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reed magazine logoSummer 2009

Financial Aid at Reed

On June 10, the New York Times ran a front-page article about how the recession has affected Reed, and by extension, liberal arts colleges across the country.

The story, “College in Need Closes a Door to Needy Students,” by Jonathan D. Glater, focused almost exclusively on Reed’s admission and financial aid procedures. In particular, the article noted that late in the admission cycle, Reed wait-listed approximately 110 applications, or 3.5% of the 3,161 applications it received, because of the applicants’ inability to pay tuition.

The article generated strong response, prompting a surge of support from alumni and friends to expand the college’s ability to offer financial aid (see next page). At the same time, a number of alumni have expressed dismay that an applicant’s finances should be a factor in any admission decision.

“As an alumna who depended heavily on financial aid while I was in attendance, I am deeply, deeply disappointed in Reed,” wrote Grace Mitchell ’01. “I understand that Reed, like so many other institutions, is facing a budget shortfall, and that the dollars are simply not available to meet the full financial need of all the students who should be accepted. But declining admission to a set of students based on their financial resources is absolutely the wrong way to address this shortfall.”

Four former student body presidents, Andy Bruno ’03, Dan Denvir ’05, Erik Cameron ’05, and Lauren Rother ’07, echoed this sentiment:

“The cost of financial imprudence is tremendous. But the social cost of denying access to Reed’s distinctive education because of financial status is also quite real. Allowing applicants’ lack of privilege to be a factor that negatively affects their chance of admittance thoroughly compromises Reed’s selection process. The decision is particularly troubling in light of Reed’s commitment to diversity. Regardless of the number of students affected, it colors the entire admissions process in a way that further privileges elite experience to the detriment of students’ desire and ability to learn and thrive at Reed. No imaginary firewall can exist between the values used to choose some and not others; on questions of principle, decisions made on the margins of the admissions process are as important as those concerning the majority of applicants.”

President Colin Diver has responded to these concerns in a series of letters and emails. “Ideally, the ability to pay should never enter into a decision of whether to admit a particular student,” he wrote. “But compared to a handful of truly need-blind colleges and universities, we have had to put a limit on the number of students we could admit on a need-blind basis.” (see for more.)

While this policy is not new, the article prompted debate over a dilemma that has confronted Reed for years: how to provide a first-rate education, while making that education accessible to as many qualified applicants as possible.


It is worth thinking about why the response to the Times article was so strong. Certainly, the sensational headline, coupled with several alarming paragraphs, may have misled some readers into thinking that the college had slashed its budget for financial aid, or even eliminated it entirely. On the contrary, Reed increased its financial aid budget by 7.8% this year, to $23 million, and offered aid to 14% more applicants than it did in 2008. Overall, 50% of Reed students currently receive financial aid, with the average package totaling $34,873 a year.

But another reason stems from a durable myth: that once upon a time, Reed admitted all worthy students regardless of their ability to pay.

Like most myths, this one contains a grain of truth. For many years, Reed followed an unusual practice known internally as “come anyway.” Once the college had exhausted its financial aid budget for any given year, it told needy applicants they could come anyway, as long as they could find a way to pay their first year’s tuition in full; in subsequent years, Reed would meet their demonstrated need.

There were several problems with the “come anyway” policy: it was confusing to many applicants and counselors; it favored applicants with wealthy grandparents or other hidden resources; it tended to discourage minority applicants; it encouraged students and families to incur high loads of debt; and it stoked the misimpression that Reed was need-blind.

Several years ago, on the recommendation of the faculty Committee on Admission and Financial Aid, President Diver ended the “come anyway” practice, and put renewed emphasis on three basic principles. First, the college guarantees financial aid to all continuing students—their needs take priority over incoming applicants, even if their financial situation significantly deteriorates. Second, financial aid is awarded only when there is demonstrated need. Third, Reed meets 100% of the demonstrated need for every student it admits.

Under this policy, almost all admission decisions at Reed are blind to financial need. Every year, Reed sizes up its applicant pool and makes offers to the strongest candidates regardless of their ability to pay. At a certain point, however, the limitations of the financial aid budget begin to bite. The remaining applicants undergo a review that considers only those who can pay tuition.

In most years, Reed receives roughly 3,000 applications, and denies fewer than 100 because of financial status. This year, however, the recession put severe pressure on the finances of both continuing students and new applicants, taxing the aid budget far more than usual.

In the end, after accounting for yield (the number of applicants who accept), melt (those who change their mind) and various other factors, the number of matriculating students whose admission this year was influenced by their ability to pay is about 50, or 12% of the total admissions (freshmen and transfers) of 419. Statistically, these students are practically indistinguishable from their peers, according to Dean of Admission Paul Marthers. Indeed, this year’s freshman class boasts the same strong academic credentials as recent classes (see sidebar).

