How a “Hidden Ivy” Eliminated Most Student Loans Thanks to Alumni Support

Photo: Stephen B. Goodwin/shutterstock

Photo: Stephen B. Goodwin/shutterstock

Last April, Jeff Platsky asked in the Press & Sun-Bulletin, “Can New York’s small private colleges survive the financial strain of coronavirus?”

The pandemic, Platsky wrote, was “yet another mortal threat” for schools like Colgate University, Vassar and Skidmore College, which were already grappling with foreboding demographic trends, rising costs and competition from more affordable public universities. Countless private schools across the country found themselves in a similarly perilous situation.

At least one school cited by Platsky has deftly navigated the pandemic. In January, Colgate announced it saw a 104% increase in applications for the Class of 2025 over the previous year. Officials attributed this to an initiative launched last October that replaced federal loans with grants for students with family incomes up to $125,000.

On June 1, the school launched the “Colgate Commitment: An Initiative in Access and Affordability,” which eliminated tuition for students from families with annual income levels of $80,000 or less, and upped the limit on the no-loan initiative to $150,000, beginning with the Class of 2026. Two weeks later, the school announced the $150,000 income threshold would apply to members of the classes of 2022 through 2025.

“This new expansion of the Colgate Commitment to include all current Colgate students is possible due to record-setting giving from Colgate alumni,” said Communications Director Mark Walden. This support flowed through the Colgate Fund, the university’s unrestricted annual fund. University leaders will seek an additional $25 million over the next three years to fund the commitment in perpetuity.

A month after Platsky laid out his dire forecast, I wondered if the unfolding pandemic would force alumni to reconsider their historically tepid support for financial aid. Colgate’s efforts suggest they will be amenable to reducing students’ financial burden—provided that advancement officers draft a workable plan, engage key stakeholders and make a compelling case that lower tuition is good for the university’s brand, recruitment efforts and long-term sustainability.

Making a bet on lower tuition

To quote Press & Sun-Bulletin’s Platsky, rising tuition posed a “mortal threat” to private colleges long before the pandemic struck. For example, in 2018, St. John’s College launched a $300 million campaign to reduce annual tuition costs for students by as much as 50%. The school’s $60,000 tuition rate drove away high-performing students and painted the school as an “elite, secluded college on a hill,” said its president, Mark Roosevelt. The plan called on donors to change that perception.

In retrospect, calling on alumni to reduce the tuition burden seems like a perfectly reasonable ask. But it’s important to understand the state of alumni giving in 2018. That same year, the Council for Advancement and Support Education (CASE) found that alumni donors preferred gifts for athletics and academic divisions over student financial aid. St. John’s College’s campaign was predicated on the calculated risk that alumni could be convinced to pivot toward chipping away at the school’s exorbitant sticker price.

Colgate’s leaders made a similar gamble. In 2019, trustees, faculty and the school’s alumni council approved the school’s Third-Century Plan, which included a “no-loan initiative” that replaced federal loans with grants. The no-loan initiative, the plan stated, would benefit the school’s “selectivity, desirability, and overall reputation” and attract “a diverse and talented class of students of increasing promise and achievement.”

Colgate joined institutions like Brown, Duke, Harvard and Stanford that have eliminated tuition for students below a certain household income threshold. The key difference is that Colgate, which is often referred to as a “Hidden Ivy,” is far less affluent than these other schools. At $1.1 billion, its endowment is smaller than that of Brown ($4.7 billion) and Duke ($4 billion), and nowhere near that of Harvard ($41 billion) and Stanford ($29 billion).

On the other hand, Colgate’s 2021–22 tuition of $61,594 is actually higher than that of Brown ($60,944) and Duke ($58,085), suggesting its advancement officers had a steeper financial hill to climb to make the no-loan initiative and Colgate Commitment a reality. Let’s see how they did.

How it came together

For the first phase of Colgate’s no-loan initiative, which eliminated loans for students with a total family income of up to $125,000, leaders drew funding from the university’s operating budget, gifts for financial aid and the Colgate Fund.

Jennifer Stone, Colgate’s assistant vice president for advancement, annual giving and professional networks, said her team specifically encouraged donors to support the no-loan initiative by giving to the Colgate Fund, and that their efforts generated a “significant increase in support.” In June 2019, the school announced that plans were in place for the no-loan program to be “fully supported” by the endowment and the Colgate Fund.

The next phase called on the university to raise $1 million to launch the Colgate Commitment on June 1. Karl Clauss, Colgate’s vice president for advancement, told me his team tested the plan with key constituencies before going public. “These conversations were very useful in fine-tuning our messaging and understanding what resonated most with potential funders,” he said.

