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The End of the Student Aid Bubble?

We've been following the news out of Hanover simply because their 14 percent structural deficit makes Cornell's budgetary problems seem a bit Lilliputian. (As opposed to Princeton's, which are microscopic.)

So it's interesting to note that Dartmouth has decided that its students can begin to shoulder a heavier loan burden:

Dartmouth College announced Monday that it is restoring loans to the aid packages of students from families whose incomes exceed $75,000 -- ending a no-loans policy that was announced with much fanfare two years ago. Dartmouth will continue to exclude loans from the aid packages of those with smaller family incomes and will continue to be "need blind" in admissions, meaning that financial need will not be taken into consideration in admissions decisions.

The announcement by Dartmouth was part of a package of spending cuts designed to deal with a $100 million "structural deficit" the college faces. Students currently on financial aid or those admitted this year (who would have applied believing they were exempt from loans in aid packages) will be grandfathered into the no-loans approach.

Dartmouth's announcement comes a week after Williams College moved away from its no-loans policy, although Williams will also continue to offer its lowest-income students packages that do not include loans.

We'll start counting how many other schools end up having to cut their aid pools. Cornell's own aid pool for undergraduates has grown by $40MM in the last five years. For his part, Skorton has continued to pledge that student aid will not be touched.

We may start to see schools with substantial merit aid programs, like WashU, begin to cut these funds. It can certainly help to close budget gaps without any painful staff or faculty layoffs.

Interestingly, Cornell now has a more generous no-loan policy than Dartmouth:

The following year, 2009-10, the program will take full effect by eliminating need-based loans for students from families with incomes up to $75,000, and capping annual loans at $3,000 for students from families with income between $75,000 and $120,000.

Dartmouth currently wins around 65 percent of the common admits with Cornell. This may change if Cornell can afford to keep its current aid policy.

One final thought: By shifting more of the student tuition burden back onto loans, Dartmouth is just helping to feed the lurking student loan bubble -- and with a continued bleak employment outlook for most graduates, we're still waiting for that one to pop.

Matthew Nagowski | Posted on February 09, 2010 (#)

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