Paying for College: Where do loans fit?

Email|Print| Text size + By Linda K. Wertheimer
Globe Staff / December 12, 2007

BOSTON—Harvard University announced a major financial aid initiative this week, including a decision to replace loans with grants in financial aid offers. The news prompted questions from Globe readers on how common loan elimination was and how to handle the challenges they face paying for college.

Robert Shireman, a financial aid expert and president of the nonprofit, nonpartisan Institute for College Access & Success, Inc., fielded questions from Globe higher education reporter Linda K. Wertheimer on the topic.

Q: Harvard, Williams, and other colleges have made big headlines with the decision to cut loans out of financial aid packages and replace them with grants. What is the standard practice nationally among colleges in regard to loans' place in financial aid packages? Will the move of a few colleges become commonplace?

A: When a family's ability-to-pay is not enough to cover tuition and other costs, many colleges will offer some grant aid, but usually it is in combination with some student loans. In recent years, Harvard and several other colleges announced they would replace the loan amounts they were including in their aid packages with grants for families with incomes below $60,000. Now Harvard is extending that policy to students at higher income levels.

Few colleges have the resources to offer grants to cover all need or to reduce expected parent contributions for such a broad income spectrum. But many colleges could change their policies to move in the direction of eliminating loans for the neediest students, reducing the loan burden for many middle income students, and increasing the clarity about the cost of college.

For more information on various colleges' approaches, go to

Q: Some college officials say students should bear part of the responsibility for college costs, including taking out a small loan, so they take more ownership of their education. What is your view of this philosophy?

A: For most colleges, aiming for a low-debt approach is more realistic than a zero-debt approach. While Harvard's policy is generous, it is not a free ride. Even though parents below $60,000 of income are not expected to contribute, those students are expected to be able to pay up to $6,000 from work-study and summer jobs. In addition, for families above $60,000 of income, there is still an ability-to-pay amount. Some families expect their children to take out loans to help cover that amount.

Q: When the federal government figures out what a family can afford to contribute to financial aid, how do loans come into play?

A: Virtually all students can get federal loans. But the ability-to-pay formula, combined with a school's cost, determines what type of loan you qualify for. For more information to figure out your expected family contribution, go to you have financial need (if the total school cost is more than your ability-to-pay amount), then you are eligible for a loan that has zero interest while you are in school.

Q. Harvard, in its new financial aid effort, said it would advise families that on average, they would have to contribute no more of 10 percent of their income if their earnings were between $120,000 and $180,000. Some college financial aid directors say that formula is too simplistic, and they question whether it will work out to so low a contribution for many families. What does Harvard's new zero to 10 percent standard add to the national conversation about financial aid?

A: I credit Harvard with trying to be clear. It got them headlines that counter the bad press about rising tuition. In response to the skeptics, I would note that the policy is not as simplistic as it sounds. Harvard actually says that those percentages are for families "with assets typical for these income levels." Harvard will clearly still be looking to make sure that asset-rich families with modest incomes aren't treated too generously.

Q. What advice would you give a family as it reviews financial aid offers from multiple colleges, some that include loans, and some that do not?

A: Choose a college where you will thrive. If you can manage the cost with no more than what's available in federal student loans (generally $3,500 to $5,500 a year), then you are in good shape. If private loans are part of the equation, however, then take a step back and reconsider.

Q. Some people find it hard to believe that families with incomes over $100,000 are struggling so much that they would need such largesse from Harvard and other universities. They question whether the problem is a lack of money or poor decisions made about spending. How real is the college affordability issue for higher-income families?

A: There are many excellent colleges that are affordable for families with income in the $100,000 to $150,000 range. But without aid those families would find it difficult to afford Harvard.

Robert Shireman, founder and president of the Institute for College Access and Success based in Berkeley, Calif., was an education policy adviser in the Clinton administration. He has been active in student loan reforms nationally and was appointed to Congress to the Federal Advisory Committee on Student Financial Assistance.

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