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Health & Fitness

College Q-and-A: What's a No-Loan Policy?

Many private colleges meet 100 percent of a family's need with financial aid. Some with no loans.

Question:  Our neighbor has a daughter who will start Princeton University this fall.  They told us that she will not be taking out any student loans.  Since the parents earn a modest income. How does that work?

Answer:  What a timely question!  The architect of the ‘no-loan policy’ at Princeton University, Mr. Don Betterton, will be at our office later this month seeing clients and helping promote a new software that will allow the student to make a REALISTIC college list using his own ranking system.

Many private colleges meet 100 percent of a family’s need with financial aid.  The package may vary dramatically from school to school.  This is due to the fact that financial aid has three components: grants (free money), work-study (work it off) and loans (pay it back with interest).  Schools have a variety of policies when it comes to the combination of these components.  Often the mix consists of a high portion of university grant money and a smaller portion of loans/work-study.

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When a school implements a no-loan policy, the loan component is eliminated and displaced with grant money and possibly, but not necessarily, a work-study.  The family must still come up with their ‘expected family contribution’ (EFC), but having no student or parent loans in the financial aid offering is a marvelous feature for schools offering such a policy.

For families with incomes under $60,000 (and high-achieving students) several universities including Princeton offer full-ride grants.  Sadly, many families are unaware of this, and the result is that many students are failing to optimize their college search.

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For those families whose EFC is higher than the cost of attendance, the no-loan policy does not apply.  Unsubsidized Stafford loans, parent PLUS loans, and private education loans are still a viable option.

Take a look at the WEBinar schedule at GetCollegeFunding.org.

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