This entry was posted on Tuesday, January 8th, 2008 at 3:21 pm and is filed under College Planning For Students. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
January 8, 2008
Colleges respond to high college loan balances
The college funding landscape is changing in some astounding ways recently, espically relating to the financial packages some well-healed colleges are awarding their students. Colleges are moving to ease-and in some cases, eliminate-student debt in the aid packages being offered. This is in response, partly, to pressure in Washington for them to spend a larger percentage of endowment funds to help families and students pay for the ever-increasing cost of a college education.
Late last year, Williams College announced that loans will be eliminated from the financial aid offers sent to prospective students. The loans will be replaced with grants. This is an important development, since loans have to be repaid (with interest) while grants are a form of gift aid that does not have to be repaid.
The Williams College announcement follows similiar initatives by Amherst College, Davidson College and other colleges that are reducing the emphasis on loans and increasing grant monies. Harvard University, last year, expanded its low-income program to cover selected families that earn up to $80,000.
Surveys of schools show that about 8% of all colleges have endowments that exceed $1 billion, a percentage that has doubled since 1996. This news, coupled with stories of college students building substantial debt loads during their college years, has members of Congress prodding schools to spend more of their endowments.
I expect this trend to filter down from the eastern “upper-tier” colleges to the point where other private colleges will feel the need to supplement their students’ aid packages with more gift aid. This will help them be competitive with their peers and allow them to recruit the type of student they desire.
So, what is a family to do with this information? The most important strategy, I believe, is to apply to at least five or six colleges. You also need to visit these colleges so they have some kind of record that you are interested in the institution. When each of these schools sends their financial aid award letter, a careful analysis is needed to determine how much of the package is loans vs. grants and other gift aid. It is possible, then, that an appeal could be made to the financial aid officer to reconsider the package and decrease the loan amount in favor of gift aid.
Be sure to contact us to get help with this important process.
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