What are no-loan colleges?

Student loan debt in the U.S. is at $1.5 trillion and counting and rising education costs continue to put the pressure on students. The average class of 2019 graduates left school with a degree and tens of thousands in student loans. 

In an effort to curb the trend of students starting their post-education lives with debt, a handful of no-loan colleges have established non-traditional financial aid policies. For students and families, attending a college or university with a no-loan policy could result in thousands of dollars in savings.

What is a no-loan school?

In a nutshell, no-loan colleges are schools that have adopted more generous financial aid policies that allow students to attend and earn a degree without racking up debt. In place of loans, students are awarded scholarships, grants, work-study funds and other types of financial aid to help cover tuition payments and other costs of attendance. 

"This means that students are graduating with $0 in student loan debt," said Amber Masters, an attorney and finance expert who blogs about paying off $650,000 in student loans at Deeply in Debt. 

5 WAYS TO PAY FOR COLLEGE WITHOUT STUDENT LOANS

Many of these no-loan colleges are able to offer these programs by relying on endowments and other fundraising efforts to extend scholarships, grants and other financial aid. Some schools feature broad, no-loan policies that cover every student, while others are reserved specifically for low-income students. Low-income is typically based on where a family's household income falls in relation to the federal poverty line. 

What qualifies a student as low-income? 

When considering no-loan colleges as an option for avoiding student debt, it's important to look at the requirements. That means meeting the admission requirements first and possibly having to qualify as low-income to receive a no-loan financial aid package second. 

The FAFSA or Free Application for Federal Student Aid is used to determine the Expected Family Contribution (EFC) for students and families applying for aid. Whether students qualify for financial help through no-loan colleges that cater to low-income students typically depends on their household income, EFC as determined by the FAFSA, and whether they're eligible for federal, state or university grant programs. 

WHAT DOES FAFSA COVER?

No-loan colleges can review FAFSA details to evaluate how much aid to extend, what types of aid the student is eligible for and what, if anything, a student's family is expected to chip in. It's important to note that attending a no-loan school isn't the same as going to college tuition-free. Parents and students may still have to pay something out of pocket. And while students aren't required to take on loans, they do still have the option of applying for them. 

That may be necessary for students who don't qualify for no-loan colleges, either because they don't meet the admissions requirements or don't fit the low-income guidelines. Masters said those students should be focused on what they can do to keep student loan debt to a minimum, which includes:

• Selecting a school with affordable tuition payments.
• Researching scholarship and grant options.
• Working part-time or full-time while in school to help cover attendance costs. 
• Only borrowing what's necessary to attend school. 

Students can manage their debt more effectively after graduating by carefully considering which repayment option to choose, exploring refinancing or consolidation and attempting to qualify for student loan forgiveness. 

Colleges with "no student loan" policies

The list of no-loan colleges is small but growing. As of 2020, these schools have instituted no-loan policies for all students attending:

• Amherst College
• Berea College
• Bowdoin College
• Brown University
• Colby College
• College of the Ozarks
• Columbia University
• Davidson College
• Harvard University
• Haverford College
• Johns Hopkins University
• Northwestern University
• Pomona College
• Princeton University
• Stanford University
• Swarthmore College
• University of Chicago
• University of Pennsylvania
• Vanderbilt University
• Washington and Lee University
• Yale University

Additionally, there are more than two dozen schools that have no-loan policies in place just for low-income students. The income guidelines are different at every school. 

Students at Duke University can qualify with a household income under $40,000, for example, while the threshold is $100,000 for low-income students at Dartmouth College. Masters said students who are considering no-loan colleges should consider not only the financials but whether the school is a good fit for their career and degree plans before making a final decision.