The Trust: Students question loan transparency

Will McDuffie and Michelle Wan (Emeritus Editors)

National student debt has risen steadily as the cost of college also continues to rise. Forty-two million Americans collectively owe $1.2 trillion in federal student loans.

In 2007, Davidson College enacted the much- lauded Davidson Trust as a demonstration of its commitment to keeping education affordable for those admitted to the college. In eliminating loans from need-based financial aid packages, the Davidson Trust aims to allow students from all backgrounds the opportunity to afford the cost of attendance and the ability to pursue academic interests with fewer burdens about how those pursuits will be financed.

Since fall 2007 when the Trust was enacted, more students who previously may not have been able to afford Davidson, or for whom the cost may have been a significant burden, have been able to attend. In the 2007-2008 academic year, the first under the policy of the Trust, 784 students received need-based aid, with an aver- age need of $20,542. This academic year, 919 received need-based aid, and the average need was $41,941. The total cost of attendance this year was $60,119.

For many students, the college’s commitment to loan-free financial aid packages was a signifi- cant draw in their decisions to apply and attend. They note that without the Davidson Trust, fi- nancial constraints would not have allowed them to attend. “It’s way cheaper for me to be at David- son than a decent state school back home,” Reese Schaffner `16 said. “When you look at tuition costs that are like $60,000 a year, and then see that they’re giving you like $55,000, you can’t be much but grateful for that.”

Although the Trust allows Davidson to offer robust need-based awards that do not include loans, some students will still graduate with debt, joining the millions nationally who owe outstanding student loans.

Schaffner is one of many students on campus who have received financial aid awards and have also taken out loans to cover the expected family contribution portion of their costs of attendance. “I knew coming in that my family wasn’t in a position to contribute to the cost of college,” Schaffner said. “I knew that whatever the estimated family contribution was, I was going to be taking that on myself.”

Other students set to graduate with debt are also frustrated because they’re on the books for more than they ever thought they would be at a school with Davidson’s generous financial aid.

For these students, the problem lies with what they claim to hear – and not hear – from the college. They say that the alluring phrases, “no loan component” and “debt free financial aid package,” were more accessible to them as prospective students than their caveats. The “no-loan policy,” for example, refers specifically to the absence of loans in student aid packages, not to a guarantee that students won’t ever take out loans.

National media outlets have employed the impressive rhetoric when covering the Trust, with CNBC publishing an article in 2012 titled “Debt-Free College? Yes, It Exists,” and Bloomberg News running a piece the same year head- lined “The Debt-Free College Degree.”

Two students, Ben Corson ‘17 and Austin Crouse ‘17, hearing concerns from friends about the way the Trust is presented, have taken action, constructing an initiative they hope spotlights what they believe is a lack of transparency in Davidson’s aid rhetoric.

For months, the two, along with a small cohort of others also motivated by the topic, have explored the extent to which the rhetoric matches the stories they’ve heard from their friends.

The answer, they say, is hardly.

“We started trying to make sense of how the college markets itself compared to the anecdotal evidence that was coming in from some of our friends,” Corson explained, “and it wasn’t really adding up.” Students they spoke to were struggling to afford the portion of Davidson’s cost of attendance that the college expected them to pay. Some of these students turned to loans, taking on a burden they did not expect at the outset.

Davidson’s financial aid office follows a similar process to that of other colleges when calculating student need. The calculation of a student’s expected family contribution (EFC) determines a student’s demonstrated need and the amount of need-based award the student can receive. In addition to information provided by the student in the Free Application for Federal Student Aid (FAFSA), the office also requests information on the College Board’s CSS/Financial Aid PROFILE, a financial aid application provided by the organization that allows students to submit more detailed financial information than they did on the FAFSA.

From the information provided on these forms, including family income, number in household, number of siblings in college, family assets, and other figures, the financial aid office uses a method that follows standards set by the Department of Education to determine the amount that the family is expected to contribute toward the student’s fees. The difference between the cost of attendance and the EFC is the demonstrated financial need. “The Davidson Trust allows us to meet a student’s demonstrated need with a grant and a job. A loan is not part of meeting your demonstrated need,” said Chris Gruber, Vice President and Dean of Admission and Financial Aid.

Of over a thousand postsecondary institutions in the United States, Davidson is still one of only a few dozen that do not offer loans in financial aid awards. “Most other schools that are meeting one hundred percent of demonstrated need, they are including that loan piece as part of that. And there are many, many schools that don’t promise to meet one hundred percent of need. They might meet 75 percent and leave the other 25 percent for the family to find,” said Dave Kraus, Senior Associate Dean and Director of Admission.

Many of the loans included in other colleges’ financial packages are federal loans, available

through the Federal Student Aid program. This program includes three types of aid provided by the Department of Education: grants, loans, and part-time employment. When a student applies to a school for need-based financial aid, the school determines the student’s eligibility for each type of federal aid using financial information provided by the student on the FAFSA.

Through the Federal Direct Loan Program, students and their parents may borrow from the Department of Education. Schools that participate in the program determine the amount that students are able to borrow based on need and other financial assistance offered. Financial aid offices originate and disburse the federal loans.

