Does the “No-Loan” Approach Really Help Low-Income Student Enrollment?

Washington, D.C., Aug. 23, 2012—Almost 15 years ago, significant national attention was given to several private and public four-year institutions when they decided to introduce “no-loan” financial aid programs. Initially, most of these aid packages replaced student loans with non-repayable grants and scholarships for all incoming undergraduates whose family income was less than the national median; and, eventually some of the policies expanded eligibility to include students from other income levels. Despite the spread of no-loan policies, until now, little has been known about the low-income student enrollment impact of no-loan strategies at participating institutions. A new report released today from the Institute for Higher Education Policy (IHEP), Economic Diversity Among Selective Colleges: Measuring the Enrollment Impact of “No-Loan” Programs, asks and answers the following research questions: What can highly selective U.S. colleges and institutions do to increase attendance of high-achieving low-income students? And why does it matter that they do?

Economic Diversity Among Selective Colleges reviews the origins of no-loan policies, compares private versus public no-loan programs, and evaluates the impacts of no-loan policies on low-income student enrollment. The brief also looks at the effects of no-loan programs on improving economic diversity at many of our nation’s most selective and wealthy institutions. Taken all together, the report concludes that the introduction of no-loan programs at U.S. colleges and universities produces positive results; however, it also notes that more work can be done to achieve greater economic diversity.

Recommendations to Implement No-loan Policies That Achieve Greater Economic Diversity

Economic Diversity Among Selective Colleges offers the following recommendations about no-loan policies at U.S. colleges and universities for both policymakers and institutional leaders to achieve greater economic diversity:

• Target eligibility requirements to Pell-eligible students. To stay committed to access and affordability, particularly for high-achieving low-income students, no-loan programs will work best when campuses target their aid to the students with the greatest need.
• Actively publicize the programs and reach out to low-income students. Campus leaders should design student financial aid programs that have clear and highly visible eligibility requirements and application processes.
• Avoid “skimming” to increase economic diversity. Colleges are constantly pursuing ways to maximize their reputation and prestige, so enrollment management professionals and campus leaders must be vigilant in their efforts to use financial aid programs as a tool for achieving equity and excellence.
• Federal/state incentives to encourage more colleges to adopt these policies. To continue the progress toward greater inclusiveness for low-income students, the federal government and states should offer incentives for colleges to adopt no-loan programs.

“No-loan programs that are well thought out are a step in the right direction. And although some institutions may be backing away from offering these aid packages, these policies give hope to the idea that colleges and universities can become more inclusive of accepting our nation’s brightest students who by chance come from low-income households,” says IHEP President Michelle Asha Cooper, Ph.D. “By removing cost barriers, as outlined in this brief, colleges and universities may someday become more representative of our nation’s economic diversity.”

In addition, Economic Diversity Among Selective Colleges notes that many institutions aspire to emulate the no-loan models at several highly selective institutions when designing their own no-loan pledges. However, most colleges and universities (private or public) do not have the financial resources to be as generous as highly selective institutions and therefore modify their policies. Two in every three no-loan institutions (69 percent) restrict their no-loan aid to students from low (43 percent) or moderate (26 percent) income levels. The most targeted programs also link their eligibility requirements to the federal Pell Grant program or to federal poverty measures, while the less targeted programs do not link institutional eligibility requirements to any federal guidelines.

Economic Diversity Among Selective Colleges was authored by Nicholas Hillman, Ph.D., who is a participant in IHEP’s Academic Fellows Program. Hillman is also an assistant professor, educational leadership and policy, at the University of Utah and specializes in higher education finance and student enrollment.

For more information or to download a free copy of Economic Diversity Among Selective Colleges: Measuring the Enrollment Impact of “No-Loan” Programs, visit IHEP’s Web site at www.ihep.org.