Colleges turn discounters

Don’t automatically scratch Harvard University off your college wish list because of its steep price.

The school is overhauling its financial-aid policies to attract more middle- and upper-middle-income students. Grants, for instance, will replace loans in undergraduate aid packages starting in the fall. And parents with incomes under $180,000 won’t have to pay more than 10% of their income. That’s a big discount at a school that costs more than $45,000 a year.

So if you have your heart set on Harvard, apply. You still have to get in. But now you don’t have to let the tuition stop you from even trying.

No interest in Harvard? You might benefit anyway.

Harvard isn’t the first school to adopt a no-loan policy, and it won’t be the last. Duke University in North Carolina and Pasadena’s Caltech recently came out with plans to eliminate loans for lower- and middle-income students.

The lesson in all this: Don’t assume that you have to pay the full sticker price. Paying for college is like buying a car or an airline ticket -- what you pay may not be the same as the next person.

“Higher education is a discounting industry,” said Kalman Chany, author of “Paying for College Without Going Broke.” “They have been charging what the market can bear. The market is not going to bear these costs anymore.”

So, what should you do if applying to colleges?

First, parents and students must have a serious talk about the family finances and college, said James Boyle, president of College Parents of America.

“It’s sometimes a taboo topic within a family,” Boyle said.

Cost, of course, shouldn’t be the sole factor in choosing a school. But this discussion about money is a necessary one, so “students and parents are on the same page of what the family can afford,” Boyle said. It also would help later when evaluating aid packages, he said.

Next, do your research.

Some schools offer calculators on their websites that can give you a good idea of the aid package you would qualify for at that institution, said Matthew Reed, policy analyst with the Project on Student Debt.

His group’s website (www .projectonstudentdebt.org) also lists schools with no-loan or loan-reduction policies.

Princeton University was the first to adopt a no-loan policy for all financial-aid students in 2001. Since then, more than 30 schools have added similar programs.

A few years ago, Harvard stopped requiring families with incomes under $60,000 to contribute to the cost of college.

Its new policy will affect families with incomes of $60,000 to $180,000. Families with incomes of $60,000 but under $120,000 will pay on a sliding scale, from nothing to 10% of their income each year. Those at $120,000 and under $180,000 will pay 10% a year.

Today, a family making about $180,000 pays more than $30,000 a year for Harvard under the aid formula, compared with about $18,000 under the new policy, the school figures.

Also, Harvard will no longer factor in home equity when figuring how much families should pay. This could save an average of $4,000 a year for these families.

Harvard said it was trying to lessen the burden on families and to prevent students from being consumed by debt. Skeptics say Harvard’s motives aren’t entirely altruistic, noting growing pressure on schools by families and Congress to reduce student debt.

Whatever the motive, Harvard’s action can only be good for students and parents.

Schools are concerned that they are pricing out middle-income families with cost increases that consistently outpace inflation. The average cost of college, including room and board, rose nearly 6% this year, reaching $13,589 at a four-year public college and $32,307 at a private school, according to the College Board.

Congress is talking about requiring colleges with hefty endowments to use some of that money to reduce tuition. At about $35 billion, Harvard’s endowment is larger than the economies of more than half the countries in the world.

Pressure from families and Congress isn’t about to abate any time soon. With the spotlight on how the cost of higher education is affecting families, more schools may step up to escape the glare.