“You can afford Penn.”

This simple message has been an integral part of the pitch Penn makes to potential applicants for decades. Director of Student Financial Aid William Schilling C’66’s mission is to make sure that statement is true for everyone who attends.

Thus, it was music to his ears to hear that incoming University President Amy Gutmann intends to make financial aid a top priority of her administration. Like both Gutmann and President Judith Rodin CW’66, Schilling is a scholarship kid—his attendance at Penn was made possible by a generous financial aid package.

Penn also maintains a need-blind admissions policy, in which students are admitted without regard to their ability to pay. Gutmann has pledged to do what is necessary to support this policy. In our interview, Schilling noted that while Penn has made great strides in its ability to remain committed to both need-blind admissions and full financial aid for everyone who needs it, both are still a bigger challenge for Penn than for its sister schools.

Q. How big is our financial aid budget?
A. We expect that our total undergraduate aid budget this year will be about $72 million. That doesn’t include all of the aid that our undergraduate students get. In addition, students are getting federal grants, state grants and private grants, and loans through the Stafford and Perkins programs. That $72 million is just the institutional aid budget for undergraduates.

Q. What fraction of our undergraduate student body receives financial aid?
A. Most everything in this business depends on how you define things. Between 55 and 60 percent of our undergraduates are financing part of their education with some kind of assistance. It may be just a Stafford Loan, a scholarship from the Rotary or Kiwanis or some outside organization, or some other type of aid.

About 45 percent of our undergraduate students are receiving aid through this office, Student Financial Services, and most of those, about 40 percent of our undergraduates, are receiving some grant assistance from Penn.

Q. What portion of the typical student’s financial aid package consists of grants, and what fraction comes from work-study or loans?
A. For the freshman class, the initial awards going out, the average total package is about $25,000 to meet the need. And we do meet full need for all students when we determine that they have need. Of the overall package, 78 percent was met with grants, between 11 and 12 percent with loans and a little over 10 percent work-study. And that grant percentage has been increasing over the last seven years.

Q. What portion of our financial aid budget is covered by tuition? Is it unusual for a school like ours to fund financial aid through tuition revenue?
A. I don’t think we’re unusual in that we have to fund some of it. We’re unusual compared to our peer institutions in the large amount of our funding from unrestricted resources as opposed to endowment. We fund about 12 percent of our undergraduate grants from endowment income. The other 88 percent is coming from unrestricted income, of which tuition is the big piece.

Q. How did we get to this ratio?
A. It depends on what direction you think we’re moving. We’re actually doing better. It was a few years ago, probably about seven or eight years ago, when that was more like 95 percent compared to 88 percent. So we’ve made some significant strides in fundraising endowment for undergraduate aid in the last seven years or so.

Q. Do you think we will see the day when we, like Princeton, can offer students just grants, no loans?
A. It won’t be in the next few years. We have to really have the endowment grow considerably. We’re looking at [an additional] $3,500 to $4,000 per student overall. The endowment needed to generate that much additional revenue would be about $350 million. Obviously, if we raised $350 million over 10 years, needs will have gone up, costs will have gone up, and the amount we’d have to cover would be more. So I think we’d probably be looking, depending on what year you’re referencing, somewhere between $350 and $500 million.

Q. What does need-blind admissions mean?
A. Need-blind admissions means that when Admissions is reviewing an application for admission, they are not taking into account whether that student has financial need or if we have financial aid. So it means that the admissions decision is divorced from the student’s aid application.

In a need-conscious school, they would say, for example, We can afford to aid 35 percent of our student body. And then they’d have a pool of aid applicants and a pool of non-aid applicants, and they would stop admitting when they’d reached the point where they’d say, This is all the admits we can take from the needy pool this year.

Q. How different would our student body look if we didn’t have the financial aid policies we do?
A. I think it would look very different. I don’t know if I can quantify that, but we do know that roughly 40 percent of our undergraduates are getting grant aid. If we didn’t have that program, some of them would probably be able to stay, particularly those who have relatively low need. I would think, though, probably a good 30 percent of our student body would be very different. We would probably lose quality, and we’d certainly lose diversity.

Q. And the student body would be richer too, I imagine?
A. Oh, it would definitely be richer. We could be back where a lot of private institutions were in the 19th century, where lower- and lower-middle- and even middle-income students didn’t consider attending. I think that the advent of need-based financial aid has certainly had a significant impact on the diversity of the student body.

Q. How long has this need-based system been in place?
A. Just about half a century in any sort of organized fashion. Back in the early 1950s, under the prodding of a guy from Harvard named John Monroe, a number of folks from a lot of the Ivy schools, Penn being one of them, got together and talked about trying to come up with some reasonably uniform approach to assessing a family’s ability to pay and focusing on providing financial aid funds to meet the need of any student who was admitted to the school.

Their discussions led them to approach the College Board, and at that point, the College Board established the College Scholarship Service. They created a form called the Parent Confidential Statement so that a student applying to five schools that used the service would file one application. The information would be sent to all five schools, they would have a reasonably similar approach to assessing the ability of the student to pay, and then agree that they would try to meet that need once it was determined.

Q. What would you say to those people who argue that colleges should just cut their tuition and fees to the point where more people could afford them?
A. Those people run a huge gamut. We could cut the tuition in half—assuming we could still run the enterprise—and at $20,000, a lot of people still couldn’t afford it. There are a lot of students who can’t afford state institutions, public, tax-supported institutions that cost less than $20,000.

There would also be a negative effect on our net revenue if we reduced tuition. If 100 percent of our students were aided, it might make sense to do that. But within the limits of what we could do in terms of tuition reduction and still maintain the academic program, we wouldn’t be able to reduce it enough to make Penn affordable to most of the students who are on financial aid.