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Student loans are a popular tool that families use to pay for college, especially as top schools become more and more expensive, but given the risks of borrowing, families are eager to find alternatives. A number of schools have responded to this need by instituting “no-loan” financial aid policies, which they proudly use as proof of their excellent financial aid offerings.

 

Graduating from college with no student loans is certainly an appealing idea, but before you make any major financial decisions, it’s important to understand the details of what no-loan financial aid entails and how it would apply to your specific situation. Read on for more about what no-loan policies may mean for you, as well as a list of colleges that are currently no-loan.

 

 

Student Loans: A Brief Refresher

Student loans allow you, the student, to borrow money specifically to pay for the costs associated with your college education. Some popular loan types are available through government programs, which have specific conditions, limits, and eligibility requirements. Other student loans can be obtained through private lenders, who set their own terms and can vary a great deal.

 

Government loans in particular come with features that are particularly attractive to college students. For instance, you’re able to delay repayment until after you leave college, and repayment plan options are often more flexible than those of private loans. Government loans do have limits, and some are restricted to students with demonstrated financial need, but they don’t generally require credit checks or cosigners, so they’re easier for a young person with little credit history to obtain.

 

With college costs already high and always rising, borrowing money to fund your education is very popular. According to The Institute for College Access and Success, in 2012, 71% of graduates from four-year colleges carried some amount of student debt, with the average amount of debt being nearly $30,000.

 

Students expect to be able to pay back their loans once they leave college and start their careers, but some find this to be more difficult than they anticipated, especially as interest adds to the overall repayment amount. If you end up in a field with lower pay or fewer job opportunities than you expected, you might find yourself under additional pressure or facing the legal consequences of defaulting on your loan.  

 

Taking out student loans can be a powerful tool that allows you to get the high-quality education you’re looking for, but that money has to be paid back eventually. In almost all cases, grant-based financial aid, which doesn’t need to be repaid, accumulate interest, or expose you to legal risks, is a much better option than loan-based aid. However, grant-based aid isn’t always available.

 

 

The Rise of No-Loan Financial Aid Policies

You’ve probably heard news stories and conversations about student loan debt in recent years; the public is becoming increasingly concerned about the burden that repaying student loans places on young adults. Many solutions and changes in the system have been proposed, but it’s yet to be seen how these efforts will pan out.

 

One particular change, however, has already gone into effect. Spurred by concerns about student loan debt, some colleges have adopted “no-loan” financial aid policies. At these no-loan schools, no student (or no student under a certain income level) is routinely expected to take out student loans, government or private, in order to help pay for their education.

 

No-loan policies are based upon a need-based financial aid system, in which the school determines how much the family can afford to pay, and creates a financial aid award intended to make up for the difference. At many schools, that financial aid award may include loans that will cover costs now, but must be repaid later.

 

At no-loan schools, the financial aid award doesn’t include required loans; instead, the student is given more grant-based aid to meet their demonstrated need. These policies are intended to ensure that the student’s financial needs are met without the student needing to take out any loans.

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No-Loan Colleges: The Current List

Currently, only a handful of colleges offer no-loan financial aid policies, but the list is growing. The colleges listed here maintain entirely no-loan financial aid policies. If you apply for financial aid and are assessed as having financial need, you won’t be required to take out any loans to meet that need.

 

 

Some colleges have more restricted no-loan policies, in which students must be below a particular family income threshold, or be considered “low-income” by some other standard,  in order to qualify for no-loan financial aid. Colleges that currently guarantee no-loan financial aid to particular students are listed below; we’ve included the yearly family income threshold below which the no-loan policy applies where it’s available.

 

 

Keep in mind that policies can change; more and more schools are instituting or broadening no-loan policies, but occasionally these policies will become more restrictive over time, as happened with Cornell a few years ago. Also, special circumstances may make your personal financial aid situation more complicated. Always check directly with your school’s financial aid office for the most updated information on financial aid policies and procedures.

 

 

Does “No-Loan” Actually Mean No Loans?

