More universities are giving no loans to help students graduate debt-free

Aamid a heated national debate over the financial burden of student loans and the prospects for loan forgivenesssome colleges and universities are taking matters into their own hands and eliminating loans altogether.

Last month, Williams College, an exclusive liberal arts college in western Massachusetts, announcement that it would implement the nation’s first “all-grant” financial aid program in the upcoming fall semester. This means no loans and no vocational education requirements – just cash rewards.

“Williams will simply replace loans, on-campus jobs and required summer work with an equivalent amount in grants,” Williams President Maud Mandel said in a public address. letter.

In doing so, Williams joins a small, albeit growing, group of colleges. Over the past year, at least six colleges have either launched new loan-free policies or expanded their existing ones.

At Williams, Mandel said the changes will benefit just over half of the college’s students, or some 1,100 students. The college estimates that middle-income families will receive an additional $35,000 in grants over four years as a result of changes to its program. Williams already offered no loans to lower-income students, but the college says those families will also get an additional $16,000 in grants.

What is financial assistance without a loan?

At first glance, the term “loan-free” is simple: it means that students are not required to borrow money as part of their aid programs. But there are a few important details to keep in mind.

Generally, no-loan policies only apply to students who receive financial aid based on college need.

“But if you don’t need it,” says Paula Bishop, CPA and college financial aid counselor, “it doesn’t matter. In other words: if the college does not determine that you are eligible for need-based aid based on your family’s financial situation, you will not be eligible for expanded grants under these new policies.

Of the 547 incoming freshmen at Williams in 2021, for example, 59% applied for need-based aid, but only 44% were determined to be in financial need, according to Data of the common data set. Among the Class of 2021, about a third of students ended up taking out loans.

And not all no-loan policies apply to all students at a given college – most schools with these policies have no-loan financial aid programs only for students below a certain threshold of income.

Which Colleges Have Eliminated Loans From Financial Aid Programs

Williams says it’s the first college in the nation to completely eliminate loans and work-study requirements from financial aid programs, but it’s certainly not the first college to end loans.

Princeton University removed loans from its financial aid program in 2001, and the school said more than 10,000 students have benefited from this decision over the past two decades. About 20 additional colleges, including Brown University, Northwestern University and Pomona College, have since adopted no-loan policies for all students. In total, the Chronicle of higher education estimates that more than 75 schools have no-loan policies for all students or students from low-income families.

It should be mentioned that the vast majority of schools with loan-free policies tend to be small private institutions with low acceptance rates. Prestigious colleges like Williams are so sought after that their loan policies alone aren’t what drives students to apply, Bishop says. And despite the growing popularity of loan-free programs, this exclusivity means that the vast majority of students in the United States will still attend colleges with loan-based financial aid programs.

Yet with Williams, other no-loan policies are on the way. Last year, Ohio State University announcement a ten-year fundraising plan that includes a debt-free curriculum—a major milestone for a massive public university. While other public universities have limited loan-free programs, Ohio State aims to be the first to open it to all students, regardless of income or state residency.

Smith College also has announcement that it will eliminate loans from its financial aid programs this fall, making it the first women’s college to institute a loan-free program. Last summer, Colgate University mentioned it would eliminate loans from financial assistance programs for families with incomes below $150,000.

What you need to know about financial aid without a loan

Loan-free financial aid programs don’t prevent students from taking out loans or working on campus if they choose – and there are many reasons why students may want (or need) to do so. To do.

Financial aid formulas are based on two years of financial information, Bishop says, and that doesn’t always reflect a family’s financial situation in the present. There are also school-related expenses that aid may not cover, such as childcare or room and board.

Additionally, many families complain that the prices the financial aid formulas predict they can pay are still unaffordable. If, for example, a school’s formula estimates that your family can afford to pay $15,000 a year from their current savings and income, but you cannot change that, then loans can be one of the only options you have.

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