More Colleges Are Replacing Student Loans With Grants and Scholarships

Carleton College, a private liberal-arts college in Minnesota, is eliminating student loans from its financial aid packages. The school will instead offer grants and scholarships that do not need to be repaid, Business Insider reported. The change applies to both new and current students, making the policy relevant for families already enrolled as well as future applicants.

Carleton said middle-income students stand to benefit most, noting that one-third of every incoming class over the past decade has come from middle-income households. Students may still choose to borrow outside the college’s aid package, and they remain responsible for their expected family contribution based on income. The program is funded by $80 million in donations, and Carleton is seeking another $48 million to sustain it.

Business Insider reported that Asbury Theological Seminary in Kentucky announced it would phase out federal student loans and shift toward scholarships. Princeton University became the first school in the US to replace student loans with grants in 2001. Harvard and Yale later launched similar initiatives as colleges looked for ways to reduce student debt burdens.

The move comes amid a broader student-debt burden of $1.7 trillion affecting more than 40 million Americans, according to the article. Business Insider reported hearing from thousands of borrowers who struggled with repayment due to factors including rising interest and difficulty finding gainful employment. For students comparing colleges, no-loan aid policies can be an important question to ask alongside tuition, family contribution, and scholarship availability.