What are endowments for, anyway? Harvard has long been pressured to invest some of its $35 billion endowment in making its tuition more affordable. Now it seems to have done so in a significant way, cutting the cost of attendance by as much as half for students in families making between $120,000 to $180,000 a year and by more for families making less. From Bloomberg:

These families [making 120k to 180k] will pay just 10 percent of their yearly earnings to send a child to Harvard, the Cambridge, Massachusetts, university said today. The payments decline on a sliding scale, with those making less than $60,000 attending for free. The school also eliminated student loans, saying students will get additional grants as needed.

The newest initiative expands a program started in 2004, when former president Lawrence Summers added a tuition-free financial aid program for students from low-income families. The program, which begins next year, will cut costs for a family earning $180,000 to $18,000 per student, compared with $30,000 this year, according to the school.

``What you see here is a real commitment to try to identify a response to the enormous stress that a particular group of families feel about the cost of higher education,'' President Drew Faust said in a conference call. The new program focuses on a ``middle-income group,'' she said.

Excluding home equity from financial aid formulas, another part of the initiative, may save some students about $4,000 a year, according to a statement from Harvard.

Here's Senator Charles Grassley, who has been pushing for this:

“This is big news. Universities hold at least $340 billion in endowments. Harvard has the biggest endowment of all. This could inspire other expensive colleges to make tuition more affordable. Choosing a college should be based more on brain power than bank account size. As a society, we need to avoid saddling families with tuition they can’t afford and students with sky-high debts. I hope the colleges that are taking steps to reduce tuition will make the costs known up-front, so families can comparison-shop ahead of enrollment and don’t get any rude surprises afterward.

"I hope Congress is motivated by Harvard’s action to continue a discussion of whether to impose a mandatory endowment pay-out requirement on well-funded colleges. Colleges are tax-exempt, and other tax-exempt entities, such as most private foundations, have a mandatory pay-out requirement of 5 percent a year. Tax-exempt organizations are supposed to provide public benefit in exchange for their special status. Helping the next generation afford college is a public benefit. It’s good to see a top college recognize that.”