Correction: Earlier versions of this article said that Colby College in Maine pledged to eliminate loans as part of aid packages for in-state students. The college did establish such a policy in 2008, but it later extended it to all aid recipients. This version has been corrected.
Megan Tuck is living that pleasant lull between college and career, traveling from her Suitland home to a different Starbucks each day with her laptop to look for a job.
Tuck has no urgent need for a paycheck because she attended Duke University on a full ride. She is among the first beneficiaries of “no-loan” financial aid, a movement to eliminate the student loan as a fact of life at dozens of the most expensive U.S. colleges.
More than 70 colleges have replaced loans with grants in financial aid awards, at least for their neediest students, a wave of largess that spread nationwide in 2007 and 2008. Now, some of the first students to benefit are graduating, often debt-free.
“For me to be able to look for a job and an apartment and not have to worry about $25,000 in loans is amazing,” Tuck said. “I don’t have the monetary resources that a lot of other students at Duke have.”
No-loan pledges effectively reduce the price of college to zero for a select group of disadvantaged students at elite national universities and liberal arts schools.
Students from low-income families are enjoying a buyer’s market in higher education. Prestigious colleges are falling over one another to offer aid on favorable terms to these promising students from disadvantaged homes. The aid pledges are part of a broader movement among top universities toward admitting students without regard to need and meeting all of that need with financial aid.
“They’re essentially chasing after the same group of low-income students who are academically talented,” said Mark Kantrowitz, an industry expert who is tracking 73 colleges that have eliminated or capped student loans. “If you get in, these schools are a great deal.”
At the most generous (and wealthiest) institutions, Harvard and Yale, even comparatively wealthy families now pay no more than 10 percent of household earnings toward college — perhaps the first time in academia that families earning up to $180,000 have been regarded as needy.
Elsewhere, student loan policies vary widely. Pomona College in California eliminated loans from aid awards in 2008. Colby College in Maine made the same pledge, but only for Maine residents; it later extended the policy to all aid recipients. Emory University in Atlanta eliminated loans in 2007 for students in financial need and capped four-year loan debt at $15,000 for families earning up to $100,000.
“The objective,” said Emory President James Wagner, “is to be able to recruit students who are appropriate for our institution, without barriers.”
The movement has spread to several public flagships, including the universities of Virginia and Maryland and the College of William and Mary. But experts who track the movement say that only one top private college in the region, Washington and Lee University in Virginia, has eliminated loans. Others, including Georgetown, Johns Hopkins and George Washington universities, typically pledge to meet student need with a package that can include loans.
Eliminating student loans is a costly initiative that “no more than a couple hundred colleges” with the largest endowments could afford, Kantrowitz said.
No college has managed to eliminate loan debt completely. Students still borrow money to bridge the gap between financial aid awards and the full price of attendance. Colleges award aid based on an expected family contribution. For a household making $160,000, that figure can hit $50,000 a year, nearly half of the family’s take-home pay.
“They’re putting real money on the table,” said Lauren Asher, president of the Institute for College Access & Success, a nonprofit organization that monitors aid pledges. “But no-loan is not the same as no-cost.”
Princeton launched the loan wars in 1998, replacing loans with grants for low-income families. Brown followed with a variation on Princeton’s pledge in 1999, Harvard and U-Va. in 2004, and Yale in 2005. Twenty colleges made no-loan pledges in 2007 and 37 in 2008, Kantrowitz said. The movement set off a migration of needy students “from the colleges that don’t offer those pledges to the colleges that do,” he said.
An aid pledge can give a university a competitive advantage over its peers in recruiting needy students. Colleges court them because disadvantaged students with Advanced Placement credits and high SAT scores are comparatively few.
“We want to be out in the lead in terms of accessibility and affordability,” said David Oxtoby, president of Pomona.
Tuck, 21, a graduate of T.C. Williams High School in Alexandria, was living with her mother, who is on disability, at the time she got the aid package. Tuck applied to Duke even though the North Carolina institution charged about $50,000 a year for tuition and living expenses and their household income was essentially zero. She had heard that top universities were growing increasingly generous.
Duke delivered, and Tuck graduated this spring without debt.
New federal data show the movement from loans to grants has made a dent in student borrowing, at least among schools with the aid pledges.
Student debt fell sharply in 2008-09 among a core group of 22 colleges Asher’s group identified for their strong aid policies. The share of freshmen with loans at those schools declined from 31 percent in 2007-08 to 19 percent in 2008-09.
Grant aid at the same schools rose from $12,902 per freshman to $15,295 in that span, illustrating the shift to grants.
The move away from loans at elite colleges may be feeding a broader trend. Student loan debt at private nonprofit colleges nationwide peaked at $17,900 per graduate in the 2006-07 academic year, then eased to $16,900 in 2008-09 in inflation-adjusted dollars, according to the nonprofit College Board.
The campaign against student loans arose from complex motives: equal parts social justice, market competition and institutional ambition.
It took seed among the 31 members of the Consortium on Financing Higher Education, the elite of private higher education. School leaders sought to raise minority enrollment. They feared that mounting debt might deter students from doctoral study or public service.
After easing off student loans for several years, Wellesley College eliminated them completely in 2008 for families earning $60,000 or less and set caps for other students. The pledge costs the school about $10 million a year. For that investment, Wellesley’s share of low-income students has risen from about 15 percent before the pledge to 21 percent today.
Consuelo Valdes, 22, is spending her first summer out of Wellesley researching “smart furniture”: to wit, a device resembling an iPad the size of a coffee table. A Miami native with two parents on disability, Valdes is studying the interplay between humans and computers at Wellesley through a low-paying summer internship and preparing for graduate school.
“If I had loans I had to pay off, I wouldn’t do this,” she said. “I’d become a software engineer, immediately.”