The recent decision by Dartmouth College to no longer include student loans as part of the institution’s financial aid package, while worthy of applause, is also worthy of a closer look to explore its wider repercussions. Eliminating student loans as part of a financial aid package is a step in the right direction but it could quite possibly be a classic case of “treating the symptoms rather than the illness” because eliminating student loans does eliminate student needs.
Dartmouth has announced that it will fill the gap once covered by student loans with grants, so clearly, this decision is far from some reactionary or performative impulse on the part of the leadership.
Nevertheless, Dartmouth should stand out as an example – or warning if things go south in the future – for other institutions considering the same. Student needs will not go away. Tuition increases will be the biggest influence, so it would be ironic that the funding for the grants stagnates or rises slower than the institution’s own tuition increases. Books, food, and housing – all remain – and will increase in cost independent of the grants. Either, students will have to take less or institutions will have to admit fewer in order to make the grant monies go farther.
This is not inevitable. The fact is, there are always additional needs. Removing student loans from the financial aid package will restrict access to student loans and channel applicants to them in unpredictable ways. If you take away access to federal and private student loans, then the access to them will most likely be via marketing channels in which federal student loans do not partake as deeply as private companies. When offered as part of the financial aid package, there is a strong likelihood that the financial aid office will advocate for including lower-cost federal options first. Without such advocacy and without the same visibility as private lenders, federal student loans could recede into the background.
In the end, private student loans could surge in terms of usage. If it comes down to a marketing battle, private companies are more likely to win when pitted against the federal government. Private companies, despite any given institution’s ability to fulfill the financial needs of its students, can find ways (and reasons) to supplement the institution’s financial aid package.
In the end, our country still needs to address the underlying problems confronting its student population. Higher education and research are very much a part of our competitive advantage and, like so much of our physical infrastructure, our system of higher education needs fixing. Increased government support in investment, is not a handout, and the growing income and wealth gap has become a crisis.
Yes, we applaud Dartmouth College’s decision to replace student loans from its financial aid packages, but grants may not be the most effective or sustainable solution. Income Share Agreements, where the goals of the students, originators, and investors are all aligned in a meaningful and positive way would be a better alternative.
