Liz Pulliam Weston

The Basics

Graduate from Harvard debt-free

Dozens of universities are replacing loans with grants for low-income students. But there's more work to do by other schools, Congress and families.

By Liz Pulliam Weston

After two decades of rising costs and declining grants, something good has finally happened with college financial aid.

More than 50 universities -- many of them elite, most with fat endowment funds -- have eliminated loans for low-income students while increasing other financial aid programs. Some have replaced loans with grants in all their aid packages. A few have waived tuition or capped how much families have to contribute, even when household incomes are substantial.

At Harvard, for instance, families with incomes up to $180,000 will have to pay no more than 10% of their incomes toward the cost of school. Yale extended the same policy to families with incomes up to $200,000.

At both schools, the "expected family contribution" is reduced to zero for families with incomes below $60,000. (You can see more details of the various programs at FinAid.org.)

"There are some families that will pay less for their kid to go an Ivy League school than they would if their kid went to a state school," said financial aid expert Mark Kantrowitz of FinAid.org.

The no-loan movement is a huge step forward for poor and working-class families who want their kids to get a decent education but are scared away by the debt they'd have to incur.

"Even though the students may know intellectually they'll be able to pay the money back" with their enhanced earning power, Kantrowitz said, "emotionally, it has a chilling effect."

That has led, he said, to lower college graduation rates among these families compared with middle- and upper-income students. Without a college degree, it's harder to climb out of poverty. Furthermore, many argue that America needs a better-educated work force to compete effectively in the global economy.

For more on this, see "Mortgaging Our Future: How Financial Barriers to College Undercut America's Global Competitiveness" (.pdf file) by the Advisory Committee on Student Financial Assistance, which advises Congress on these matters.

Still not a free ride

The deleterious effects of debt aren't limited to lower-income folks. Plenty of students of all economic backgrounds have overdosed on student loan debt in recent years, as borrowing replaced grants in student loan packages and as private lenders aggressively entered the market. (For more, see "How did student loans get so sleazy?")

The no-loan policies won't eliminate all borrowing. Most families and students are expected to contribute at least something toward the cost of their educations, and many will still borrow to come up with that money. But these policies do significantly ease the burden. (Colleges that have eliminated all loans from student aid packages include Amherst, Bowdoin, Claremont McKenna, Columbia, Dartmouth, Davidson, Harvard, Haverford, Pomona , Princeton, Stanford, Swarthmore, the University of Pennsylvania, Wellesley, Williams and Yale.)

So the no-loan movement is all to the good. But there are still some strides that need to be made. For example:

More schools need to step up. Fifty schools just aren't enough. There are more than 4,000 degree-granting institutions of higher learning in the U.S. Most of them don't have big enough endowment funds to eliminate student loans, but some do.

There are plenty of well-known institutions sitting on treasure chests of $1 billion or more that haven't taken "the pledge" to eliminate student loans for low-income students. They include:

  • Boston College.

  • Johns Hopkins University.

  • New York University.

  • Pennsylvania State University.

  • Purdue University.

  • Smith University.

  • The University of California system.

  • The University of Southern California.

  • The University of Texas system.

If you're an alum of one of these schools, you might give the board of trustees a poke and tell 'em to get on the ball. (If your college education is paid for, you also might consider donations to your school -- or any other -- and earmark them for replacing student loans.)

Continued: What Congress needs to do

READ MORE: FINANCIAL AIDSTUDENT LOANS - PUBLIC COLLEGESPRIVATE COLLEGES

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