Seeing Double: Amherst’s Invisible Financial Aid Crisis (Part Two)

This is the second part of a two-part series about Amherst College’s financial aid program. Check out the first part here.

Last week, we showed how Amherst College’s financial aid fails its students. Once we graduate from Amherst, we’ll have hundreds of thousands in debt, and thanks to those of you who reached out to us after our last article, we know we aren’t alone. 

Amherst’s student debt crisis is unacceptable, and not just because Amherst grads shouldn’t have to leave with the crushing burden of loans. It’s unacceptable because it doesn’t need to exist. To close out our two-part series on Amherst’s invisible financial aid crisis, we’ll present our ideas — some novel, others mundane — to fix it.

Many colleges have reduced debt through creative solutions, even within the constraints of shoestring budgets. On the other hand, Amherst’s student debt levels have worsened in recent years.  Our performance seems even worse when you remember that Amherst is far from average. It has the tenth largest endowment per capita of any college or university in the country. That means it can afford solutions that most other institutions can only dream of. What’s more, Amherst has a tiny student body, allowing it to be nimble and individualized.

Amherst shouldn’t settle for its existing, rickety financial aid system. Instead, Amherst should constantly strive for new and bold solutions. In other words, it should be a light to the world. That philosophy, and the college’s exceptional financial position, will guide our choice of solutions.

Our solution will start by redefining success for Amherst’s financial aid program. Rather than vague, euphemistic terms like “meeting 100 percent of demonstrated financial need,” Amherst should focus on good outcomes for its students. Its goal should be to prevent forced student debt while maintaining need-blind admissions. This goal may be hard to achieve, but it’s specific, actionable and measurable. Even better, it’s inherently connected to student wellbeing — when Amherst succeeds at reducing debt, students are guaranteed to do better.

Spending More on Aid

However, there’s no clear way for Amherst to erase student debt after it’s accumulated, at least not without opening loopholes that would only help those with access to institutional knowledge. Therefore, the first part of our plan involves offering enough financial aid to prevent students from having to borrow. Amherst College won’t be free, but it won’t require families to lease their futures either. Keep in mind that our plan isn’t a government solution, and there’s no doubt that the federal government could do much more. But in this series, we’re concerned with what Amherst should do.

One of the most obvious ways to prevent student debt is by simply spending more money on financial aid. We don’t propose lowering tuition because Amherst’s full price only affects students that we aren’t particularly worried about — students wealthy enough to be disqualified from financial aid entirely. Instead, Amherst needs to lower each student’s expected family contribution (EFC), a key internal number that determines how much aid they’re given. As a student’s EFC goes up, they get less in aid, eventually paying full price. As their EFC goes down, that student gets more in aid, leaving them with less debt and a stronger future.

How exactly would this policy work? One potential example comes from Harvard, which never expects families earning under $150,000 a year to pay more than 10% of their income towards college. Colby College also uses that method, which is why those two colleges performed so well in last week’s theoretical financial aid comparisons. If Amherst adopted such a policy, it would substantially reduce debt among lower-income students while also clarifying its opaque financial aid calculations. Alternatively, Amherst could target increased financial aid grants towards student populations particularly vulnerable to accumulating debt.

Meanwhile, remember that Amherst can afford a dramatic increase in financial aid spending. We attend one of the richest schools in the entire world, but Amherst students still graduate with around $3 million in total debt each year. That’s a huge sum for students, but it’s paltry compared to the coffers of Amherst College. In 2018, the last year for which we have data, the endowment grew 5.8 percent to a grand total of nearly $2.4 billion. If the college had accepted a total endowment growth of merely 5.3 percent, it would have freed up over $10 million for other purposes. Even that tiny reduction of endowment growth could more than offset the debt problem. 

Nor are Amherst’s resources limited to its huge budget and colossal endowment. The college could also reach out to alumni and top donors for support. After all, Amherst received hundreds of millions in donations over the last five years, mostly to pay for our shiny new $214 million science center. In short, Amherst has no shortage of resources with which to solve the debt crisis. At this point, it only lacks the will.

The administration might claim that Amherst is struggling financially due to the Covid-19 pandemic, but according to a recent report from Chief Financial Officer Kevin Weinman, the college has mostly recovered and the endowment remains “strong.” In fact, stock market fluctuations have helped schools like Amherst make a killing. What has not recovered, however, is the national economy, which means that students’ families are still struggling. Covid-19’s lopsided economic impacts give Amherst all the more reason to bridge the gap and expand its financial aid program. 

Allocating Aid

That said, Amherst shouldn’t simply throw money at the problem. Amherst must change its financial aid policies as well. For example, Amherst could stop deducting students’ external scholarships from financial aid. Williams lets students keep their external aid, which means that Williams students are more likely to seek out scholarships. That one rule difference accounts for $1.4 million extra in outside scholarship money reported by Williams students.

Another concrete change that Amherst should make is eliminating work-study. At the moment, Amherst treats the $2,200 work-study allowance as “aid” that can meet financial need, so the college gives students with work-study that much less in grant aid. However, qualifying students must work for that money throughout the year. This simply isn’t fair. Why must some students work the 1 a.m. Schwemm’s shift to afford tuition while those wealthier get more time for homework or extracurriculars?

In the end, work-study increases student debt and disproportionately hurts lower-income students. Amherst should stop expecting that student work can meet financial need in its aid calculations. There’s nothing wrong with students wanting campus jobs, but those jobs should not be required to afford Amherst. 

Debt Education

Even if Amherst manages to eliminate forced indebtedness in future graduating classes, its past and present graduates will still hold plenty of student loans. And some students will most likely still take out loans — under the right circumstances, loans give families flexibility. So we aren’t satisfied with solutions that only aim to prevent debt. Amherst also has a responsibility to mitigate the harms of debt it can’t eliminate.

