Shifting Gold Standard for Aid Policy

In 2002, Brown University announced that it would become "need blind" in admissions, meaning that all admissions decisions would be made without regard to an applicants' ability to pay. Brown acted only after years of student protests and lobbying on the issue (and the arrival of Ruth Simmons, a president who made need-blind admissions a priority). While most of the institutions Brown considers peers are need blind, paired with a policy of awarding aid packages that meet students' full need, the university had been wary of taking on the commitment to do so year after year.

This year, in the wake of an announcement by Harvard University that it was eliminating loans from students' aid packages and significantly cutting family contribution expectations, it didn't take Brown a single admissions cycle to respond. It found the money to eliminate the loan requirement for families with incomes up to $100,000, and to reduce the money to be owed by many families sending children to the university.

While Brown became what some are calling a "no-loans college" in much speedier fashion that it became need blind, other institutions embracing the no-loans movement (or substantially cutting loans) are not need blind at all. And some experts think this raises questions about the equity of and rationale for the no-loans policies that have spread rapidly in recent months and that have received almost universal acclaim. As more colleges go no-loan, more are also likely to be among institutions that aren't need blind, adding to concern about the issue.

Going need blind has long been considered the gold standard in private higher education when it comes to admissions and aid policy. To be sure, public colleges are de facto need blind and many private colleges without mega-endowments devote huge shares of their budgets to financial aid. And it is easier for some colleges to be need blind because they don't recruit or enroll that many low-income students.

But for the vast majority of private colleges that are not need blind, some percentage of slots are awarded not to the best applicants, but to the best applicants who can pay. Typically, these colleges have a set financial aid budget, admit students without regard to need -- except to be notified by the aid office when the aid budget is used up. Then these colleges admit students who don't need aid.

Even if only a small percentage of a class is admitted in these "need aware" systems, the policy runs very much against the meritocratic ideals people like to associate with higher education. A need-blind college can tell low-income grade school kids that if they study hard, they'll have the exact same shot at admission as graduates of wealthy prep schools. A need-aware college can't say quite the same thing.

Historically, private colleges that wanted to demonstrate their commitment to the highest level of equity to applicants have pushed -- if they could afford it -- to be need blind. But in recent weeks, Lafayette College, Tufts University and Washington University in St. Louis have gone no-loans for some students, without being need blind. And Carleton College significantly cut loans while not being need blind. All four of those institutions apply a need-aware approach only to a small portion of their classes. Tufts is operating need blind, but not yet stating its commitment to the policy, though it hopes to be able to do so after a fund-raising campaign. Lafayette is need-aware only for its wait list.

Why does this matter? Catharine Bond Hill, Vassar College's president and a scholar of higher education economics, has seen the significance of both kinds of aid policies. Last year, before the no-loans movement took off, Vassar reinstated a need-blind policy that it had abandoned a decade earlier. This year, with its competitors going no-loans, Vassar announced such a policy for those with family incomes of up to $60,000.

The danger of going no-loans without being need-blind, Hill said, is that it could result in some students receiving less aid and some low-income students not being admitted -- at least once you leave the relatively small group of colleges and universities with stratospheric endowments. "If you are a school that is not need blind, and you go to a no-loan policy, you are going to make the financial aid for each of those you accept more generous, but it's not saying what your overall commitment is," she said. "If your aid budget is unchanged, or doesn't increase in the future, you will be giving more financial aid to fewer students, and I'm not sure I would consider that a welfare-improving situation."

The desire to go need blind, she said, is about doing something "that puts a low-income kid and a high-income kid on a level playing field." While no-loan policies are also motivated by a desire to help low-income students, "schools are also doing them because they feel the need to do so," she said. "If the schools you compete with have [gone no-loans], you almost feel that you have to," she said. From a financial standpoint, staying need-aware gives colleges more financial flexibility, she added.

