Financial Plan - Cornell University Division of Budget & Planning

Tuition, Financial Aid & Endowmentdeavors, and New York State-funded employee benefitscosts that are related to research.Financial AidMost government-funded undergraduate financial-aidprograms were created in the 1960’s, as successors tothe Servicemen’s Readjustment Act of 1944, popularlyknown as the “GI Bill.” Pivotal federal legislative actionsof the time were the Economic Opportunity Act of1964 and the Higher Education Act of 1965, which isreauthorized periodically. These and other laws createdprograms to provide grant, loan, and work-studysupport for low-income students as well as to channelexpanded funding to higher education institutions directly.As reported by the College Board, 20 the demandfor federal financial-aid funding rose dramatically inthe 1970’s, so much so that the U.S. Congress reshapedthese programs to diminish the cost of federalgrant funding, substituting a variety of subsidized andunsubsidized loan programs. 21 More recently, Congresshas instituted education tax credits and tuition andfee deductions that benefit middle-income familiesprimarily. 22 These policy changes have: (a) encouragedgenerations of students to assume ever increasing levelsof debt to finance their educations and (b) forcedinstitutions of higher education to commit their ownresources to substitute for the missing grant aid. (Seegraph at right.) Federal loan programs currently accountfor 40 percent of all student aid, and loans fromall sources represent 52 percent of the total. At $26.3billion in 2006-07, grant aid funded by colleges anduniversities from institutional resources exceeded the20 College Board, Trends in Student Aid 2007. http://professionals.collegeboard.com/data-reports-research/trends/student-aid-200621 The enrollment of first-time freshmen in U.S. degreegrantinginstitutions of higher education climbed from670,000 to 1,046,000 over the ten years between 1954-55and 1963-64. This enrollment increased 38 percent in thenext two years, rising to 1,442,000. By 1975-76, the numberof first-time freshmen had reached 2,515,000—almost twoand a half times the number enrolled when Congress passedthe 1964 and 1965 acts.22 Educational tax benefits were introduced in 1998-99and were projected to total $5.9 billion in 2006-07. In 2005,taxpayers with incomes above $50,000 enjoyed 58 percentof all tax education credits and 83 percent of all tuition taxdeductions.total of federal sources ($19.6 billion) and was slightlyless than the total grant aid provided by federal andstate resources combined ($27.4 billion).Many of these national trends have been mirrored atCornell over the past 20 years, though differently andin some cases more dramatically. (See graph at the topof page 23.) Federal and state funding for undergraduategrant aid increased nominally but decreased ininflation-adjusted terms, dropping from $17.7 millionin 1987-88 to $14.6 million in 2006-07. The use ofgovernment loan resources for need-based financialaid (which accounted for 92 percent of such loans atCornell in 2006-07) increased in inflation-adjustedterms through the late 1990’s, but has declined since.Cornell-funded grant aid has tripled, in inflationadjustedterms, over the same period, rising to $109.3million in 2006-07. Cornell’s recently announced initiativeto alter how financial aid is awarded to lowerincomestudents will further transform the trendsdisplayed in this graph by increasing the amount ofCornell-funded grant aid and lowering students’ relianceon federal loan programs.Inflation-Adjusted Dollars in BillionsSelected Sources of Financial Aid forU.S. Postsecondary Education *(in inflation-adjusted, 2006-07 dollars)$60$50$40$30$20$10Loan – GovernmentGrant – GovernmentGrant – InstitutionalWork-Study – Federal$064 67 70 73 76 79 82 85 88 91 94 97 00 03 06Fiscal Year* Data interpolated between 1964-65 and 1969-70.22