One of the best ways to do this is by educating students about debt management. Right now, Amherst accepts borrowed money without a second thought. The college doesn’t reach out to students to offer guidance on what types of loans are best, how to avoid bankruptcy or how to effectively pay back their debts. A student can attend Amherst College and take out tens or hundreds of thousands in loans without ever knowing how to actually pay them back.

Right now, Amherst’s financial education efforts are passive: students must reach out on their own and ask for help understanding their debt. If Amherst were more serious about the problem it would hold workshops to acknowledge the problem, help students deal with debt and prevent people from feeling alone or ashamed. 

For students who come from families that are already institutionally disadvantaged in America’s financial system, Amherst’s unwillingness to help is especially egregious. Even programs as simple as educating students about alternatives to private loans, like the low-cost, low-interest loans financed by the Massachusetts Education Financing Authority, would help students avoid the worst outcomes of borrowing.

Mitigating Existing Debt

But Amherst should do more than just educate students about outside creditors. Too often, once a student graduates, Amherst washes its hands of their debt problems. To increase Amherst’s institutional investment in the problem, we propose the following plan: Instead of leaving students to borrow from whatever private sources they can find, Amherst should lend out money itself to any student who can’t afford to pay. 

Last year, over 43 percent of Amherst student debt was privately-held. This is a huge problem because private loans have higher interest rates and stricter repayment terms. For example, private loans this year have interest rates ranging from 3.82 to 14.5 percent annually, while federal loans charge only 2.75 percent. If Amherst took the place of private lenders, students would be far better off. For one thing, Amherst already lends out money directly to students who cannot receive federal loans, so the necessary infrastructure already exists.

Since Amherst isn’t a for-profit institution, it could afford to treat its debtors far better than private lenders would. Under this system, offering debt leniency is actually a good thing for the lender — alumni would be better positioned to succeed, and Amherst’s name would be burnished as a result. This solution could even apply retroactively; Amherst could offer current students and alumni the opportunity to refinance their student debt into lower-interest loans held by Amherst. 

The reader’s stomach might squirm at the idea of our alma mater also being our creditor. But the problematic nature of the relationship is exactly the point. Historically, Amherst has avoided responsibility for the debt crisis by only occasionally lending to students. 

As its students’ main private creditor, though, Amherst would be responsible for the debt it creates. The uncomfortably close connection between Amherst and student debt would incentivize reform and increase transparency. Rather than obscuring the debt crisis through a panoply of loans of different types held by many different creditors, our system would allow investigators like us to know exactly how much debt students possess. Anyone would be able to check if Amherst’s financial aid is actually meeting its stated goals. 

Transparency

Lack of transparency is another central problem with Amherst’s financial aid system. As we discussed last week, a student could easily read Amherst’s financial aid website and come away with the false impression that Amherst students don’t graduate with debt. Amherst should replace its glittering, marketable generalizations with concrete statistics comparing Amherst to other colleges.

Transparency should extend beyond just advertising. In this article, we’re unable to offer many concrete suggestions for how Amherst could better allocate its financial aid money. That’s because Amherst (along with other elite colleges) keeps its financial aid data under lock and key. 

We have no idea which income levels or demographic groups graduate with the most debt, and so we have no way to design targeted solutions or evaluate if attending Amherst is the right choice. This level of secrecy is shocking. It’s a bit like if Val kept all of the ingredients in its meals totally secret. In that case, we wouldn’t be able to judge whether or not we wanted a particular dish, and we’d be powerless to speculate the origins of each week’s mystery meat. If Amherst released its financial aid distribution information, students would better understand the problems facing financial aid and could offer more productive solutions. 

Typically, colleges don’t want to release their financial aid distributions because that gold mine of data reveals unwelcome facts about their enrollment strategies. Then again, Amherst probably wouldn’t want to release its Val data either if it weren’t legally required to. But more transparency is exactly what the college needs if it wants to take responsibility for and resolve its student debt crisis. And if that forces the college to grapple with enrollment practices that almost certainly privilege the enormously wealthy, we’ll call that a serendipitous side effect.

As Amherst students, we want to see Amherst thrive. That’s part of the reason we’re pushing for financial aid reform. Fixing financial aid would not only reduce student debt, but it would also make Amherst stronger as an institution. 

When Amherst graduates are financially unburdened after college, they’re more likely to actually succeed. They’re also more likely to look back at Amherst as a wonderful place rather than an overpriced, unaffordable college that clouded their futures with debt. When one of us worked for the Amherst phonathon, calling grads to ask for donations, a common response was, “Sorry, I can’t donate. I have to pay my student loans.”

Besides, Amherst has plenty to gain from being the only college in the nation to accept students on a need-blind basis while also eliminating student debt. Imagine how Amherst would forevermore outrank Williams as student after student clamored to become debt-free Mammoths rather than cash cows. Once other elite colleges realized Amherst’s advantage, they’d be quick to follow, improving outcomes for many more students than Amherst’s alone. Because of Amherst’s status as an elite institution, any improvements it makes to financial aid will reverberate through the NESCAC, the Ivy League and other similar schools across the country. 

We are proud to attend Amherst College, one of the finest institutions of higher education in the country. Yet with that lofty title comes a responsibility to ensure affordability and accessibility. Too often, Amherst has abdicated that responsibility by distancing itself from the student debt crisis and using its vague and subjective policies as a means of deflecting criticism. 

At the most basic level, we’re proposing that Amherst take responsibility for the crisis it helped create. A college as respected as Amherst should feel no shame in pointing out its own flaws and vowing to fix them. Only once Amherst acknowledges its student debt crisis can our community work together to create a better future for both students and the college. We hope that this series can help start that process.