Ronald G. Ehrenberg, director of the Cornell University Higher Education Research Institute and author of numerous books and papers about tuition and aid policy, said that the colleges are in a very unusual situation -- with many taking on new financial commitments (by going no loan) at a time that the economy is changing and a period of sustained endowment growth may be coming to at least a temporary halt. "If the economy goes south, a lot of institutions are going to have new policies that are difficult to sustain," he said. And so those that have adopted no-loan policies without being need blind "have given themselves a little protection."

Colleges like Vassar that have given up that flexibility and protection -- without a mega-endowment cushion -- are looking at the no-loans trend with a bit of skepticism, especially when practiced by institutions that aren't need blind. Jon Burdick, dean of admissions and financial aid at the University of Rochester, said flatly: "I think the idea of providing no loans while you aren't guaranteeing full need is ludicrous." Rochester is not no-loans, but is in the fourth year of being officially need blind. Any time that some students are admitted to a college based in part on ability to pay, "you are putting a thumb on the scale for the richest people," he said. "If you aren't admitting as many poor students in the first place as you should, how are you empowering them with no-loans for those you admit?"

In part by being need blind, 18 percent of Rochester's undergraduates are eligible for Pell Grants (a good proxy for low-income status), twice the share at plenty of those announcing no-loan policies, Burdick said. He said he views the recent round of announcements much the way he thinks about colleges that say they can't afford to be need blind, but that give out merit scholarships. "It seems like colleges are trying to get the benefit of making an announcement just like the big guys," he said.

Steve Givens, associate vice chancellor and executive director of university communications at Washington University, noted that only a small portion of the university's class is admitted while considering applicants' ability to pay. And he added that the new funds for eliminating loans "are above and beyond the resources previously allocated for financial aid."

At other colleges grappling with these issues, however, some are questioning whether no-loans is really the best approach from a social policy perspective.

Brian Lindeman is financial aid director at Macalester College, an institution with a high percentage of students on need-based financial aid and a track record of providing substantially more need-based aid than most other institutions to undergraduates from outside the United States. But it also stopped being need blind in 2005, citing budget difficulties. Since moving away from need-blind admissions, the percentage of students who qualify for need-based aid has dropped to 67 percent, from 70 percent.

Macalester isn't planning on going no-loans, and Lindeman said that from where he sits, he wouldn't offer no-loans even if someone offered him the extra $1 million a year it would cost for him to change his policy just for families with incomes of up to $60,000.

"First of all, let's say hurrah for those schools that can do this. It's terrific that they are doing things to improve their aid programs," he said. But for colleges without extra money sitting around, the equation is different, he said, and it's important to look at the stated purposes for no-loans and who is being helped.

For example, Lindeman noted that many colleges going no-loans say that they are thinking about the undergraduate who wants to be a teacher or join the Peace Corps, but who is worried about loan repayment. If that's the problem, he said, colleges should be creating funds that repay the loans of new alumni who enter those or similar service-oriented (and low-income) fields. But he noted that the elite colleges that are boasting of going no-loans turn out plenty of lawyers and technology entrepreneurs and investment bankers -- arguably far more than inner-city school teachers. Does everyone deserve a loan-free education, he asked?

"We have high need students who leave here when they graduate and immediately start making a lot of money and there is no reason they can't repay a reasonable loan," he said.

So why aren't colleges creating those kinds of programs? "The difference between a program that helps alumni repay loans and just going no loans is that the former doesn't give you a competitive advantage in admissions," Lindeman said.

The competitive advantage is real, Lindeman said, even if he's not convinced of the social advance represented by no-loan policies. "I'd be lying to say we aren't concerned" about the impact of competitors going to no loans, he said. With acceptance letters and aid packages about to be reviewed by this year's class, he said, "I fully expect to hear" from parents who point to other institutions' no-loan policies. But if that's all they have to say, Lindeman said, "either fortunately or unfortunately, it's going to be a short conversation," because Macalester wants to give its aid dollars as it thinks most equitable, not to match other institutions.

