Part 3: Middle Class Families CAN Go to College for Free!
This article was originally published on Socratic Summer Academy’s blog.
- Some schools have explicit capped loans policies — either only giving federally subsidized loans or limiting overall loan amount — which means more protection for your family.
- Some schools have student contribution policies, that explicitly limit student contribution and allow them to focus on school.
- Read more college admissions tips on our blog!
Colleges with No-Loan Thresholds
The idea of “schools that don’t give loans” might sound awful at first — one financial aid office we contacted said, “If we don’t give loans, how would students pay for school?” — there are some schools that are generous enough to give completely grant-based aid, which means that, upon graduation, there’s nothing to pay back.
You want a no-loan school: You want to pay back no loans after you graduate.
Last time, we talked about schools that had a no-loan policy for every student. These schools are generally endowed well enough (or have chosen to make it a priority to) make sure that every student who gets accepted has no loans to pay back so that finances don’t stand in the way.
Some schools offer no-loan policies, but only for those students whose families have incomes under a certain threshold. It is extremely hard to find a list of schools with their no-loan thresholds — we ended up calling colleges’ financial aid offices to check so you don’t have to!
This list of no-loan schools with thresholds is current as of June 15, 2020:
- Colgate University — no loans under $125K
- Cornell University — no loans under $60K
- Dartmouth College — no loans under $105K
- Emory University — no loans under $50K
- Haverford College — no loans under $60K
- Lafayette College — no loans under $50K, lowered loans under $100K
- Lehigh University — no loans under $50K (but may change due to COVID-19)
- Tufts University — no loans under $60K
- Washington University in St. Louis — no loans under $75K
- Wellesley College — “for Wellesley students who have the greatest financial need and for whom debt after graduation can be an issue”
- Wesleyan College — no loans under $60K, reduced loans under $80K
- Williams College — no loans under $75K
Many other schools, especially those with 100% need met guarantees, have various modified versions of these loan policies as efforts to make their school more affordable.
To understand these policies, it’s important to understand how many schools in the U.S. use loans to meet families’ need.
After a family’s EFC, or Estimated Family Contribution (as explained in this blog), is calculated, most schools meet the leftover need using grants and loans. Let’s use an example:
- College U costs $60K and meets 100% of need
- Your EFC is $20K
- College U will offer you $40K in aid, using:
- Grants/scholarships (free money you don’t have to pay back)
- Loans (money you have to pay back)
- Work/study (on-campus job at school, usually capped at 10–12 hrs/week and $3K/year
Grants cost the school money, so colleges will include loans as part of your “aid” to cut down on their own costs. The more loans they use in your “aid” package, the less free money they have to give you.
Most schools use federal loans to fill need:
- Subsidized loans don’t accrue interest until 6–9 months after you graduate; interest rate is low. Here are the maximum allowed amounts of subsidized loans per year:
- $3.5K for the first year
- $4.5K for the second year
- $5.5 for the remaining years
- Unsubsidized loans start accruing interest immediately when you take them out, but at a low rate.
Colleges will first use the full allowed federal subsidized loan amount, and then the federal unsubsidized loans. Some schools offer ParentPLUS loans, another type of federal loan you can apply for here.
2020–2021 loan rates are:
- Undergraduate Direct Loans: 2.75%
- Graduate Direct Loans: 4.30%
- Graduate and Parent PLUS Loans: 5.30%
The schools listed above (and in the “no loan schools” blog) have opted to not use loans at all for some students. Although this means the school has to pay out of its own budget instead, they are helping their students not fall into debt.
Capped Loan Policy — Federal Subsidized Loans only
Some schools have made smaller efforts to prevent their students from becoming too overwhelmed with debt. For example, many schools ONLY use federal subsidized loans to meet need — not unsubsidized loans, or anything else. This means that the amount you have to pay back is capped at the subsidized loan maximum as listed above. A few schools that do this:
- Boston College
- Hamilton College
- Pitzer College
This does not mean you can’t use the other loans — it just means they won’t use it to fill your calculated need.
Note: this information is often not readily available on college financial aid websites.
You can call and ask for this information, or you can keep an eye out for when you get aid packages — look at what they include as part of your “aid.” Are they saying they’ll give you $30K in “aid” when you’ll have to pay $10K + interest back after you graduate?
Capped Loan Policy
And finally, some schools have adopted a capped loan policy in which they have committed to not using any more than a specified amount of loans to meet student need. A few examples:
- Olin College caps loans at $3.5K a year
- UVA caps loans at $4.5K a year for in-state students and $7K a year for out-of-state students
Reduced Loan Policy
Other schools have taken it further and chosen to reduce the loan amount to even below the federal subsidized loan maximum. One school has adopted this policy:
- Middlebury College has a limited loan expectation dependent on income, ranging from $7K — $19K over four years
- Although this is vague, it essentially means that they will try to reduce the loans included in your aid package dependent on your income. Likely, the lower your income, the more they will try to reduce your loans.
Student Contribution Policies
And believe it or not, there are EVEN MORE policies in place unrelated to loans that are meant to help students pay for college. Schools often have a “student contribution” portion of EFC, where they calculate how much students should be earning to contribute to school (often composed of a percentage of assets, summer earnings, and part-time work while in school). Schools have different expectations for this, so make sure to pay attention. For example:
- Pitzer College uses an increasing summer earnings and work-study model. They expect that you take more responsibility for your educational costs as you progress towards your degree.
- Davidson College simply states that “You and your family have the primary responsibility for college costs, to the extent of your ability.”
- Tufts University explains that “Every package will include a student contribution — an amount we expect you to pay from summer earnings, ranging from $1,000–2,600. This expectation remains even if you do not work over the summer.”
Note: this information is also often not readily available on college financial aid websites.
You can call and ask for this information, or you can keep an eye out again when you get aid packages. An increased student contribution will increase your EFC, decreasing the aid amount you receive.