Neal Hutchins Lockhart is a business and finance executive and writes for numerous online publications. In the article below, Neal Hutchins Lockhart explains why and how some colleges are removing student loans from financial aid programs.
In a surprising turn of events, Dartmouth College has joined the ranks of several other public and private universities in eliminating student loans, says Neal Hutchins Lockhart. At first glance, it may appear that this decision will disenfranchise thousands of students unable to afford the high fees to attend post-secondary school. However, Dartmouth’s decision comes at a time when millions of Americans are struggling with student loan debt.
By eliminating the possibility of student loans, Dartmouth hopes to help its student body by canceling the burden of debt. Neal Hutchins Lockhart takes a moment to explore how it will work and learn what Dartmouth has up its sleeves to allow non-wealthy students to attend its prestigious institution.
What really happened?
With recent headlines reading “Dartmouth Abolish Student Loans,” it’s easy to assume the Ivy League school is banning the practice altogether. That’s not entirely true, says Neal Hutchins Lockhart. What really happened was that Dartmouth issued a statement announcing that they would be removing student loans from undergraduate financial aid programs for students from families earning more than $125,000 a year.
The announcement came after the university previously eliminated student loan requirements for families earning less than $125,000 a year. However, graduate and post-graduate students will still be able to access student loans, as will wealthier people who can afford to repay them, says Neal Hutchins Lockhart.
Dartmouth’s decision is intended to protect all undergraduates and is expected to save graduates about $5,500 in debt each year.
How Dartmouth plans to provide financial aid
Considering that the vast majority of college students take out loans to pay for their education, then one has to wonder how Dartmouth will provide financial aid to low-income students. As part of its statement, Dartmouth explained that it will now begin expanding its scholarship program and has increased the income cap for full scholarships to $125,000, says Neal Hutchins Lockhart.
Their decision is backed by approximately $80 million provided by 65 donors. With this money, the university should become one of the first to offer full scholarship programs to most of its students, says Neal Hutchins Lockhart.
The student loan crisis changes politics
Neal Hutchins Lockhart says that over the past two decades, the student loan crisis has become a major issue impacting the lives of millions of young Americans. By now, the average student will graduate with around $33,000 in debt before starting their first job. With such a financial burden, the default rate on these loans rose to 11%.
These student loans create more than just a debt crisis, according to Neal Hutchins Lockhart. For young workers at the start of their careers, such crushing debt has had a significant impact on their ability to buy a home, start a business and save for retirement. Coupled with inflation and rapidly rising house prices, analysts predict millennials may never own a home.
According to Neal Hutchins Lockhart, Dartmouth’s decision to eliminate undergraduate student loans is intended to combat these effects. As one of the most prestigious universities in the world, it can set a new standard for what is acceptable and shift the policy from crippling student loans to donor-supported scholarships for all students.
Dartmouth is just the tip of the iceberg
Although Dartmouth has received the most attention in recent days, it is just the latest school to join the trend of universities eliminating student loans. Neal Hutchins Lockhart explains that from small private schools, like Williams College in Massachusetts, to large public schools, like Ohio State University, many higher education institutions are making the difficult decision to fight rising debt student.
Of course, eliminating student loans presents some challenges, says Neal Hutchins Lockhart. Above all, it is expensive. Many schools that have decided to do so have large endowments or may attract the attention of financial donors.
While an Ivy League college, like Princeton or Dartmouth, can attract millions of dollars in private funding, smaller regional schools can struggle, says Neal Hutchins Lockhart.
In such cases, it will likely depend on a decision by the federal government before anything really changes. The Biden administration came into office promising to tackle student debt, but little has been done so far, says Neal Hutchins Lockhart. Analysts say the president’s $25 billion campaign pledge will likely come into play in a month or two, but, for now, it remains invisible.
Dartmouth’s decision to remove student loans from its financial aid programs is a direct response to America’s student debt crisis. If successful, it could contribute to policy change and spur other institutions to offer more comprehensive scholarships to all students, says Neal Hutchins Lockhart.