Federal student aid also includes need-based grants and a work-study program that funds part-time employment for students who earn an hourly salary.

In addition to these federal aid sources, many institutions provide their own need-based grants awards, and some offer loans owed directly to the college.

When the Davidson Trust was enacted, the college broke away from this model by removing loans from the need-based aid packages it offered to students. Grants may come from the college directly, or as federal Pell Grants and FSEO Grants if the student is eligible. Part-time employment may be federal work-study awards or provided by the college for those who are eligible for need-based employment but do not meet the qualifications for federal work-study.

The calculated EFC remains a family’s responsibility to pay. Davidson acknowledges that there is often a difference between the college’s calculation and what a family might think its EFC should be, but also notes that its method is a fair one, an “equitable calculation, consistent for all students,” Gruber said.

The college considers how a family elects to pay the EFC the family’s individual choice. For families who take out loans, the college participates in the Federal Direct Loan Program and helps students apply for both Direct Subsidized and Unsubsidized loans, also called Stafford loans. Parents may also apply for non-need-based Direct PLUS loans.

According to data updated in March on the College Scorecard database maintained by the Department of Education, 21 percent of David- son students currently owe federal student loans. The median debt amount is $16,663.

Students at other schools that do not include loans in their aid packages are also borrowing to meet costs. Of the nineteen schools the college considers its peer institutions, only three others, Amherst, Bowdoin and Swarthmore Colleges, also do not include loans in their financial aid awards. At these schools, the percentage of students who have federal loans are 13, 20 and 26 percent, respectively.

Corson and Crouse remain concerned in particular about what they perceive is misleading rhetoric surrounding Davidson’s financial aid policy.

Jada Wiggleton-Little ‘17 possesses the kind of story that has inspired Corson and Crouse to craft their initiative. A first-generation college student, she remembers attending a college fair held in the cafeteria of her high school her senior year, when she and her mother met with a David- son representative. Neither she nor her mother, Wiggleton-Little recalls, were told anything about the possibility that students might end up taking out a loan.

“No, I would have remembered that,” Wiggleton-Little said. “I would have been a lot less angry the first time I walked onto Davidson’s campus and had to go to the financial aid office.”

She also insists she hardly ever came across information about loans when she toured the college. She visited Davidson four times as a high schooler and attended workshops put on by the financial aid office. Yet “nowhere [on those visits] was I told the possibility of having to take out loans.”

Even as late as the start of her freshman year, Wiggleton-Little recalls her and her mother being surprised when a financial aid staffer proposed the loan option to them.

By that point, however, Wiggleton-Little would presumably have had access to “Understanding Your Award Letter,” a brochure the financial aid office sends – along with award letters – to all accepted students who receive financial aid awards. The brochure reserves a section to outline the two loan options students have. Davidson’s website also contains a “Loans” page, which mentions the loans students may take out and includes a link to a “Loans FAQ” page.

Between the brochure and Davidson’s website, then, information on applying for Stafford and PLUS loans as a choice to meet the family contribution is accessible to both prospective and admitted students. “Our obligation is to tell them how we met their need. Incorporated within that, it says if you need any assistance, if you would

want to be taking out a loan, we can help them do that,” Gruber said. “It’s all there when these things go out.”

Despite the availability of the information, however, Wiggleton-Little is not alone in describing being caught off-guard by the reality of her financial circumstances after receiving her aid award letter.

A female senior, who asked to be anonymous, has taken out Stafford loans each year to help meet her family contribution. “I do think [the policy] could be phrased better,” she explained. “I think it does give an implication that students do not have to take out loans, and that is not the case. There are students who are having to take out loans. I don’t necessarily think the college would say they’re claiming that, but that’s the implication.”

Lauren Parham, a senior at Appalachian State University, transferred from Davidson two years ago because she did not receive need-based financial aid and could not afford the full cost of attendance. She also shared her concerns about Davidson’s presentation of its financial aid policy.

“I do wish that the Trust had not been presented as an unfailing solution to everyone’s financial concerns,” she said before adding, “It is a great thing and I’m really happy for the people who benefit from it.”

Corson and Crouse have met with various groups around campus, including a handful of Patterson Court Council organizations, the Honor Council, and the Black Student Coalition, and they say their message is being met with understanding, and often familiarity.

“We found that talking about debt at Davidson is kind of a taboo because of this idea that Davidson doesn’t give loans and people don’t have loans,” Crouse explained. “And so we really wanted to give people the space to talk about that and feel like they weren’t alone. A lot of people that we talked to felt like they were the only ones on debt or no one could understand them. Being able to tell people, ‘Hey, there are one in five of you around’ is really helpful [in being able to] talk about financial aid and trusting in general.”

Crouse and Corson have secured a referendum that will be sent via email to the student body tomorrow. The referendum will ask students whether the administration should conduct “a transparent review of our financial aid practices, metrics, and associated marketing,” Corson explained. “We want [the administration] to review the entire process.”