Don’t Have the Green? Give ’Em the Guidance.

There’s been a flurry of news lately about colleges eliminating loans for lower and middle income families. Of course, any strategy that reduces the loan burden of students seeking higher education should be applauded.

But the issue isn't that simple, I'm afraid. It's mostly wealthier, well-endowed schools that are heralding these sweeping new initiatives to reduce loan burdens. The vast majority of colleges, in contrast, won't be able to afford such dramatic steps—even though they may serve populations with the greatest need for financial assistance.

The endowment wealth of some institutions, combined with steep tuition increases in recent years, drew enough attention to prompt a proposed amendment to this year’s reauthorization of the Higher Education Act, which would have required every college, regardless of size or wealth, to spend at least 5 percent of its endowment assets each year to reduce students’ tuition costs. Amid passionate protests from colleges, the amendment was withdrawn. But the suggestion seems to have touched a nerve—both with an American public frustrated by tuition increases that far outpace inflation and with institutions facing a lagging economy that could affect their cash flow.

In fact, some schools are already feeling the financial pinch when it comes to alumni giving. According to the Voluntary Support of Education report, written by the Council for Aid to Education and set to publish in March, financial contributions from alumni to U.S. institutions decreased in 2007. The dollar amount donated by alumni dropped 1.5 percent. And the percentage of alumni who gave to their alma maters fell to 11.7 percent from 11.9 percent in 2006. These figures extend the downward trend from 2005, when alumni participation was 12.4 percent.

When I first read about the VSE report on Insidehighered.com, I noticed that the message boards buzzed with a lively conversation among alums who pointed to their onerous student debt burdens to explain why such donations felt out of their reach. This connection between student debt and alumni giving isn’t new to me. Research sponsored by ASA has shown that alumni without college loans are more than twice as likely to donate as those with loans and that many feel poorly equipped to manage their repayment. The study found a direct correlation between these students’ impressions of their schools’ effectiveness in financial literacy training and their likelihood to contribute to their alma maters as alumni.

Clearly, it supports schools’ best interests, not just borrowers’, when institutions help students with their debt burden. Perhaps not every college can eliminate or greatly reduce students’ loan debt through grants. However, I believe that every school can take responsibility for teaching their students how to manage that debt. It’s time to think outside of the box on the topic of financial literacy for students. Perhaps we should start by fostering partnerships between the areas of alumni relations and financial aid—two offices that rarely collaborate on most campuses.

What do you think about the rash of loan-reduction announcements from the educational elite? How will this trend impact your school? And how are you doing your part to ease the burdens on student borrowers? We want to hear from you!

Posted by Susan Nathan on March 19, 2008 at 03:09 PM EST

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