Princeton University recently announced that it will completely eliminate the loan component of all undergraduate financial aid awards, replacing loans with grants from the university’s endowment.

Washington University financial aid administrators state that a comparable policy will not be adopted at WU.

According to the Chronicle of Higher Education, the new Princeton policy is set to begin in 2001-2002 and will substitute a higher grant to cover what would have once been covered by private and governmental loans. The grants-for-loans program also includes reforms to graduate school funding, including full tuition scholarships and living stipends for all first year Ph.D students, who would originally have had to receive support through research grants and teaching assignments.

The new policy was made possible when the Princeton Board of Trustees voted to devote $57 million from the endowment into the schools operating budget, $16 million of which is expected to fund the scholarships.

Whether or not other national universities like Harvard and Yale will follow in Princeton’s footsteps remains to be seen. At WU, however, major adjustments in financial policy are unlikely for the near future.

“I guess I was astounded [by the news of Princeton's new policy]” said Financial Aid Advisor Bill Witbrodt. “I think it’s great that Princeton has the resources to be able to do that. [but the same policy] not a possibility here in the forseeable future.”

According to Witbrodt, a similar policy would not be likely to emerge at WU because of the university’s size and also because of rules concerning how the endowment can be spent.

WU is a little bit different from Princeton in that we have larger undergraduate schools that we need to support. We also have more schools than Princeton does, and they have a much larger endowment,” said Witbrodt.

At just over $8 billion, Princeton has the USA’s fourth largest endowment, while WU had the tenth largest at $4.3 billion.

Even so, the size of the endowment is not necessarily what determines how much money is available for grants because endowment funds are rationed very specifically.

“In talking about endowments, you have to also talk about its restrictions. When we receive gifts from friends and alumni of the university, they tell us how that money can be spent,” said Witbrodt. “We can only spend money on scholarships that are given expressly for that purpose.I’m assuming that the Princeton endowment must have a lot of money put towards scholarships.”

The reason that the Princeton Board of Trustees was able to institute such a policy is complicated. The university’s policy states that 4 to 5 percent of the endowment can be spent every year, with a 5 percent increase in the rate of spending every year. However, in years when the endowment increases significantly, the percent of the endowment for spending can also increase. the donation of $57 million to the operating budget from the endowment made Princeton’s new policy possible.

Princeton’s new policy has prompted many newspapers to call for reevaluation of how endowment monies are allocated.

The Wall Street Journal recently published an editorial praising Princeton’s policy and encouraging other universities to loosen up their restrictions on how endowment funds can be spent. The editorial further noted that the dollar amount necessary to fund Princeton’s new program comes to approximately two-tenths of one percent of the entire endowment.

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