No Loan Financial Aid Policies: Flash In The Pan?

Help for middle class families. Reducing college loan burden of students and parents. These are a couple of the reasons given by colleges and universities for developing "No Loan"  financial aid policies. Institutions of higher education instituted these financial aid policies, which fully fund financial need of families with AGIs under institutionally prescribed caps without requiring or offering student or parent loans. The AGI caps vary from college to college. The income caps can be set at anywhere from $50,000 to $120,000. Colleges accomplished these "No Loan" goals by utilizing institutional grants and scholarships in conjunction with federal grants, scholarships and workstudy.  The institutional funds typically drawn from endowments.

Up until a few years ago there had been relatively few such programs. And although, these programs have increased in  number, they are still not widely available at most colleges or universities. "No Loan"  programs are found generally at elite and selective colleges with healthy endowments. Most colleges don't have that luxury.

The popularity of  "No Loan" financial aid programs began in earnest about three years ago in response to criticism from Congress regarding the large endowments many of these institutions held.  As tuition costs rose and endowments grew with a strong stock market, Congress felt that universities were holding too much money in their endowments. It questioned why more of those funds were not put towards financial aid or  used to reduce tuition. There were threats of Congressional reviews of and potential federal regulation of endowments.

Despite the growing popularity of such programs by elite and selective colleges, many students and families were unaware of them. Unfortunately, there has been less interest in initiating "No Loan" financial aid policies at other institutions. And with the economy in a slide and endowments suffering huge losses in  fiscal year 2009, colleges and universities are now reviewing, revising and reversing these policies.

The 2009 NACUBO (National Association of College and Unversity Business Officers) Commonfund Study of Endowments ranked the endowment losses in fiscal year 2009. The following institutions experienced the greatest losses in endowment dollars. 


1 Harvard University: ($10,894,229,000.00) or   -29.8%

2 Yale University: ($6,543,000,000.00)  or  -28.6%

3 Stanford University: ($4,595,279,000.00)  or -26.7%

4 University of Texas System: ($4,008,135,000.00)  or -24.8%

5 Princeton University: ($3,735,016,000.00)  or -22.8%

6 Northwestern University: ($1,798,688,000.00) or -24.8%

7 Duke University: ($1,682,998,000.00)  or -27.5%

8 The Texas A&M University System and Foundation: ($1,575,598,270.00)  or -23.7%

9 University of Michigan: ($1,571,075,000.00)  or -20.7%

10 University of Chicago: ($1,538,224,000.00) or -23.2%


Earlier this year, Williams College in Williamstown, Massachusetts, ended its "No Loan" policy.  Lafayette College, in Easton, Pennsylvannia, has reviewed it's financial aid policy. While it retained the "No Loan" policy for families with AGIs below $50,000, the loan limit was raised for students with family AGIs of between $50,000 and $100,000. Those families are now expected to borrow $3,500 a year up from $2,500 a year. Dartmouth College in Hanover, New Hampshire is on record as considering revamping it's "No Loan" financial aid policy.

So while there are a number of colleges and universities that still have "No Loan" financial aid policies, if you are considering one of these schools, be sure to question the future status of the policy and make your college decisions knowing that there is a good possibility that the program will be eliminated.  If the program is eliminated, you will need to rely on federal or private student loans. So be forwarned and prepared.