Student Debt Prevention
NEW YORK ( MainStreet) Haverford College's six-year-long experiment with a "no loan" pledge to some of its studentsmany from middle-income familiesis set to bite the dust.
The goal was to ensure that none of its students would be forced into debt to attend the private liberal arts college located outside Philadelphia. A new plan will supposedly build in cost reductions for students from families that are not wealthy. Those from households earning under $60,000 per year will not have to take out loans of any kind and the college hopes that no one should have to borrow more than $12,000 over four years. In calculating a family's wealth, Haverford considered all home equity to be an "available asset."
The plan still needs to be approved by the College Board, which could tweak or reject it, but baring last minute changes, Haverford seems ready to join Dartmouth, Carleton and Williams College, which tried no-loan programs, then bailed following the 2008 credit freeze. Haverford's "no loan" policy would be honored until the Class of 2018 graduates and begin in 2019.
"The truth is that we've been having conversations about the long-term sustainability of the financial model since 2008, since the economy took the turn that it took in 2008," Jess Lord, dean of admissions and financial aid told Inside Higher Education earlier this month. Lord added that the college has been seeking an "equilibrium" between access and affordability and long-term sustainability.
The Great Recession, which many leading economists believe is over, continues to cast a long shadow. Philly.com reported in 2008 that Haverford's endowment dropped from $521 million that June to $375 million by the end of the year. By 2012, with the costs of educating its students on the rise, the total endowment was about $387 million, although The Clerk , Haverford's independent student newspaper, reported that it reached $433 million last May.
In August 2013, Moody's downgraded Haverford's long-term bonds from Aa2 to Aa3 with a stable outlookstill investment grade, yet Moody's noted the 35% decrease in its endowment in 2009. Small college peers with Aa2 rated debt include Bowdin, Bryn Mawr, Claremont Mckenna, Hamilton, Oberlin and Vassar.
A September Moody's report cited Haverford's "stagnant net tuition revenue, thinning operating margins, and a needs blind student aid policy requiring greater reliance on endowment spending" as contributors to the downgrade.
Still, the new plan is expected to retain significant protections for students from lower income brackets: families making less than $60,000 will still not have to take out loans and no family should have to borrow more than $12,000 over four-years, which is far less debt than the average debt-bearing student. The median U.S. family incomes is roughly $51,000.
The "no loan" pledge has not been the only drag on Haverford's balance sheet. According to "Financial Aid and the No Loan Policy," a fact sheet posted online by Haverford this month, the college spent $16.9 in financial aid in 2009, rising to $23.5 million in 2013 an increase of about $6.6 million per year. The "no loan" program cost about $1.9 million this year.