No-loan schools don’t require you to take out loans, but that designation doesn’t necessarily mean that no one at that school takes out student loans, or that you couldn’t take out student loans if you want to do so. In certain circumstances, you may still find that you want or need a loan in order to manage your college finances in the way that’s best for you.

 

For example, your school will usually require you, the student, to contribute a certain amount to your college expenses from term-time and summer jobs. If you choose to pursue a non-paying activity during the summer instead, you may have the option to take out a loan to cover that expected student contribution for the next school year. You’ll eventually have to pay that loan back, but you may decide that that debt is worth the opportunity.

 

Your parents may also still choose to take out parental loans in order to cover their share of your college costs—for instance, if they’d prefer not to sell any assets to free up funds. Like student loans, parent loans are available from both government and private sources. Again, it’s up to your parents to decide how they want to finance their expected family contribution; parent loans aren’t required, but they may be a viable option for your family.

 

Special financial circumstances can complicate how a college assesses your need and eligibility for aid; these policies don’t apply to every student perfectly, and some students may come to the conclusion that student loans are the best option for them personally. However, no-loan policies still help expand the reach of grant aid and the range of options available for students who are figuring out how to pay for college.

 

 

How Will a No-Loan Financial Aid Policy Affect Me?

No-loan financial aid policies have the most potential to make a difference to those who are most in need of financial aid to help pay for college—in other words, those students who are most likely to take out student loans in the first place. You’re most likely to see the difference personally if your family is low to middle income, has average assets for their income, and is clearly unable to pay the entire cost of college out of pocket.

 

Some colleges only offer no-loan financial aid programs to students whose family incomes are below a certain threshold. Even at schools with no income requirement, no-loan programs are only really relevant to students who are eligible for some type of financial aid in the first place. (If your family can afford to pay in full for college up front, you wouldn’t need to take out loans to begin with, and wouldn’t even be eligible for certain loans.)

 

As you may have noticed, many of the schools that currently maintain no-loan financial aid policies are well-known, top-tier institutions. Elite schools like these typically have larger budgets, so while their cost of attendance may be high, they can also afford to offer more generous financial aid.

 

You’ll have to get accepted to these competitive schools first in order to take advantage of these policies, and that’s a challenge; these schools are considered reach schools for almost everyone. You’ll still have to consider how you would finance an education at a different school if you don’t get accepted to your reach, and it’s wise to also apply to target and match schools that are more affordable.

 

A no-loan policy could also be particularly helpful to you if you intend to pursue a career that’s known to be on the low end of the income spectrum, especially for new entrants to the field. There’s plenty of valuable and satisfying work to be done in fields like these, but student loan payments can put a strain on already stretched finances. Without the burden of loan payments, you may have more freedom to pursue your real passions.

 

If you’re a student who will need some help paying for college, and you have the strong applicant profile necessary to apply to the competitive schools that offer no-loan financial aid, it’s definitely worth looking into this option. No-loan policies may or may not shape your decision about which college to attend; only you can weigh your personal circumstances and come to an informed decision.

 

However, if you would likely have to take out student loans to finance your education, and you have other reasons to be interested in a no-loan college, this type of policy can be a real boon. In a world where student loan debt is something that deeply affects the lives of many young people, the opportunity to graduate debt-free can really help you to get your career and post-college life off to a bright start.

 

 

Learning More

Affordability is a major concern for college applicants, but figuring out all the requirements, acronyms, and forms can be confusing, especially for families going through the process for the first time. Take a look at these posts from the CollegeVine blog for some background information and guidance about how to navigate this important process.

 

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Monikah Schuschu

Monikah Schuschu

Senior Blogger at CollegeVine
Monikah Schuschu is an alumna of Brown University and Harvard University. As a graduate student, she took a job at the Harvard College Office of Financial Aid and Admissions, and discovered the satisfaction of helping students and parents with the often-baffling college admissions process. She also enjoys fiber art, murder mysteries, and amateur entomology.
Monikah Schuschu