When evaluating college options, it is easy to get sticker shock. Tuition and housing can cost well over $50,000 per year at many schools. Some are closer to $100,000 per year by the time all the costs of attendance are included.
Despite the scary numbers, it is a big mistake to judge schools by the sticker price. Many high-priced schools have excellent financial aid programs. Some schools even have programs so that student loans will be unnecessary.
The schools that can provide large scale financial aid normally have two resources in their favor: a massive endowment fund and students from wealthy families who can afford the large bills. Getting admitted to a top college may be a significant challenge, but paying for the education has arguably never been more affordable.
“No-loan” Colleges 101
The idea behind a “no-loan” college is pretty simple: students will not need student loans to attend.
Many families mistakenly assume that only the very poor can qualify for “need-based” financial aid. In reality, many solidly middle-class families can get most or all of the tuition paid for by the school.
Some schools have their own financial aid application, while others rely mainly on the FAFSA for determining a family’s ability to assist with their child’s education. These financial aid applications are used to determine a family’s EFC (Expected Family Contribution).
Schools may also expect that students earn some money via work-study programs.
Once these two funding sources are added up, the school will cover the remaining cost of attendance via scholarships and grants.
Finding a No-Loan College
There isn’t a definitive list of the no-loan schools, and with each passing year, more schools claim to be no-loan schools. Lists of schools that claim students can graduate without student debt can be found here, here, and here.
Many other schools may not fall into the “no-loan” category, but they still might have excellent scholarship and grant opportunities. These schools may not be no-loan for all students, but they might be no-loan for many families.
If there was one theme among the many no-loan schools, it is that the elite institutions often have the best financial aid programs. Students considering these schools should not be intimidated by the high prices of education. Instead, they should focus on overcoming the challenging rejection rates.
Is it Possible to Get Student Loans if you Attend a No-Loan School?
Yes. The No-Loan designation means that the financial aid at the school is designed so that students will not have to borrow any money. The schools do not ban students from borrowing student loans.
For example, circumstances may exist where a student is unable to work during the school year, or the family is not able to meet the Expected Family Contribution. Working with the school’s financial aid office may yield additional grants or scholarships. Still, even if no other funds are available, student loans can be used to cover the funding gap.
How can Schools Afford No-Loan Policies?
Many of the schools that have generous financial aid programs also have very large endowments. Returns from the endowments can be used to provide financial aid for students in need.
Unfortunately, the no-loan policies are often limited to the elite or more selective schools. Even though most schools employ a “need-blind” admissions policy, students from wealthy families tend to get admitted at much higher rates than poor and middle-class students. Students from wealthy families often have access to better high schools, tutors, and college-application coaches.
One recent study found that 43% of white Harvard students were not admitted on merit. Rather than gaining admission based upon merit, these students fell into the following four groups: children of faculty and staff, athletes, legacies, and applicants with ties to wealthy donors.
In short, no-loan policies don’t mean that anyone can afford to go to college. Instead, it means the top students who get admitted into elite schools don’t have to worry about affording the hefty bill.
One Tip When Applying to College
Affording school should be a significant concern for any potential student.
However, comparing schools based upon the listed price of tuition can be very misleading. Some schools are set up so that any student who gets admitted can afford to attend. Others may not be as good, but they still might have excellent financial aid and scholarship programs.
Schools that appear more affordable based upon tuition costs may end up being the most expensive because they provide no financial assistance.
Unfortunately, it can be challenging to tell which school is the most affordable. Sometimes it requires an acceptance letter and results from the Office of Financial Aid.
Finding actual costs might be confusing, but don’t make the mistake of assuming a school is too expensive without first doing a little bit of research.