universities began with little or no tuition. They kept their tuitions minimal for many years. And stories abound at Catholic universities about students in those days whose debts and missing tuition payments were simply waived by Father or Sister. The mission was clear and the missing dollars did not amount to much.
But those days have passed. The faculty and staff at Catholic universities are lay people who have to be paid fair and competitive salaries. The costs of keeping up with today’s educational technology are staggering. Government and professional regulations add significant costs. And Catholic universities now exist in a highly competitive environment. Not only must academic programs be first rate—but so must living and dining facilities, athletic and other extracurricular opportunities, and the general beauty and convenience of campus.
As a consequence, tuitions are high at Catholic universities. This places burdens on students and families and threatens to make Catholic higher education unaffordable to the same kind of populations they were intended to serve—the working poor.
This is why financial aid is so important to Catholic universities. It differs in many ways from university to university, but the overall reality of financial aid is shaped by two distinctions: how it is funded and how it is awarded.
From the university perspective, the preferred funding of financial aid is from a gift of an endowment. Such a gift is designed to be perpetual so the principal is never spent, only a portion of its projected earnings. A typical payout of an endowment would be 5 percent. A $100,000 financial aid endowment would, therefore, yield $5,000 annually to help students pay their tuitions. Presuming that over time the principal earns more than is paid out in awards, the endowment continues to grow, helping more students into the indefinite future.
A less favored but also necessary form of financial aid is discounting. No fund stands behind this practice; there are no dollars to fund it. Universities simply choose to grant aid where it means, in effect, foregoing tuition income from those students.
Financial aid is awarded based either on need or other non-need factors. The award for need is obvious. It is given when it is clear that a student could not afford to pay the tuition without the aid.
Non-need factors that lead to financial aid awards include the desire to attract the best students academically, to get the right mix of students for the university’s programs, to increase diversity in the student population, and to satisfy donor intent when the aid is funded by a gift.
In terms of the founding intentions of most American Catholic universities, need-based financial aid is a clear priority. Generally, they look to loyal alumni to provide the gift endowments to fund it. And in doing so, a Catholic university education is made possible for generations to come.