USA Today reports on a popular new trend among pricey private colleges looking to compete with more affordable public colleges: promises to help students repay their loans.
Through alumni donations or through agreements with private companies, colleges are offering prospective students help with their loans as a recruiting tool.
“When we have an excellent student we know will be successful here (but) who has that anxiety about student loans, this is one more tool for us,” Jeff Abernathy, president of Alma College, told USA Today. “We are making myriad attempts to help our students find their way to a private liberal arts education, (particularly) students who might feel like they’ve got to go to a lower-cost public institution.”
A few reasons not to get overly excited about these programs:
- They may just be duplicating the Income-Based Repayment plan that everyone who has federal loans can use. Many of these colleges offering help with student loans are really just, in effect, offering bridge loans. If your starting salary is low, you pay less on your loans. If it increases later, you pay more later to make up for their generosity.
- The promise of repayment help is often only as good as the school’s ability to provide it. Most of these colleges that are offering repayment help are, by their own admission, doing it in order to fill their classes with warm bodies who can provide the school with cash flow. With some speculating that hundreds of private colleges may close over the next decade or so, colleges desperate enough to offer loan repayment help might not be in such great financial shape themselves.
- The help may only kick in if your income is really low. Some of these programs only cover payments if your income is under $20,000 per year. And if your income is decent but not low enough for help, the student loan payments may still prevent you from saving for retirement, buying a home, or starting a family.
The bottom line is this: These programs are great if you’re already in debt and they offer you help; they are not a reason to feel better about borrowing tens of thousands of dollars to attend an obscure private college. Pick a college that you can afford and never, ever, rely on the kindness of strangers to eventually help pay off the loans that same stranger is advising you to take out.