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Dartmouth's Decision To Drop "No-Loans"

(Photo courtesy No Doc Loans)

As the full extent of the cost crisis in higher education hits home, colleges and universities have to make extremely tough choices. Dartmouth College recently made one this past weekend - one that affects all students currently attending the Hanover, NH college, but also the members of the football team:

Dartmouth College announced Monday that it is restoring loans to the aid packages of students from families whose incomes exceed $75,000 -- ending a no-loans policy that was announced with much fanfare two years ago. Dartmouth will continue to exclude loans from the aid packages of those with smaller family incomes and will continue to be "need blind" in admissions, meaning that financial need will not be taken into consideration in admissions decisions.
 Looks like some kids may need to refamiliarize themselves with a new type of institution - banks.  (more)

Dartmouth followed Division III Williams in retracting their aid program. This "no-loans policy" - enacted two years ago by the richest university in the world, Harvard, with the rest of the Ivy League following suit in some form thereafter - amounts to, in effect, a "scholarship" to attend the school (provided you could make it through admissions, of course). This is one of the reasons that it has been somewhat comical to call the Ivy League "non scholarship" when a family income of $75,000 or less results in a four year education that is 100% paid for.

But Dartmouth's new president, Jim Jong Kim, felt that this aid program could not stand at Dartmouth:

The Ivy League school said it will lay off about 76 staff as part of a plan to close a projected $100 million budget gap.

The Dartmouth board also approved a 4.6 percent increase in undergraduate tuition, room and board, and fees, raising the annual tab to $52,275 — the smallest increase in the past five years, officials said.

The school said it would increase its financial aid budget 10 percent to help offset the tuition increase. But one big part of the aid program will be cut: The plan to offer loan-free financial aid for students of all income levels beginning with the class entering in fall 2011.

"The simple reality is that we just can't afford that anymore," said Dartmouth President Jim Yong Kim.

While it was very difficult two years ago to find critics of giving more free education to lower and middle class families, nevertheless Inside Higher Ed managed to find some people who evidently were against it, including one cringe-inducing way of looking at it:

One expert on the financial aid strategies of top colleges, who asked not to be identified, said that when colleges see a Williams and a Dartmouth -- "two very strong institutions" -- pulling away from no-loans policies, others are likely to follow. He said that this might especially be the case for the private colleges that eliminated loans despite having smaller endowments (overall or per student) than Dartmouth and Williams.

This expert, echoing the comments of others after the Williams shift, said that from a broad policy perspective, the shift back to loans may be a good thing. "While going no loans was admirable for low-income students," who may have little family experience with borrowing and for whom the possibility of a loan might hinder them from applying, that's not the case for eliminating loans for the middle class, he said. For generations, there has been a philosophy about "sharing the costs" of higher education, with students among those sharing. So there is no reason, he said, to eliminate that responsibility for those who are unlikely to be discouraged from enrolling by reasonable loan requirements.

(Greeeaaat. If I'm the parent of a student at Dartmouth, who now has to spend a large hunk of my income towards college, I'll be able to comfort myself with the thought that for generations we've "shared the costs" of higher education. And if I still qualify for the full loan, I'll be able to take comfort in the fact that I have the loan because I have "little family experience with borrowing".)

Many of the discussions on the termination of this aid policy have focused , in my opinion, on the wrong things:

"Are the colleges prioritizing financial aid in the overall budget, and, within financial aid, are they prioritizing the students who are most needy?.... You need to look at the fine print."


[Macaaester College president Brian] Rosenberg has been critical of no loans, arguing that it ends up helping some students who don't need it. "Does it make sense to give no loans to someone who graduates and goes on to Morgan Stanley, when that person is perfectly capable of paying loans back?" he asked.

That's real misleading - making it sound like it's a choice between needy students and middle-class students when it comes to financial aid. The truth is at most high-academic NCAA institutions there is already very intense focus on needy students - but many do not make it past admissions, for fair and unfair reasons. To me, this reasoning is a cop-out: aid for middle class students and needy students does not need to be mutually exclusive.

As for Mr. Rosenberg's take on it - I'd like to own the crystal ball he uses if he can figure out which high school seniors are going to go on and work for Morgan Stanley so they can repay their student loans.


While there evidently are larger issues that Dartmouth needs to deal with, this decision will reverberate through Ivy League and Patriot League athletics as well.

The first question has to be: how can Dartmouth compete with Harvard for athletes? Academically, they are going after the same type of kid: top of his class, etc. But Harvard has not, nor have any plans to, discontinue their aid policy where any kid who gets through admissions and whose family is making under $120,000 will get his education paid for. How can Dartmouth possibly compete?

Put it this way: your family is making six figures. Dartmouth wants you to pay to play football in Hanover, but you have to pay to go there. Harvard does too, but they pay your whole way. Where is he likely to go? Dartmouth had a tough sales job going in, now it's immeasurably tougher - especially if all seven Ivy League schools keep their aid packages intact.

The other issue is how this change might affect the high-academic members of the Patriot League, many of whom offer similar aid programs. (According to this website, Lehigh's no loan policy affects kids whose fmily incomes are less than $75,000.)  Lafayette specifically did not end their aid program, but did modify it slightly:

Lafayette College, for instance, with an endowment worth less than 40 percent of the value of the $1.4 billion fund at Williams, recently considered ending its no loans policy, which applied only to families with incomes of up to $50,000. While that remains intact, the college raised the loan limit it pledged to students with family incomes of between $50,000 and $100,000 from $2,500 a year to $3,500 a year. (Both Lafayette and Williams are grandfathering in those who enrolled under the previous policies, so any changes will only affect future students.)

And, interestingly...

There may also be an educational case to be made for modest borrowing. Robert J. Massa, vice president for communications at Lafayette and previously a senior official in enrollment and admissions at Dickinson College and Johns Hopkins University, said that there are definitely some low-income students for whom any loan may be a barrier to college. But largely, he said, "I think that when we have some skin in the game, we're more invested in whatever it is that we do. So from a philosophical point of view, I think it's important for colleges to ask: Should students be borrowing to finance some portion of their education?"

The other side of the debate:

"If you believe that X is a good idea for non-rich students, you ought to believe that it is a good idea for rich students. If taking out loans is good for Sue, coming from a family of school teachers, then it is good from Sarah, coming from a family of investment bankers. Do the rich trustees of Williams make their children take out loans? Hah!" he wrote. He added that "making students take on debt causes them to make choices that are different, and generally less desirable, then the choices that would have otherwise made. By re-instituting loans, the Williams administration has demonstrated its priorities."

Clearly, there is a debate going on in higher education about whether or not kids should be "invested" in their education. In the world of the Ivy League, Patriot League and Pioneer Football League, the winner of that debate will also affect athletics, too.


Anonymous said…
The discussion misses an important point. Colleges, like most non profits are almost as inefficient as government. While colleges have many worthy priorities, the first tends to be the preservation of the insiders' tenure, salaries and benefits. Imagine if admninistration and professors had the same tenure guaranties as the coaching staff. Cut costs first!
rich said…
The gap in the IL grows again between the H-Y-P and the rest
オテモヤン said…
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