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  • Writer's pictureWall Street Journal

How ‘No Loan’ College Works (It Doesn’t Mean Free)

By Cheryl Winokur MunkDec. 6, 2019 10:56 am ET

With all that has been written and said about the dangers of taking on too much debt to go to college, schools with no-loan financial-aid policies may sound like a dream.

No loans? Yes, dozens of U.S. colleges and universities have instituted no-loan policies in recent years, aiming to meet students’ financial needs with grants and work opportunities, rather than student loans.

While avoiding debt is an appealing prospect for most families, students should understand that different schools have different rules when it comes to no-loan financial-aid packages. That is why students need to educate themselves on the basics of no-loan financial aid, and how it might apply to them, before making any decisions about where to go to college.

Here are four things to know about no-loan policies.

Princeton University began the no-loan trend more than two decades ago. PHOTO: DOMINICK REUTER/REUTERS

1. ‘No loans’ doesn’t mean no cost

Families often think that attending a no-loan school means they won’t pay anything out of pocket. But this isn’t necessarily the case.

No-loan doesn’t mean free. It means that once the school has determined what a student’s need for financial aid is, the school meets that need with funds other than student loans, says Robin Moscato, director of undergraduate financial aid at Princeton University, which began the no-loan trend more than two decades ago.

Even schools with no-loan policies generally require a parent contribution of some level, and most schools require students to have skin in the game, as well, by contributing some of their own funds.

Here’s a hypothetical example of how financial aid might work at a school that commits to covering 100% of what it determines to be a family’s eligibility for need-based aid without loans.

Say the school’s cost of attendance, which includes tuition, room, board and other items, is $65,000 a year. The school determines, by looking at the family’s finances and any special circumstances, if applicable, that the family can be expected to contribute $25,000 toward the overall cost for the year. That leaves the family eligible for $40,000 in need-based aid for that particular year. At a no-loan school, this would likely be offered in the form of grant aid and on-campus job opportunities. At other schools, a portion of the $40,000 might be offered in loans.

It is also important to keep in mind that institutional calculations for the expected family contribution can vary, sometimes widely, depending on the college. While some schools rely solely on data from the Free Application for Federal Student Aid (Fafsa) and its federally established formula, others may use additional applications and formulas for determining need for institutional funding.

Families can use the Education Department’s free tool to get a rough sense of what their expected contribution could look like, says Trey Chappell, director of College X-ing, a comprehensive college-admissions advisory service in Scottsdale, Ariz.

2. Few schools offer it and they tend to be selective

More than six dozen colleges and universities have adopted no-loan financial-aid policies, according to, an information and resource site. But it is still only a sliver of the overall market: There were 4,298 degree-granting postsecondary institutions for undergrads and graduate students in the U.S. in the 2017-18 school year, according to the latest data available from the National Center for Education Statistics.

Schools with no-loan policies also tend to be more selective, highly competitive institutions, meaning the odds of admission are small and academically gifted students, as well as those prioritized by the institution, will be favored. But it also means that smart students from poorer families could end up paying less to go to a top private university with a no-loan policy than to a state school with a lower sticker price.

This list of no-loan schools includes Amherst College, Bowdoin College, Brown University, Colby College, College of the Ozarks, Columbia University, Davidson College, Harvard University, Johns Hopkins University, Princeton University, Swarthmore College, the University of Pennsylvania, Vanderbilt University, Washington and Lee University and Yale University.

3. No-loan policies vary

Each school that has a no-loan program has its own policies on who might qualify for this type of financial-aid package.

Some schools, including Amherst, Brown, Penn and Yale, offer no-loan aid packages to students, regardless of family income.

At other schools, however, the no-loan option is available to families whose total income falls under a certain threshold. At Duke University, for example, loans aren’t included in the financial-aid package for households with income under $40,000, and there are loan caps for families at other income levels. Emory University replaces loans with grants for families with annual total income of $50,000 or less; the university also caps federal subsidized student-loan debt for families with annual income between $50,001 and $100,000. Haverford College, meanwhile, doesn’t include a loan expectation in the package of students with family income below $60,000 a year; loan expectations for incomes above this threshold remain low, ranging from $1,500 to $3,000 each year.

4. You might not graduate debt-free

Having a no-loan policy “is not a promise that students will graduate debt-free,” says Gail W. Holt, dean of financial aid at Amherst.

Students at no-loan schools can still take federal or private loans if they want, and many opt to do so for various reasons.

For example, some students may decide to take loans to meet their expected yearly student contribution, which can vary, depending on the institution, the student’s year in school and other factors. Based on a sampling of schools that have the requirement, this amount could range from about $1,800 to roughly $6,100 annually. Though schools generally expect the requirement to be met through summer employment, academic-year work or both, some students may prefer to take a loan so they can focus more intently on academics or so they don’t have to work as many hours, aid officers say.

Sometimes students opt to take federal loans to help defray the cost of eligible education-related expenses like a new computer, says Ms. Holt of Amherst.

Still, no-loan schools tend to have a healthy portion of students graduating debt-free. At Amherst, for instance, 70% of its 2018 graduates had no student-loan debt at graduation. At Princeton, 82% of recent seniors graduated without student-loan debt, and of those who did take loans, the average debt at graduation was $9,000, Ms. Moscato says.

To put that in perspective, 69% of all those who earned undergraduate degrees in 2018 took out student loans, and they graduated with an average debt of $29,800, including both private and federal debt, according to Student Loan Hero, a LendingTree unit that has free information on refinancing, lowering payments, loan forgiveness and other debt-related topics.

Parents also might need to take out loans, even at no-loan schools, to cover their portion of the expected family contribution. Not every family can pay their share of the college bill without doing that, aid officers say.

Ms. Winokur Munk is a writer in West Orange, N.J. She can be reached at

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