Davidson College Sees Positive Results After Eliminating Student Loans

Student Loan Girl — Thu, 10 Jul 2008 03:44:00 GMT

While Princeton was the first university to completely eliminate student loans from its financial aid packages in 2001, it was Harvard’s announcement to follow in Princeton’s footsteps this fall that garnered national media attention as no-loan financial aid policies for 2008–09 began to turn up at elite colleges and universities across the country: Amherst, Columbia, Dartmouth, Stanford, Swarthmore, Yale.

So far, some 50 institutions across the country have implemented no-loan and loan-cap financial aid policies, according to the Project on Student Debt, a nonprofit advocacy group — in some cases for all students; in others, only for students whose families fall below a certain income cutoff, although that cutoff runs as high as $150,000 a year at some schools.

After stinging rebukes from legislators critical of yearly tuition-hikes that have outstripped inflation and the proliferation of costly private student loans in undergraduate debt loads, many of the nation’s richest schools have moved to reduce student dependency on college loans and to entice greater numbers of low- and middle-income students to enroll at their institutions.

But it’s a small, selective liberal arts institution in North Carolina — Davidson College — that’s already seeing the results of eliminating student loans from its financial aid packages (“At Davidson, Getting Rid of Loans Shows Early Signs of Success,” The Chronicle of Higher Education, July 11, 2008).

While the long-term, broader nationwide impact of these new financial aid policies may not be seen for a few years, Davidson — which got a head start over the rest of the Ivy Leagues by instituting its no-loan policy a year earlier, in the fall of 2007 — has already experienced a three-percent jump this year in the number of incoming students who demonstrate financial need.

Although Davidson’s endowment of $489 million is much smaller than the multibillion-dollar endowments of its Ivy League competitors, the school has set a goal to have 40 percent of its incoming students receiving only need-based aid by 2011 — a plan that Davidson’s dean of admissions and financial aid, Christopher Gruber, says will cost $3.5 million to implement.

"We're moving in the right direction with a year to promote it," Gruber says.

Davidson’s early results aren’t surprising, says Jonathan Epstein, from the education consulting firm Maguire Associates. But families shouldn’t expect no-loan policies to become the norm. “My take is, it’s not something that, as announced policy, is going to spread across the country.”

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Student Loan Debt Is on the Rise, and College Grads Face Growing Financial Obstacles

Student Loan Girl — Sun, 04 Nov 2007 20:10:00 GMT

Money. Some of us have it. Some of us need more of it. Particularly recent college grads transitioning from their campus to the workspace, from having student loans available that help pay their living expenses to having to make it on their own—all while paying back those student loans that paved their way to graduation.

With the surge in student loan debt outpacing the growth in starting salaries, and with tuition increases far exceeding increases in federal financial aid, a growing number of college graduates are facing barely manageable levels of student loan debt.

Tuition Hikes Outstrip Increases in Federal Financial Aid Awards

“Student aid continues to grow, but not as fast as tuition, and not enough to make up for the difference between family incomes and the price of college,” says Larry Abramson in a story for National Public Radio (“Tuition Hikes Outpace Student-Aid Increases,” Oct. 26, 2007).

According to the College Board’s “Trends in College Pricing” 2007 report, average published tuition and fees for in-state college students at four-year schools climbed by 6.6% for the 2007–08 academic year, a hike that “outpaced increases in the financial aid that lowers what most students actually pay” writes Erica Perez in the Milwaukee Journal Sentinel (“College Costs Outpace Inflation,” Oct. 23, 2007).

Starting Salaries Increasing More Slowly Than Student Debt

With more tuition to have to pay, students are graduating with more student loan debt than ever. In 2004, two-thirds of college graduates left school with student loans, and between 1993 and 2004, the average debt for college graduates with student loans soared a staggering 107%, according to a report by Luke Swarthout, a Higher Education Associate for the U.S. PIRG Education Fund. Student loan debt, Swarthout notes, is rising faster than both the cost of living and the cost of health care (“Student Debt and Consumer Costs in the Minneapolis–St. Paul Area,” July 2006).

Student debt levels are also eclipsing income gains. The “rapid rise in student debt comes while the real median income of younger Americans has only modestly increased” by 4.4% between 1995 and 2004 for household earners under 35, writes Swarthout.

Starting salaries for recent graduates can’t keep pace either. A report on “Student Debt and the Class of 2006” released by the Project on Student Debt found that for graduating seniors, average student loan debt rose 8 percent between 2005 and 2006, while starting salary offers rose only about 4 percent.

“Too many young people leave college saddled with heavy debt burdens and struggle to cover their loan payments on top of basic living expenses,” says Robert Shireman, Executive Director of the Project on Student Debt, in a press release for their recent study. “Students need better options and counseling when they’re deciding how to pay for college.”

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Davidson College Sees Positive Results After Eliminating Student Loans

Student Loan Debt Is on the Rise, and College Grads Face Growing Financial Obstacles