I am pleased to share with you the University of Pennsylvania's response to Senators Max Baucus and Charles Grassley of the U.S. Senate Finance Committee, who had written Penn and 135 other colleges and universities seeking information regarding our tuition rates, financial aid, and endowments. The report is available online in PDF format.
At my inauguration in 2004, I articulated a strategic vision for the University – the Penn Compact – that included a commitment to make a Penn education affordable to all outstanding students of talent and high potential. Over the past three years, Penn has moved aggressively and effectively to enhance our undergraduate financial aid programs. In 2006, we substituted grants for loans for students from families with income under $50,000, and in 2007 we increased the threshold for our no-loan program to $60,000.
We have doubled the number of students attending Penn from families below the $60,000 income threshold. In addition, the benefit of these moves has been demonstrated through the increase in the number of no-loan packages from 31% to 49% of the grant-aided admitted freshman class. As important, in one year alone, our new policies have decreased the average debt at graduation by 10%, from $20,927 in 2006 to $18,800 in 2007.
This December, with our Trustees' enthusiastic support, we announced our most far-reaching financial aid initiative: Penn will substitute grants for loans for all students eligible for financial aid, regardless of family income. Effective fall 2009, a student admitted to Penn who is eligible to receive financial aid will no longer have to take on any loans to study at Penn. This transformative initiative will continue Penn's commitment to lower- and lower-middle income students while also lifting the burden off of students from middle- and upper-middle income families, who typically have carried the greatest debt from higher education.
Beginning in fall 2008, all undergraduate students – not just entering freshmen – from families with calculated incomes under $100,000 will receive no-loan aid packages. Families with incomes above that level will receive a 10% reduction in need-based loans.
Beginning in fall 2009, all undergraduate students eligible for financial aid--currently 40% of our undergraduate enrollment--will receive loan-free aid packages, regardless of family income level.
This new initiative is the latest step in the University's efforts to make a Penn education affordable and accessible to talented students from every walk of life. Penn currently spends more than $90 million per year of its resources for grant aid to undergraduate students. When the new initiative is fully implemented, that figure will exceed $110 million per year -- an increase of more than 20%.
While our endowment ranks among the largest in the country, Penn ranks 61st among the nation's colleges and universities in per student endowment. This means that we educate many more students with far fewer financial resources. The vast majority of our financial aid expenditures come from the University's operating budget, with only 17% derived from the endowment. Further, our full tuition and fees cover only 70% of the direct cost of instruction. We therefore substantially subsidize the costs of a Penn education for all of our students, including those not on financial aid.
Our strong commitment to supporting our graduate and professional students also should not be overlooked. We spend an additional $170 million per year on graduate and professional student aid. Our core priorities for our Making History campaign therefore include raising both $350 million for undergraduate student aid and $323 million for graduate and professional student aid.
We also invest in many targeted outreach efforts to encourage students of all backgrounds to consider Penn. In addition and as important, we spend endowment and operating funds on initiatives that support our local community in areas including public education, service learning, mentoring, economic inclusion for minority businesses, and free health care programs. We also leverage our resources to help develop educational, public health, and other infrastructure capabilities in some of the world's developing countries.
I invite you to read Penn's response to the Senate Finance Committee and explore in more detail our commitment to training the next generation of leaders, scholars and professionals by providing a world-class education to students regardless of their economic background.
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