What Does it Mean When a School Has a “No Loan” Policy?

What does a "no loan" policy mean for schoolsYou may find yourself reading the title of this post and thinking, “Wait, what?” How could a college not have students taking out loans to pay for their education? Is it even possible to pay for college without a loan? However, once you learn more about how and why colleges have a “no loan” policy, it starts to make sense.

What is a “no-loan” policy?

First things first—why are colleges across the country adopting this policy? Administrators at these institutions understand that it can be very difficult for students and their families to afford the rising costs of college. Taking out loans is an option for some, depending on the student’s major and their employment after college. However, paying off these loans can take years. Student loans can be a huge financial burden.

It is especially hard for low-income students to pay these loans off, as they would generally need to borrow more. Knowing the cost of college is so high can be a psychological barrier for low-income students. It can limit them from seeing their potential to succeed. Especially if they are unaware of the financial help they could likely receive. The college administrators see this as a huge detriment to their students and alumni. Therefore, they are combating it with their no loan policies. So how are students paying for school then?

A focus on grants

The schools with these policies are relying on grants to replace loans for students. A low-income student would still receive a hefty amount in aid; they would just be lifted of the burden of having to pay back the money they are being granted. The qualifications to be considered a low-income student vary from institution to institution. Schools can also require that students participate in work-study programs, work part-time, and fulfill other requirements.

Other ways colleges reduce financial aid burden

Besides eliminating loans from a student’s financial aid package, there are a few other ways that colleges and their administrators are trying to help reduce the burden of paying for college. Some schools have introduced loan caps, in which they are only allowing low-income students to take out a smaller amount of money from loans and then the school is paying for other portion of their financial aid. There are a handful of schools that match Pell Grant awards, thus significantly reducing the cost of college for those students who are eligible.

In the United States, there are approximately 70 schools who have no loan, loan cap, or Pell matching policies. These schools have larger endowments and a smaller amount of students who are eligible for this type of aid, which is part of what makes it possible for schools to help students this much financially.

We have a variety of financial aid, scholarship, and loan resources on our site to help inform students and their families during the college search and application process. Use our college matching tool to see the best colleges for you, including your own personalized net price estimate at each one.   

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