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Stanford GSB Financial Aid System Overhauled: New System Based Solely on Need

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Stanford Graduate School of Business (GSB) will implement a new financial aid system next month that allocates fellowships and loans to incoming MBA students using a formula based solely on financial need, the school announced today. This will formalize the transitional system the school has used for the past year—ever since a data breach last fall caused its prior approach to financial aid to come under close scrutiny.

Today’s decision resulted from an exhaustive review and redesign of the school’s historical practices surrounding financial aid and drew on input from faculty, students, staff, alumni, and outside advisors, the school said.

Kirsten Moss took over as assistant dean of MBA admissions and financial aid at Stanford in June 2017 and had only just started assembling her first incoming class at the GSB last fall when the data breach occurred. Misconfigured permissions on file-sharing platforms resulted in the breach, which revealed information about certain students and many employees.

Analysis of the breached data subsequently revealed that Stanford sometimes awarded financial aid based on criteria other than need, including gender, immigration status, and work experience. While a common practice at many leading business schools—it contradicted Stanford’s own stated policy of allocating fellowships and loans based solely on need.

Dean Jonathan Levin, also new to his role, immediately committed to completely reevaluating the school’s approach to financial aid in the wake of the data breach and appointed Moss to lead the year-long, in-depth review and redesign process, resulting in today’s announcement.

Moss and Levin Share New Stanford GSB Financial Aid Approach in Joint Letter
“In January, we launched an initiative to review and redesign the GSB’s financial aid system,” wrote Levin and Moss in a joint letter released today. “Many members of the GSB community contributed time and ideas as we explored and deliberated different approaches to allocating fellowships and loans to students offered admission to the MBA program,” they wrote. “These decisions are important in enabling students from a wide range of backgrounds and circumstances to attend the GSB.”

The letter went on to explain in detail the decision to base financial aid solely on need. It painted a picture in broad strokes of what the new financial aid system will look like when it takes effect in December. And it revealed the thorough, expansive process the school went through in choosing this path forward.

Faculty, students, staff, and alumni all took part in the Financial Aid Initiative, Levin and Moss noted, with more than 200 MBA students providing input as part of discussions, surveys, and community meetings made possible thanks to efforts by the GSB Student Association.

stanford gsb financial aid
Rushil Prakash, Stanford MBA Class of 2019

Rushil Prakash, a student in the Class of 2019, praised the inclusive approach the school took. “Stanford GSB’s unique and collaborative culture allowed the entire community—students, faculty, staff, and alumni—to have a voice at the table as we worked to redesign the financial aid system,” she said. “This new policy ensures there is fair and equitable access to all and will help the GSB to continue attracting the most diverse and competitive candidates both now and in the future, while staying true to its culture.”

Alumni, too, chimed in as part of dozens of consultations and formal focus groups in California and New York. And an advisory group made up of faculty, staff, and alumni helped Moss lead the initiative.

Kirthiga Reddy, a 2003 GSB grad and current chair of the Stanford Business School Management Board, praised the thoroughness of the financial aid system redesign. “From discussions and surveys to community meetings and a design thinking workshop, the GSB collected a wide range of perspectives and voices to ensure that its new process upholds the ideals of transparency and fairness,” Reddy said. The design thinking session was a process in which participants were encouraged to envision the financial aid experience from the applicant’s perspective. “The resulting changes will improve the applicant experience, reduce barriers for qualified candidates, and provide greater access for all students to attend and participate in the GSB’s world-class educational experience.”                                        

Three Guiding Principles Lead Approach to Aid at Stanford
Before they began any of this, the Stanford team first came up with three guiding principles to lead the initiative:

  • Excellence, meaning that the financial aid process must support the school’s efforts to draw the most competitive and diverse class possible;
  • Access, meaning that the financial assistance awarded as part of the process is adequate to allow all students who gain admission to attend and participate fully in the educational experience; and
  • Fairness, meaning that the process must treat students fairly and equitably.

“We found that these goals resonated widely and captured a shared vision for our community,” Levin and Moss wrote.

Stanford explored three broad categories in terms of possible models for offering financial aid—one in which fellowships would be awarded in a discretionary manner in hopes of influencing recipients to attend, a second using a formula based solely on financial need, and a third, blended version of the first two, combining a need formula with an element of discretion. Different stakeholders expressed thoughtful perspectives in support of each.