Rodney Oto, associate dean of admissions and director of student financial services at Carleton, said he believes institutions should aspire to two policies: "to be need-blind and to have minimal loans." The emphasis, though, is on the word "minimal" as opposed to "no." Carleton just announced a plan that will significantly cut loan requirements, but that does not eliminate them.

Oto said that in planning the effort, "we had the conversation" about cutting loans while not yet being fully need blind, and the moves by competing institutions "put this issue in the forefront."

While Oto said Carleton felt some pressure to respond, he also said that there are philosophical issues with regard to loans that deserve some attention. "I would argue that loans are not a bad thing" if they are kept to reasonable limits, Oto said. "There's an argument to be made that students ought to have some investment in their education via a loan," he said. While there is debate over where the "magic line is" that debt becomes too much, he added that colleges should slow down before embracing the idea that any loan is a bad loan.

In some ways, he said, the no-loans movement reflects the latest iteration of a more sophisticated way that many families look at aid packages. Long gone is the day when people would just accept packages if they provided enough to get a student through. "Now people want to know what the components are of an award," Oto said. For many families, the qualities associated with being need blind aren't as important as the quality of an aid package, he said. "You now have this added measurement," he said.

Barmak Nassirian, associate executive director of the American Association of Collegiate Registrars and Admissions Officers, said that while he was happy to see the attention on new issues, he is concerned about the shift away from need-based aid. "Need-blind admissions and need-based aid are together the key components of a national strategy for access," he said.

For institutions that are recruiting and enrolling low-income students with need-blind policies and providing them with enough aid, adding a no-loans policy on top doesn't create policy dilemmas, he said. "There are places where it's fairly straightforward to eliminate loans," he said. But in other cases, he said, the announcements are "savvy marketing" that may have the result of helping middle income students while lower income students aren't recruited or admitted.

Robert Shireman, executive director of the Project on Student Debt, which maintains a database of pledges colleges have made on aid policies, said he also sees shifts in the way people are thinking about aid policy. He said he is pleased to see more colleges that are adopting no-loan or other policies talk explicitly about the need to attract more Pell Grant eligible students. Shireman's organization has pushed that issue, noting as he said that some prestigious institutions that can make a no-loans pledge "have such high expectations in terms of grade point averages, test scores and worldly experiences, that the proportion of students who make that cut doesn't include a lot of low-income students."

And, he said, "there is a hazard as institutions make commitments to financial aid to low-income students that, if they are not need blind, they will look at the cost of enrolling those students, and would maybe think twice about admitting them because of having to fully fund them."

With both loans and admissions policies, Shireman said he is hearing more talk about the need for less-absolute positions. For example, his organization has been talking about " 'low debt' and not 'no debt.' " He said that he is worried that if the emphasis remains on no debt, "the goal may be too expensive for colleges that have got any respectable proportion of low-income students."

Shireman said that a "pioneering area of thought" in financial aid right now is whether there should be a new category of the "mostly need blind." These are institutions that would "like to be thought of as need blind" and that "come very close," but where the "budget is precarious enough" that they don't feel able to make the commitment.

The fact that colleges are talking about such a designation may be another sign that need blind is no longer the ideal to many that it once was -- or no longer carries enough perceived public benefit. Shireman said some of the institutions that would like this new designation are in fact "making very strong commitments to need-based aid." But he also said that many questions were unanswered: For example, would a college be eligible for the list if it also awarded merit aid?

While a number of public universities have made major pledges to eliminate loans for students from low-income families, the announcements kicked off by Harvard would apply to much wealthier families (Harvard's reaches $180,000). That has attracted interest, Shireman said, to just what colleges' policies are. "It took reaching much higher into the middle class and upper class for the message [that there are no-loan or low-loan options] to penetrate," he said.

So now colleges are eyeing his group's list of aid pledges and other less formal lists -- such as of those who remain need blind -- and they are looking for "some kind of stamp of approval for their policies." Colleges know that going no loans gets them on a list, but at least some always want the "close enough to need blind" designation, too, he said.

Most experts aren't expecting, however, a surge colleges going beyond "close enough" to being 100 percent need-blind.