By: Mary Beth Marklein
June 13, 2011
Law schools have done it for years. Now, some private liberal arts colleges are experimenting with the idea: They're offering upfront to help students pay off their loans after they graduate.
The financial-aid benefit, which targets students who expect to pursue careers in low-paying public-service fields, aims to help colleges attract and retain students who might otherwise enroll somewhere cheaper, or nowhere at all.
"When we have an excellent student we know will be successful here (but) who has that anxiety about student loans, this is one more tool for us," says Jeff Abernathy, president of Alma (Mich.) College, which is testing the concept with about 10 students this fall. "We are making myriad attempts to help our students find their way to a private liberal arts education, (particularly) students who might feel like they've got to go to a lower-cost public institution."
At least seven other schools -- mostly small Christian colleges -- offer the option as a strategy to boost enrollments in tough economic times. A growing number of college freshmen say they aren't attending their top college choice even if they are accepted there, often because of cost, says an annual survey by UCLA's Higher Education Research Institute. In last fall's survey, 62% said the economy affected where they enrolled.
A number of wealthy colleges, including Amherst and Pomona, in recent years have eliminated loans from financial-aid packages. Private schools with small endowments rarely have that option and are more likely to lose students to lower-priced public universities.
The loan program gives students a safety net. "I don't have to worry about how much money I'm going to be making. It frees me up to do what I feel I'm called to do," says Erica Harris, 22, a May graduate of Huntington (Ind.) University, which offered her the option two years ago when she nearly withdrew because of finances.
Harris, whose degree is in family and children ministries, accrued about $40,000 in debt and isn't sure where she'll work after her summer internship at a Christian youth camp. If the job pays less than $20,000 a year, the loan repayment plan will cover that year's payments. The Huntington plan will help cover up to $90,000 in student or parent loans when borrowers earn less than $40,000 a year.
Participating students pay nothing for the benefit. The college pays a fee -- on average about $1,200 per student per year -- to LRAP Association, a 3-year-old company that uses the pooled funds to repay loans for graduates who qualify. Company president Peter Samuelson projects that no more than 20% of participating students will need the money or will need it for more than a few years.
Tufts University in Medford, Mass., expanded its law school's repayment plan universitywide in 2008. Funding comes from donor gifts.
Matthew Osborne, a vice president at Michigan's Spring Arbor University, which expects to add 20 students this fall to its program, says it's "a matter of time" before more colleges offer similar relief. He sees a longer-term payoff if recipients look kindly on their alma mater for doing so. "Gratitude allows for a better relationship," he says. "And better relations allows for the opportunity for better alumni donations down the road."