Emergence of "no-loan" policies at universities
Recent reports indicate that unless there's a substantial donation of around $1 billion or a widespread forgiveness of student loans, attending college is becoming increasingly limited to those who can afford it. About 24 institutions have chosen "no-loan" policies, which means they have completely removed student loans from their financial aid packages.
Menaka Hampole, an assistant professor of finance at Yale School of Management, said that a few universities are now implementing these regulations very commonly. Among the universities featured in The Princeton Review's "The Best 389 Colleges," 23 promise to fulfill 100% of their undergraduates' financial needs without resorting to loans.
Princeton's influence and financial pressures
According to Hampole, more institutions are implementing no-loan policies after seeing Princeton's example, which had the financial capacity to launch such an initiative. She added that when Princeton makes a step, other colleges follow suit, but it is largely the elite universities that can handle this due to the availability of financial resources.
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Colin Hatton, a senior consultant with NEPC's endowments and foundations division, said that universities across the country are suffering post-Covid problems, such as fewer students and lower tuition revenue. This has had an especially significant influence on college endowments. Hatton stated that the higher education sector is currently under severe pressure and hurdles.
Challenges even with no-loan policies
Even if students do not take out loans, they may still be required to pay the expected family contribution and other expenses like books and fees. Some colleges may also require students to enroll in work-study programs. Even if a school has a no-loan policy, it does not prevent students or families from borrowing money to satisfy their financial needs.
Robert Franek, the editor-in-chief of The Princeton Review and author of "The Best 389 Colleges," stated that having a no-loan program does not imply that everything is free.
Moral imperative of affordability
Nicole Hurd, president of Lafayette College in Pennsylvania, highlighted the need to keep college affordable despite its high tuition. Lafayette provides financial help to families earning up to $200,000 through grants and work-study programs, eliminating the need for debt. Hurd feels it is a moral obligation to ensure that low- and moderate-income families understand that investing in college means investing in themselves.
Meanwhile, Colby College in Maine has maintained a no-loan policy since 2008. Terra Gallo, a senior studying environmental policy, emphasized the importance of this program for her and her family because it relieves the burden of student debt. Many of her peers value Colby's commitment to addressing such financial needs.
Jackie Hardwick, another senior at Colby, emphasized that the cost of tuition was her top priority when selecting a college. Without scholarships and financial help, she would be unable to attend Colby, especially given her family's large intended contribution. Hardwick works various part-time jobs at school to support herself and her family's needs. Randi Maloney, Colby's dean of admissions and financial aid, highlighted the powerful message of the no-loan policy, especially at a time when many families are concerned about the cost of higher education.
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Benefits and implications of no-loan policies
Franek noted that these schools have effectively addressed the primary worry of students and parents, which is the fear of incurring enormous debt. By introducing no-loan policies, they are acknowledging and assuring students and parents.
Furthermore, such activities are likely to attract more applications, increasing a college's yield—the percentage of admitted students who opt to enroll—an important indicator for institutions. Franek noted how this method benefits both schools and kids.