“Many students advocated for a solely need-based formula on the grounds of access and fairness,” wrote Levin and Moss. “We heard arguments to include an element of discretion, if it would assist in attracting competitive and diverse students. We also heard that once admitted students felt attendance was possible, their decision typically depended on the overall appeal of the GSB education and community rather than the specific mix of fellowship and loans.”

A review of recent enrollment decisions supported this final point—showing that students who ultimately didn’t decide to attend Stanford often hadn’t submitted a financial aid application. Meanwhile, a very large majority of students who applied for aid subsequently enrolled.

Also factoring into today’s decision was the test case offered by the past year’s transitional system, in which fellowships were awarded solely on financial need. The resulting class—the current first-year Class of 2020—helped give Stanford confidence that a system of financial aid based exclusively on need does not compromise the high caliber, diverse array of students who choose to enroll and attend.

Stanford GSB financial aid
Kirsten Moss, Stanford GSB assistant dean of MBA admissions and financial aid ; Photo Credit: Toni Bird Photography

“With these considerations, and acknowledging that the income of our endowed financial aid funds are already awarded on the basis of financial need, we decided to proceed with awarding GSB fellowships based solely on financial need,” Levin and Moss wrote.

As part of the new system, all financial aid offers made through the general GSB fellowship pool will incorporate a minimum loan in an amount to be determined each year. This general pool constitutes roughly 85 percent of Stanford’s fellowship budget, the letter continued, and is distinct from named fellowships such as the USA Fellowship, the Africa Fellowship, and the Reliance Fellowship. These named fellowships are awarded using their own set of criteria and were not reviewed or altered as part of the past year’s process.

New Ways of Assessing Financial Need, Less Cumbersome Application Process, Provision for “Edge Cases”
The new system announced today will also include a more nuanced way of assessing financial need. Historically, the GSB based its determination of how much aid individual students needed on their current assets. But in the review process, students pointed out that this approach could encourage some to “spend down” assets rather than saving responsibly. “To mitigate this incentive, our new system for assessing need will factor in prior income as well as assets,” Levin and Moss noted.

The careful review of historical practices also revealed that applying for financial aid has been a major pain up until now. “We heard repeatedly that applying for aid was cumbersome, complicated, and frustrating,” Levin and Moss wrote. “There is some necessary reporting burden in any system that seeks to assess need fairly and accurately, but it soon became apparent that we could improve the process dramatically.” So the school is now at work on a new user experience design that it hopes will be an immediate improvement and that it plans to continue to refine over time.

Finally, Stanford has recognized that its new system must be able to deal with exceptional circumstances. “In our discussions, it became clear that ‘edge cases’ can arise in determining financial need, where students face complex situations, such as family health issues,” the letter continued.” Our hope is that by working with students, we can ensure that their calculated need accurately reflects their situation, recognizing that it may change over time.”

We would wager that neither Moss nor Levin hoped to devote as much of the earliest days in their current roles at Stanford to overhauling a problematic financial aid process they inherited. But early feedback suggests the effort will prove well worth it.

Stanford GSB financial aid
Devin Kelsey, Stanford MBA Class of 2018

Devin Kelsey, a 2018 grad, underscored the importance of having a financial aid process that reflects the school’s larger place in the world. “Stanford GSB’s redesigned financial aid system brings greater access and fairness to applicants, an important element that reflects the values our GSB community exhibit each and every day,” Kelsey said. “It was an honor to provide input and contribute to this initiative, one that will support the well-being of future students and the long-term success of the GSB.”

Alumnus Jonathan Garfinkel, now a partner at TPG, also spoke to the continuing influence today’s announcement promised to have at the school and in the careers of its graduates. “As members of the Stanford GSB community, we are united in our shared values and commitment to the institution,” he said. “ It was inspiring and illuminating to help redesign the financial aid system based on the principles of access, fairness, and excellence, and I’m optimistic that the changes will enable the GSB to make a greater impact for years to come.”

To read Moss and Levin’s letter in its entirety, click here. For more on the historical financial aid system at Stanford, click here.