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Colleges offer grants, work-study to reduce students' debt

The pledges were big investments at a time of rising endowments. Those funds got hammered in the recession. Two colleges, Williams and Dartmouth, scaled back their no-loan commitments this year. Other colleges have stuck with their pledges, despite the cost.

Penn's aid pledge, phased in over four years, pushed the university's financial aid budget to $149 million for the coming academic year, an increase of 78 percent in Gutmann's six-year tenure. But it's an investment, she said. "From our view, it maximizes our eminence as a university."

Strapped public universities are focusing their more limited largesse on students from low-income families, on the theory that middle-class families can afford some debt.

The wave of no-loan pledges hasn't halted the steady rise in student loan debt nationally. Kantrowitz estimated that the share of four-year students graduating with debt rose to 66 percent in 2008 from 46 percent in 1993, and that average debt rose in that span to $23,186 from $9,297, based on an analysis of federal data.

But at colleges making aid pledges, the investment is paying off.

At Princeton, the share of graduating seniors with loan debt declined to 21 percent last year from 33 percent in 2001, and average debt has dropped to $4,957 from $16,000.

At the College of William and Mary in Virginia, which eliminated loans for low-income state residents in 2006, the number of students from low-income families has increased by half in five years.

"We recognized that low-wealth students had been grossly underrepresented on our campus," said Earl Granger, associate provost for enrollment.

The goal of the no-loan movement is to reverse the upward trend in student debt, particularly among students least able to repay their loans, in an era of steadily rising college prices. The universities were also "looking for a competitive edge," Kantrowitz said. "They've had record applications in the last few years, in part because of this."

Word is spreading among high school juniors and seniors that expense is no longer a barrier to some of the nation's most selective private colleges, including many of the top liberal arts schools. And that is a factor to consider when weighing different schools.

For a middle-income student today, "it may be less expensive to go to Penn than to go to Berkeley," Gutmann said.

But the aid pledges vary widely, and opinions differ on who can rightly claim to meet full financial need.

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