College eliminates aid loans

Parents, please read: that second mortgage you’ve been dreading may not be necessary after all. In line with its ongoing efforts to ease financial burdens, the College has announced that it will no longer require students to take out loans as part of their financial aid packages and plans to replace them with grants. The decision will take effect starting fall 2008 and marks the first major shift in financial aid policy since early 2005.

President Schapiro made the announcement in an all-campus e-mail on Thursday, following a decision by the Board of Trustees the day before. “[This move] is based on our growing sense that loans, even small ones, affect a range of student decisions,” Schapiro wrote, “from which colleges they consider attending to which post-college careers they pursue.”

However, the move does not spell the end to student debt. Paul Boyer, director of financial aid, expects that roughly half of the students on financial aid will opt to continue taking out loans to help cover the parental contribution and student job portions of the package.

“You’re trying to do the right thing, and you’re trying to have as competitive a student body as possible,” said Jim Kolesar, director of public affairs. “Even small amounts of loan burden,” he explained, may prevent students from pursuing their dream jobs.

“It definitely makes post-grad work a bigger possibility,” said Schuyler Hall ’10, explaining that the move will help pay for a quarter of the loans he will take out over his four years at the College.

Andrei Baiu ’11 agreed. “My parents would have preferred I get a relatively high paying job right after graduation,” he said. “With this measure I find it a lot easier to think about going to grad school as opposed to getting a job.”

Williams is the fourth college in the country to eliminate student loans. Princeton led the way in 2001, followed by Davidson and Amherst in March and September, respectively.

Amherst president Anthony Marx has made it clear that increasing accessibility to low-income students is a high priority for him, leaving few surprised when the school announced its shift to loan-free aid packages in August. “It’s been on the agenda for some time,” said Joe Paul Case, a staff member at Amherst’s financial aid office. “And then last year, the endowment did well, and the trustees said the resources were available, so we took the step.” Case noted that he, like Boyer, expects students to continue taking out loans to cover parts of the parental contribution and work-study burdens.

Boyer acknowledged that Amherst’s decision probably helped spur the College to action.

Boyer said he does not expect the decision to significantly affect the quality of the College’s applicant pool. Harry Sheehy, director of athletics, praised the new policy, citing its potential impact on athlete recruitment. “I don’t see this change making us more successful [athletically], but it certainly is a positive for our coaches in the recruiting landscape,” he said.

In 2005 the College reduced loan burdens for students from low-income backgrounds and eliminated them altogether for families in the lowest income bracket (around $24,000 per year, depending on number of children and assets). Students with annual family incomes of roughly $25,000-$60,000 currently face up to $8000 in recommended loans over their four years, while students in higher income brackets face up to $13,800.

The changes will be funded primarily through increased spending on the endowment, Kolesar said. The total cost is expected to be $1.8 million per year, which represents 0.1 percent of the endowment and constitutes 2 percent of the endowment earnings that the College spends annually. According to Kolesar, the College’s successful capital campaign has also played a role in prompting the move.

Of the more than 900 students on financial aid this year, 601 have taken out loans, representing around 30 percent of the student body. Of the remaining 300-plus financial aid students, over 100 have already replaced their loan-component with outside scholarships, while about 200 fall into the lowest income bracket and whose packages therefore do not include loans. Students will still be able to use outside scholarships to cover the non-loan portions of their package.

All American students are eligible to apply for government-sponsored Stafford and Perkins loans, regardless of financial need. “When Bill Clinton became President there was a major change in federal student loans,” Boyer explained. “You don’t need to be a needy student.” About 75 Ephs who do not qualify for financial aid are currently taking out loans under this policy.

Kolesar predicts that the College’s next step will be reexamining remaining components of the financial aid package, including home equity. “Colleges across the board are talking about how the formula is calculated,” he said.

In theory, the College’s financial aid packages are already supposed to make it affordable for all students worldwide. Since internationals students are not eligible for government-sponsored Stafford and Perkins loans, the College loans to them directly and will continue to do so should they wish to take out loans to cover other parts of their package. Gina Coleman, associate dean of international students and liaison to Questbridge students, was unavailable for comment.

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