EVANSTON, Ill. --- Northwestern University will eliminate student loans and replace them with grants for undergraduate students with the greatest financial need, starting in fall 2008, the University announced today (Jan. 31).

New and returning undergraduate students at Northwestern with the greatest financial need will receive aid packages with no student loan requirement. That component of a student's financial aid will be replaced by University grants.

The change means that new students who qualify will be able to attend Northwestern without taking out any student loans, while returning students who qualify will receive aid packages without loans until they graduate. Northwestern determines a student's eligibility for financial aid by considering family income, assets, liabilities, family size, the number of students in college and extenuating circumstances.

In addition, all undergraduate financial aid recipients who take out subsidized Stafford or Perkins loans, the two major federal need-based loan programs, will have those loans capped at no more than $20,000 over four years.

Northwestern is intentionally tying eligibility for its no-loan program to financial need, rather than to a certain level of family income, as many other schools have done.

"We believe that linking our no-loan policy to financial need rather than family income is inherently more fair," said Michael Mills, associate provost for enrollment management. "There are instances where middle- or even upper-middle-income families have tremendous financial need because of circumstances such as caring for a grandparent, coping with extensive medical expenses, enrolling several children in college simultaneously or other situations. Our new no-loan pledge based on financial need will help these types of families who otherwise wouldn't qualify under an income-based program."

Mills estimated that 80 percent of the beneficiaries of the no-loan program will come from families making less than $55,000 annually. The remainder would come from families with greater incomes but with financial circumstances such as those described above.

The funding for the additional grants and scholarships will come from Northwestern's endowment earnings.

Northwestern currently provides more than $70 million in University-funded grants and scholarships for undergraduate students. Approximately 60 percent of Northwestern undergraduate students receive financial aid.

By capping subsidized Stafford and Perkins loan debt at $20,000, the University will ensure that Northwestern students who take out need-based loans will not be overly burdened by large debts after graduation. Northwestern already has one of the lowest average student loan debts among private research universities, averaging $18,000 for graduates in the Class of 2007 who had taken out loans.

"With the no-loan program and the loan cap, we'll be able to do an even better job of ensuring that our neediest students make important choices about majors and careers with less concern about student loan debt," Mills said.

The University expects that the no-loan and loan cap programs will benefit more than 1,400 of its 8,000 undergraduate students.

Frequently Asked Questions: http://ug-finaid.northwestern.edu/documents/NoLoanPrgm.pdf