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In November 2020, colleges and their millions of students were taking the economic bite of the coronavirus pandemic.
Colleges cut costs after closing campuses leading many to recoup extra fees for services such as residence and dining halls, which support their budgets. They have paid for costly COVID-19 tests and protections and directed more financial aid to students.
A budget crisis often meant it was time for austerity. But that month, Grinnell College, a private liberal arts institution in central Iowa, bucked the trends. She announced that she would put in $5 million a year selective loans of financial aid packages for attendees, enabling them to rely solely on grants, scholarships, and money earned from student employment. I have scheduled the changes to become effective in the fall of 2021 for all applicants eligible for need-based assistance.
Grinnell President Ann Harris — who took over as CEO in 2020 after joining the college as a senior principal in 2019 — at the time described the policy as one that would effectively cut student indebtedness from an average of $20,000. when they graduate. .
Students can still get loans if they want to, Harris said in a recent interview, and two years after the college’s announcement, the average debt load of Grinnell alumni still hovers around $20,000. The college also did not forgive past loans to those who had borrowed under previous financial aid packages.
But Harris does not consider the no-loan method a failure. Instead, she said, it has reduced the need for students to work while studying at Grinnell, and greatly simplified the financial aid process — winning reasons for maintaining the policy.
Higher education experts also see value in loan-free financial aid, which research shows can boost the enrollment of low-income students. Only a small sliver of wealthy institutions can get it to work, however, and it requires careful financial oversight and planning, which is what Grenell said she hired.
An idea stemming from Princeton University
In 2001, Princeton University was the leader in terms of observers It’s called the “radical” acceptance strategy.: Million dollar commitment To remove loans from granting financial aid.
Higher education leaders have praised Princeton, one of the nation’s wealthiest institutions, for drawing on its talent to experiment with a no-lending approach.
In a trend of following the leader in higher education, other institutions—first, wealthy private Princeton peers, and later prominent public colleges—began to pursue similar policies.
Now, at least 20 colleges are offering undergraduates financial aid packages that allow them to avoid debt, Princeton said last year. Many institutions drop loans to students and families below certain income thresholds.
The benefits of no-loan policies at Princeton and these other colleges are well documented.
The Ivy League said more than 80% of Princeton students graduated debt-free.
More broadly, loan-free program adoption can raise enrollment of low-income students by approximately 3 to 6 percentage points at institutions that offer loan-free admissions, found a 2013 study.
It can also help attract applicants and reduce barriers for families who find it difficult to navigate the grueling financial aid process, said Jill Degen, senior policy analyst for the National Association of Student Financial Aid Administrators.
Often, many types of funding include financial aid packages — state and federal loans, scholarships, merit aid, need-based aid, Degen said.
“For some students, this is their first experience with debt,” she said. “The terms you get used to as an adult — interest, repayment schedules, things like that — can be hard to understand, so not taking out loans simplifies things quite a bit.”
Harris said that officials at Grinnell realized during the pandemic that they were already pouring funding into several disparate assistance initiatives. Grinnell paid for the students’ computers and travel home. She said the college covered the costs for those who were food insecure.
“Then we started to realize, if we incorporate this into a big step, like no loan, we can really make a difference,” Harris said.
What are the results?
Grinnell’s average student debt has not yet decreased, Harris said, but some of the effects of the no-loan policy were felt immediately.
Prior to its inception, about 80% of Grinnell’s 1,700 students worked on campus, some as part of their financial aid packages. Under the new no-loan policies, Harris said, that share has fallen to about half of students.
Harris said officials considered whether they could attribute the drop to stressors related to the pandemic — perhaps students didn’t want a job on top of their studies during a turbulent period.
They found that the trend continued even as COVID-19 restrictions waned, Harris said.
She was most reluctant to take a no-loan approach by driving the changing demographics of Grinnell’s applicant pool and student body, Although research has also proven These policies benefit ethnic minority students.
Grinnell First year class of 2022, which numbered 441 students, was approximately 30% black, motivated, and other students of color, not counting international enrollment. The college has also brought in the largest percentage of Latino students in its history.
This is a particularly astounding feat for a liberal arts college in the heart of Iowa, a state in which it is located 90% of the population is white.
Harris estimates that the no-checkout initiative will help 1,100 students at Grinnell – more than 60% of the student body. Harris said Grenell is mobilizing about $68 million in financial aid this year. The price for the academic poster for the 2022-23 academic year is $60,988.
A steady financial hand is needed
However, ensuring the future of software is no easy task.
Few institutions are wealthy enough to maintain no-loan policies, said Justin Ortagus, a professor of higher education management and politics at the University of Florida and director of its Institute of Higher Education, which explains why they are not widely seen.
Because Grinnell’s student body is smaller than other institutions that have attempted a no-loan approach — like Harvard — it’s a relatively less expensive endeavor, Ortagus said.
Harris said that Grinnell managers correctly determined that they would need $5 million annually to keep the program afloat. She commended officials for closely monitoring the university endowment to ensure the survival of the non-advance program.
Grinnell is also blind to local students, meaning that it does not consider applicants’ financial situations when deciding whether to accept them. It satisfies the complete explicit need of the students as well. Both initiatives are expensive.
Harris said the college relies heavily on its endowment, which is about $2.5 billion. This is an enviable financial place compared to many other institutions, but the exorbitant returns some colleges have seen on their endowments in 2021 I started to descend.
The endowment return for the university for the year 2022 was -13.3%. Its annual return for five years was 9.6%.
The fear of having to back out of a program without a loan is real.
Williams College, a top-ranked liberal arts institution in Massachusetts, piloted a pilot in the fall of 2008. But I stopped him Two years later, amid the continuing turmoil of the Great Recession.
Williams at last Reprogram this year. And, for the first time for an American college, it has removed student work from its financial aid packages. However, that process stretched back years, and the college took heat for ignoring it in the first place.
These policies aren’t perfect either. Students can still get loans to cover expenses along with tuition and fees. Grinnell said she still supports students for costs like transportation home.
Because only a small group of colleges can afford no-loan policies, they tend to benefit a select few students who gain admission to those institutions.
Grinnell’s acceptance rate has declined over the past several years, dropping to about 9% for this year’s class. That equates to 11,658 applications – up 300% in the past decade – and offers of admission sent to just 1,073 applicants.
For nearly five years, Harris said, Grinnell’s approval rating has been as high as 20% — which speaks to one of her last points about the no-lending policy.
Grinnell is becoming more exclusive and wants Ben Williams to be seen in the world of higher education — the “elite” cadre of colleges, she says. She said the no-loan policies help place the college among them and will serve as a marketing tool.
“I like to think we’re elite without being elitist,” said Harris. “It puts us in that category of elite organizations but very purposefully we don’t want to be elitist by creating access.”