In 2005, the college determined that going need-blind would cost an additional $4 million a year; to support that increase, the endowment would have to expand by $80 million. A process is underway to update those estimates, but a rough calculation based on the latest figures suggests a figure closer to $7 million a year, with the endowment needing to expand by as much as $140 million.

The Class of ’13
A statistical snapshot

Applicants 2009 Avg. ’04-’08
Applicants 3,161 3,007
Accepted 1,281 1,178
Acceptance rate 41% 39%
Matriculants 378 349
Yield 30% 30%
1st Generation
% total
Avg. ’04-’08
Applications 514 (16%) 400 (13%)
Accepted Apps 130 (10%) 105 (9%)
% Accepted 25% 26%
Matriculants 46 (12%) 35 (10%)
Yield (%) 35% 33%
Class ’13
2009 Avg. ’04-’08
Hispanic 30 26
2 6
16 13
Asian 37 33
Other 10 8
Total 95 85
% Minorities 27% 23%
Class ’13
2009 Avg. ’04-’08
Average GPA 3.9 3.9
SAT Verbal 706 708
SAT Math 667 667
SAT Writing 689 686
Valedictorians 15 (10%) 17 (10%)

Figures do not include transfer students. Minority figures include only self-reported ethnicity and do not count foreign nationals. SAT Writing test scores were first reported by applicants in 2006. For more statistics, see


The debate over Reed’s financial aid policy has focused on three main points. The first is the college’s policy of meeting 100% of demonstrated need for every student it admits. A better policy, critics say, would be to stretch the dollars by meeting, say, 90%, and ask applicants to plug the gap themselves.

This approach, known as “gapping,” is fairly common in higher education. Unfortunately, it comes at a cost: it throws additional burden on applicants whose finances are already stressed. It forces some applicants to plug the gap by taking out loans, and thus graduate with high loads of debt. It also tends to discriminate against poorer applicants, for whom a $5,000 gap might be insurmountable.

The second debate centers on the way the college spends its endowment. Surely, critics say, Reed could tap more money from its $320 million endowment to beef up its financial aid budget, especially in a recession.

Reasonable people can and do disagree on how much money may be prudently withdrawn from the endowment in any particular year. The average spending rate reported by colleges with similarly sized endowments was 4.5% last year, according to the National Association of College and University Business Officers. Reed’s current policy is 5.3% of the endowment’s value, based on a rolling 13-quarter average. (The rolling average is designed to prevent fluctuations in the stock market from battering the college’s budget; but it also means that Reed’s actual spending rate when the value of the endowment sinks, as it did last year, is considerably higher.)

But Reed’s trustees, who oversee the endowment, must also balance the needs of the present with the needs of future generations of students and faculty. “The question is, should you sacrifice the future to pay for the present?” says Jon Rivenburg, director of institutional research. So far, the consensus among trustees has been that the college cannot spend more now without jeopardizing its ability to provide financial aid and support the academic program in the future. “Yes, it’s a judgment call,” says Diver. “But I think a thoroughly reasonable one.”

The third area of debate focuses on the college’s spending priorities. Why not devote a larger proportion of the budget to financial aid? In order to do this, of course, something else would have to be cut. The current budget, recommended to the board of trustees by the faculty and administration, aims to support Reed’s distinctive qualities by maintaining a low student/faculty ratio, hiring dedicated professors, supporting advanced research by students and faculty, and providing a rich community life on campus. College number-crunchers say it is hard to envision cuts of the necessary magnitude without threatening Reed’s academic program or its long-term viability.

“I do not believe we can simply manage our way to need-blind admissions,” Diver wrote in response to the open letter from the four former student body presidents. “Achievement of this goal will require continued budgetary vigilance but most importantly a much stronger level of external support than Reed has enjoyed in years past.”

Diver has been emphatic in his desire to reduce or eliminate family finances as a factor in admission. “I wish for nothing more of my time in office than to bring the college to the point where we never again find ourselves caught on the horns of [this] dilemma,” he continued. “The strong voices in support of financial aid predict, I hope, stronger donations to the college that will allow this change to occur.”

Indeed, strengthening financial aid is one of the key goals of the college’s Centennial Campaign, which was launched in April. Financial aid is the campaign’s biggest single component, with a target of $50 million.

As a first step, the college received a tremendous boost towards this goal from fantasy writer David Eddings ’54, who bequeathed the college close to $20 million, the majority of which he directed to the endowment for financial aid.

reed magazine logoSummer 2009