Tired of losing students to schools like Harvard, Princeton, Stanford, and Yale, this year MIT tweaked its financial aid formula to sweeten the deal for undergraduates from families making $100,000 to $150,000.
The MIT Student Financial Services office cited those four schools as offering more generous aid than MIT in that range, which Provost Martin A. Schmidt PhD ’88 called MIT’s “least competitive” income bracket.
“We don’t want a student who wants to come to MIT deciding to go to somebody else because our financial aid package is so different that it compels them to do that,” Schmidt said.
But after speaking to students in that income bracket who were admitted to both MIT and one of its “peers,” campus officials found a “measurable difference in the financial aid,” Schmidt said. “That difference is a factor in their decision.”
In an effort to close the gap, MIT no longer considers home equity on the primary residence when calculating how much financial aid a family needs, provided it earns less than $150,000 a year.
The threshold prior to the 2014-2015 academic year was $100,000, according to Schmidt and Student Financial Services, which is headed by Elizabeth M. Hicks.
The change affects 14 percent of MIT undergraduates and will cost the Institute an estimated $1.5 million, SFS said in a written response to questions.
MIT’s need-based undergraduate financial aid budget for the academic year is $95 million. This figure is down slightly from last year. SFS said that this was in part because an improving economy has made families better able to pay, and that families whose situations did not change are actually receiving more aid. (Tuition has also increased.)
Many colleges do not factor in home equity on the primary residence when calculating how much a family can pay, regardless of the family’s income. Neither does the government’s Free Application for Federal Student Aid. Other colleges, like MIT, do consider home equity, but put some restriction on or cap how it’s used in the formula.
The rationale? “I might be sitting on some gargantuan home that’s already paid for,” Schmidt said. “So in theory because I have this huge asset, I could go out and get a home equity loan and use that home equity loan to help pay for part of my child’s education.”
For the poorest, both MIT and its peers offer full rides. And for the richest, differences between financial aid packages offered by different schools might not matter as much, Schmidt suggested.
But MIT found that its formula had been a “pain point” for households in the $100,000–$150,000 range, according to Schmidt, and decided to make the change this year on the recommendation of the Committee on Undergraduate Admissions and Financial Aid.
MIT nudges its tuition up every year, but its commitment to financial aid has increased over time as well. Annual undergraduate tuition and fees net of scholarships (from MIT and others) has fluctuated between $13,700 and $20,500 (in 2012 dollars) since the mid-1980s, according to an Institute committee report. The figure was $17,984 in 2013.
“I think MIT can and should be proud of what it’s done to try and make an MIT education affordable,” Schmidt said.