updated 12/22/2007 10:20:22 PM ET 2007-12-23T03:20:22

When it comes to paying for college, cash-strapped families have had a few good tidings of late. A string of elite, private colleges have announced major boosts in financial aid.

Duke University kicked things off two weeks ago with a plan to spend an extra $13 million on aid by capping loans and eliminating any required parental contribution from families earning under $60,000.

Two days later, Harvard said it would tap its $35-billion endowment to eliminate loans entirely from its student aid and replace them with scholarships. It will also spend millions helping families that are better-off, even those earning well into six figures.

Now, nobody wants to be left behind.

The University of Pennsylvania, Pomona, Swarthmore, Haverford and Tufts all announced they would eliminate loans — more than doubling the small number of schools promising all students a debt-free graduation.

About time, some say. At four-year private colleges, average tuition and fees rose 6.3 percent this year to $23,712, according to the College Board.

At elite private schools, the full list price, with room and board, is typically double that.

Meanwhile, endowments at those places have soared. Harvard's increased nearly $6 billion last year — more than all but about a half-dozen schools have altogether.

Michael Dannenberg, a scholar at the New America Foundation, notes that's also approximately the figure Congress spent this year to cut student loan interest rates from 6.8 percent to 3.4 percent — for the whole country.

Why the change?
Pressure to act on affordability has been building from several quarters, including parents, lawmakers and alumni, some of whom think their alma maters have gotten greedy with their pricing power. And colleges jumped at once in part to grab attention during the season when high school seniors are making final decisions about where to apply.

The next question is how many families will feel the benefit. After all, the schools involved enroll the tiniest sliver of American college students. Fewer than one in five college students attend private institutions, and most of those attend less selective and expensive institutions than those lately in the news.

Says David Warren, president of the National Association of Independent Colleges and Universities: "There's no question when Harvard acts on any issue it has an impact. It's the stone in the pond and it will reach every institution."

The elite universities of the world set the tone for what other institutions will do, once they can afford it. And these latest announcements reflect a recognition in the top circles of higher education that college costs a lot even for middle- and even upper-middle-class families.

The latest initiatives clearly target that group. Most of these schools had already eliminated loans for the poorest students, so the benefits of these policies come further up the income scale. In Harvard's case, families earning more than 90 percent of the national average will see thousands of dollars in savings.

Move may pressure other schools
The colleges say they have grown increasingly convinced that there is an educational value in sparing students — at all levels — any worry about loan repayments.

Jim Bock, who heads Swarthmore's financial aid and admissions offices, remembers what it was like to have fewer choices than his classmates because of his loan debt when he graduated from Swarthmore in 1990.

"Two people in the $120,000 range, they could both be factory workers, first-generation (immigrants), with no retirement savings," Bock said. "They could be two school teachers."

The announcements could pressure less well-off schools to start spending more on aid, too. That sounds like good news, and it is — for students and parents. But some experts worry it won't prove good for the overall cause of college affordability.

Critic: Poorer students lose out?
The problem is the money to appease and attract upper-income students may come from those who need it more.

To boost their rankings and intellectual life on campus, colleges outside the highest echelon typically offer big discounts to some top students, even if they don't need it. Some worry these latest announcements will accelerate the trend towards "merit aid."

"The minute Harvard does that, a competitive scramble perforce is created," said Jack Maguire, a college consultant who says that — to his regret — he will likely be advising clients they'll have to make more use of non-need-based aid. "Folks have to use financial aid strategically in order to compete."

Donald Heller, a higher education expert at Penn State University, says the moves won't even be good for Harvard and its peers. He worries they will attract more upper-income students and crowd out poorer ones, who are already rare (about half of Harvard students pay the full price there, meaning their families earn more than the aid ceiling of approximately $180,000-$200,000 per year).

"If other institutions start to mimic what Harvard is doing, we may see poorer students crowded out at elite private institutions across the country," he said.

Expert: Economy the biggest factor
Ultimately, however, other factors will play a much bigger role in college affordability for most people than Harvard's policies for its 6,600 undergraduates.

For instance, maximum Pell Grants — the main federal aid program for low-income students — are set to rise from $4,310 to $4,731 this year under a spending bill passed Wednesday by Congress — though that's a $69 cut from what students had been promised.

But the biggest factor is the economy, says Dannenberg of the New America Foundation. Historically, when the economy falters, state funding for higher education is first to take a hit, and public college tuition soars.

"You could have this coming phenomenon where higher education at the elite colleges is becoming more affordable for the talented elite students who are accepted, but education for the masses to attend state and community colleges could become less affordable."

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