Part 3: No-Loan Thresholds: Middle Class Families CAN Go to College for Free!
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.
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 colleges with thresholds is current as of January 2024:
Colgate University: no loans under $175K
Connecticut College: “If your family’s income falls below a certain threshold, your financial aid package will reduce or eliminate student loans.”
Cornell University: no loans under $60K
Dartmouth College: no loans under $125K
Duke University: no loans under $40K.
Emory University: no loans under $50K
Haverford College: no loans under $60K
Lafayette College: no loans under $200K
Miami University (Ohio): no loans under $35K
Michigan State University: “The Spartan Advantage Program will cover full-time tuition, room and board, books, and course materials for first-year students who are Pell grant recipients if your family’s income is at or below the federal poverty level.”
Rice University: tiered levels - no loans under $75K. Scholarships covering full tuition will be awarded to students with family incomes between $75,000 and $140,000. Students with family incomes between $140,000 and $200,000 can receive scholarships that will cover at least half of tuition costs.
Tufts University: no loans under $60K
University of North Carolina at Chapel Hill: “The Carolina Covenant is an aid program that helps families at or below 200% of the poverty level. The Covenant meets full financial need through grants, scholarships, and work-study.”
Washington University in St. Louis: no loans under $75K
Wellesley College: no loans under $100K
Wesleyan University: no loans under $120K
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.
2023-2024 loan rates are:
Undergraduate Direct Loans: 5.498%
Graduate Direct Loans: 7.048%
Graduate and Parent PLUS Loans: 8.048%
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 are Boston College and Hamilton 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, Middlebury College, has adopted this policy:
“Full demonstrated financial need will be met with a limited loan amount. The low-interest, deferred repayment loan amount included in meeting student need is between $1,000 and $3,500 annually (for incoming students), based on family income.”
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 states that “all students who attend have a summer earnings contribution that ranges from $500 to $1,700 (depending on their need). The summer earnings contribution is built with the expectation that students will work over the summer and save to help toward their college costs.”
Davidson College simply states “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.
