Advice and the Advisor

Debt-free degrees: Paying for college on a sliding scale

Kenneth Kiesnoski, CNBC.com

Sticker shock vs. sliding scales

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With average tuition at private American universities and colleges well north of $30,000 a year—and nearing double that amount at the nation's most elite schools—prospective students and their parents taking the figures at face value could be forgiven for fretting. But, sticker shock aside, most college students have never paid full price, and of late, many institutions have introduced sliding-scale payment schemes that can drastically reduce—or even eliminate—tuition payments, student loans and even room and board.

(Read more: Paying for college with Roth IRAs)

Government is also getting into the act, from California and Oregon to Washington, D.C. (on both federal and local levels), with plans to begin further subsidizing secondary education for students from low-income and middle-class families. The moves are timely; according to the White House, in 2010 the average American student left college in hock for $26,000, and collective educational debt has now rocketed past total credit card debt for the first time in U.S. history.

By Kenneth Kiesnoski, CNBC.com
Posted: 16 Feb. 2014

Ivy League largess

Image source: Frank Mullin | Brown University

Strange but true: Academically gifted but economically average students can now attend an Ivy League university—Brown University (pictured), Columbia, Cornell, Dartmouth, Harvard, Princeton, Yale or the University of Pennsylvania—for free. These elite and extremely selective schools may rank near the top of the tuition tally, but, thanks to enormous if creaky endowment funds and government pressure to tap them, they can actually be among the best bargains and even cheaper than a top public university. All you have to do is make the grade.

At Brown University, families with income below $60,000 and assets under $100,000 pay nothing. For those with income below $100,000, the traditional loan component of financial-aid packages is replaced with extra scholarships. Families with total income under $150,000 get reduced loans. Only those earning more than $150,000 get a standard financial-aid package of loans, student employment and some scholarship money.


No-loan zone

Yale University
Image source: Michael Marsland | Yale University

Yale University markets itself as "one of the most affordable colleges in the country for families making less than $200,000." The school is a no-loan zone, meeting 100 percent of demonstrated need with financial-aid packages comprising need-based scholarships, "term-time" employment and a student income contribution. The total cost of attendance at Yale this academic year is $60,900, including tuition ($40,000), room and board ($13,500) and books and personal expenses ($3,400).

The average Yale scholarship grant for incoming freshmen in 2012 was (just) $39,883, but those from families earning under $65,000 annually paid nothing at all toward their education. Those earning between $65,000 and $200,000 pay on a sliding scale that begins at 1 percent of annual income and moves up toward 20 percent at the $200,000 level.


20/20 vision

Harvard University skyline.
John Coletti | Photodisc | Getty Images

Harvard University, like its Ivy League brethren, awards financial aid based on need rather than merit. Most students pay from 0 percent to 20 percent of family income toward attendance, with a full 20 percent who earn under $65,000 paying nothing at all. Those earning $65,000 to $150,000 pay 10 percent of income, while all others pay proportionately more based on individual circumstances. Home equity and retirement savings are not taken into account when Harvard calculates need.

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The school offers an online Net Price Calculator that prospective applicants can use—before applying—to get a rough idea of how much a Harvard education would cost them. Total billed costs at Harvard rose to $56,407 a year for 2013–14, up from $54,496 the year before—a 3.5 percent increase—but the school claims that 90 percent of U.S. families would pay the same or less at a state school.

Thinking smaller

Davidson College
Image source: Davidson College

Applicants need not despair if they don't make the grade as far as Ivy League admissions offices are concerned. Increasing numbers of other competitive private universities and colleges are adopting similar sliding-scale financial-aid policies. Davidson College, a 1,739-student school just north of Charlotte, N.C., eliminated loans from financial-aid packages in 2007. The school claims to have been the first national liberal arts college in the nation to do so.

Like Ivy League counterparts such as Yale, Davidson excludes student loans from financial-aid packages. Its Davidson Trust ensures that 100 percent of proven student need is met through grants and campus employment. Unlike Yale or Harvard, Davidson does offer merit-based scholarships in addition to need-based financial aid. Total billed charges at Davidson run $54,683—including tuition and room and board—for the 2013–14 academic year.


Capital idea

Image source: Georgetown University

High school students in Washington, D.C.—home to prestigious seats of learning such as Georgetown University (pictured)—may soon have access to as much as 100 grand each for future college expenses if a local councilman gets his way. David Catania (I), chair of the Council of the District of Columbia Committee on Education, introduced a bill last October that would give D.C. students from households earning up to twice the federal poverty income level ($23,550 for a family of four in 2013), as well as all children in foster care, grants of as much as $20,000 a year for post-secondary education expenses.

(Watch more: Rethinking higher education)

The maximum payout under the prospective D.C. Promise Act would be $100,000, paid over five years. Awards would be determined on a sliding scale; even students from households earning $250,000 would eligible for the smallest grant—$5,000 per year. All D.C. public and charter school students would be eligible after all other avenues for funding—i.e., other grants and scholarships—have been exhausted. The bill is an effort, according to Catania, to keep at-risk students in school.

Learn now, pay later

Image source: Kelly J. James | Portland State University

Students at Oregon's two- and four-year public colleges and universities can kiss tuition and loans good-bye—at least, until they graduate. Under the state's new so-called Pay It Forward, Pay It Back legislation, passed last summer, both in- and out-of-state students will be able to attend Oregon schools free of charge, provided they agree to pay the state a small percentage of their employee salaries for about 25 years after graduation. Legislators have approved development of a pilot program and will vote on permanent implementation in 2015. In the meantime, tuition rates have been lowered or frozen by the Oregon University System.

Should Pay It Forward, Pay It Back be fully implemented, graduates of four-year public institutions such as Portland State University (pictured) will pay 3 percent out of their future paychecks, while those who matriculate at two-year state schools will owe half that. Graduate payments will be pooled in a fund covering educational costs of current and future students. People who fail to graduate will be allowed to repay costs incurred at prorated rates. Other states, including neighboring Washington, are said to be considering similar initiatives.

Golden opportunity

Image source: University of California, Los Angeles

Middle-income college students in the Golden State caught a break last year when Gov. Jerry Brown signed California's new Middle Class Scholarship (MCS) into law. Under the legislation, being phased into implementation over the next three years, students from families earning up to $150,000 annually will be able to get state help for tuition at University of California or California State University campuses from the 2014–15 academic year onward.

(Read more: Pay packages drive up college costs)

Award amounts—determined after any other publicly funded, need-based aid is factored in—will be determined via a sliding scale: Families earning up to $100,000 can get as much as a 40 percent tuition discount for their kids, while those making up to $150,000 will receive no less than 10 percent off tuition.The California Student Aid Commission began taking applications for MCS aid on January 1, but final amounts available to each student will depend on the total number of applicants and amount of aid made available by state legislators.

End of an era

Image source: Mario Morgado

Talk of tuition, sliding scales and financial aid was once moot at New York's storied Cooper Union for the Advancement of Art and Science, where, until the end of the current academic year, all 900-plus students had always attended class free of charge, on full scholarships. Faced with an insurmountable operating deficit that made it impossible going forward to offer each and every enrollee a $39,400-per-year education for free, the 155-year-old college announced last April that new students registered from the 2014–2015 academic year onward would receive only half-tuition awards, totaling some $20,000.

Further financial aid at Cooper Union will be determined, need-based, on a steeply sliding scale, with students from the wealthiest families paying the full $19,400 balance and the neediest paying nothing at all. The college will also offer merit-based scholarships to academically exceptional applicants.

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