In the spring of 2021, Colgate President Brian Casey made the pitch to leaders of the university’s Alumni Council and Presidents’ Club Membership Council. Stone said that members of both councils were “inspired by the overall plan and what it would do for Colgate, but was also inspired by the fact that they had an opportunity to lead the effort.” Casey chose to make a personal contribution of $100,000, which also resonated with members.

Colgate designated a specific restricted fund to track the $1 million. Stone and her team then sent solicitation material, which included a cover letter from Casey, to council members. Casey met with each group while advancement staff reached out to members individually to discuss their commitment. Stone told me that “overall, alumni were incredibly inspired, and many increased their giving to Colgate to support this.”

With $1 million in hand, the university launched the Colgate Commitment on schedule. The commitment provided full-tuition support for the lowest-income students, aligned income and tuition costs for families with incomes between $80,000 and $150,000, and expanded the no-loan initiative. Beyond the $1 million from the Alumni Council and Presidents’ Club Membership Council, gifts to the Colgate Fund “have supported the launch and continued funding of the Colgate Commitment,” Stone said.

Harnessing the unrestricted annual fund

Leaders’ deployment of Colgate’s unrestricted annual fund was a critical component of its overall plan. To understand why, we need to explore some of the underlying tensions facing university advancement officers.

University leaders task officers with securing gifts that advance the university’s mission. But some donors would rather make a restricted gift that may not align with the leaders’ vision. As a result, officers often proceed with gifts that prioritize “margin” over “mission,” said Jeff Martin, senior director at education consulting firm EAB.

The pandemic amplified this tension. One respondent to IP’s 2020 survey of higher ed fundraisers lamented “the disconnect between what higher education is asking for—i.e., foundation support for endowment, scholarship and endowed professorships—and what funders want to give.”

The annual fund, which Martin calls a university’s “primary source of unrestricted fundraising revenues,” eases this tension by enabling leaders to direct funds to areas that advance the school’s mission. The problem is that donors aren’t particularly interested in making unrestricted gifts. TIAA Institute classified 93% of dollars donated to higher education from 1988–2018 as “restricted.” 

However, once the pandemic hit, donors turned to unrestricted gifts, guided by the belief that administrators were best equipped to allocate emergency funding. One of the big challenges for advancement officers going forward will be to maintain an equally robust level of unrestricted support as pandemic-driven urgency wanes.

In the case of Colgate, donors contributed $2.9 million to the Colgate Fund last December through its Colgate Together Challenge. A group of donors matched each gift, up to $1.3 million, for a challenge total exceeding $4.2 million from more than 4,700 donors. All told, 11,659 alumni made gifts to Colgate in 2020, including $8.76 million for the Colgate Fund—an 8.1% increase in unrestricted support over the previous year.

“Tying the Colgate Fund to an initiative like No-Loan is one of the reasons that there has been such strong growth in the Colgate Fund in recent years,” Stone told me. “We recommend strongly that donors that wish to make a spendable gift to support the Colgate Commitment are encouraged to do so through gifts to the Colgate Fund.”

Best of both worlds

In the early, harrowing days of the pandemic, donors tabled headline-grabbing capital gifts (at least publicly) while previously disengaged “middle-of-the-pyramid” alumni stepped up to provide critical unrestricted support. Higher ed experts wondered if this shift in how donors perceived impact was a temporary blip or the harbinger of a more enduring trend.

Recent developments out of Hamilton, New York, suggest it was both.

Colgate originally intended to eliminate federal loans for students with family incomes up to $150,000, beginning with the Class of 2026. But on June 14, it announced the initiative would apply to members of the classes of 2022 through 2025 thanks to “record-setting giving” from alumni who kept the checks flowing even as the pandemic began to recede.

Advancement officers are also deploying a different set of metrics to measure the impact of a gift. You’ll recall that Colgate’s leaders intuited that its no-loan initiative would enhance the school’s desirability at a time when high school students are increasingly drawn to low-cost options. It turns out their hunch proved accurate. An admitted student survey found that 78% of no-loan–eligible students who chose Colgate believed their financial aid offers were “superior to that of their other choices.”

But mega-donors have no plans to abandon their pre-pandemic definition of impact anytime soon. Case in point: In February, hedge fund investor Daniel Benton made a $25 million gift, $20 million of which is earmarked for the construction of the Benton Center for Creativity and Innovation to house computer science, film and media studies, and theater at—you guessed it—Colgate University.

A Colgate alumnus, Benton said the new center “will become a hub for interdepartmental collaboration and experimentation.” The gift is also a testament to donors’ enduring affinity for restricted giving. Benton’s one-time commitment is 185% larger than the $8.76 million donated to Colgate’s unrestricted fund by thousands of alumni across all of 2020.

With equities markets at historic highs, Benton’s gift, coupled with the success of the Colgate Commitment, suggests that some advancement officers can have the best of both worlds—raking in mega-gifts for new capital projects while simultaneously relying on donors to reduce tuition and burnish the brand.