“Graduating with no loans meant I was able to just apply to jobs, really knowing that I could afford to move out and go where I needed to be for that,” Callahan said. “And now that I’m working, I’m able to save so much of my income that normally would be going towards student loans.”
Callahan, the daughter of a teacher and retired freelance writer, graduated from Colby College in May debt-free. This allowed her to move into a Beacon Hill apartment, a 15-minute walk to the startup company she works for, rather than commuting to her job from her parents’ home in Maine.
When Katie Callahan was choosing a college four years ago, she was surprised to learn a small, private college in her home state of Maine, among the most competitive in the country, would be less expensive for her to attend than the public schools she applied to as safety schools.
Colby and Bowdoin College are in a small but growing cohort of private colleges with robust endowment funds that no longer include student loans in financial aid packages.
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Schools that have adopted so-called no-loan programs in recent years — including Harvard University, the Massachusetts Institute of Technology, Brown University, Amherst College, Smith College, and Williams College — say they aim to send a clear message to prospective low- and middle-income students: If you have the academic chops to gain admission, you can afford to attend, something “that can be transformative for a young person,” said Claudia Marroquin, dean of admissions and student aid at Bowdoin.
No-loan programs are among the ways colleges are appealing to low- and middle-income families; many schools also offer no-tuition deals for families under certain income thresholds. MIT, for example, said Wednesday it has expanded its financial aid program so undergraduates with family income below $200,000 can expect to pay no tuition, instead paying a maximum of $23,970 for housing, dining, fees, books, and personal expenses. Families earning under $100,000 can expect to “pay nothing at all” for an MIT education.
Some college leaders and higher education watchers, however, fear generous aid programs are under threat from politicians on both sides of the aisle who want to tax large college endowments, leaving fewer dollars available for no-loan and free-tuition programs. Progressive critics of the higher education establishment say wealthy colleges with ample resources should contribute to a broader swath of the nation’s youth by helping to fund public higher education. Many conservatives, meanwhile, would like to punish universities they view as liberal indoctrination mills that have saddled too many students with unmanageable debt. President-elect Donald Trump and his allies have said they will use federal funding and taxation to “reclaim” the university from “radical leftists.”
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In 2017, as part of the federal Tax Cuts and Jobs Act, income from endowments of 33 schools with funds larger than $500,000 per student started being taxed at 1.4 percent. Since then, efforts to increase taxes on university endowments have proliferated, said Phillip Levine, Wellesley College economics professor.
That’s a concern for schools such as Amherst College that rely on endowment income to support a large portion of their operating budgets, Michael Elliott, Amherst’s president, told reporters at a September event in Washington, D.C.
“Endowment taxes would take away from our ability to support a socioeconomically diverse student body — period,” Elliott said. “That is where the money goes.”
Some higher education watchers said seeking socioeconomic diversity on college campuses is imperative after the Supreme Court banned the use of race-based affirmative action in admissions last year.
Ohio Senator and Vice President-elect JD Vance introduced a bill last December to increase the tax rate on income from large private university endowments from 1.4 percent to 35 percent. Senate Democrats blocked the legislation.
Colleges have “burdened an entire generation of Americans with over $1 trillion of student debt, student debt relief that many of my friends on the other side would like plumbers in Ohio to pay for, but I think if the universities cause the problem, Mr. President, they ought to pay for it,” Vance said on the Senate floor last December.
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It is not clear how Vance wants revenue from an increased tax to be used.
A spokesperson for Trump declined to comment on whether he supported Vance’s proposal. “No policy should be deemed official unless it comes directly from President Trump or the Trump campaign,” said Karoline Leavitt, the incoming White House press secretary.
In Massachusetts, a bill targeting private university endowments over $1 billion hangs in limbo, still under review by the revenue committee more than 20 months after it was filed. The legislation would subject colleges to an annual excise tax of 2.5 percent on endowment assets. It would cost Harvard University about $1.2 billion a year.
“The intention is to take a little bit of the wealth that is accumulating and redirect it to ultimately remove the cost of attendance at our public universities and invest in bringing down the cost of child care — things that will benefit the entire Massachusetts economy,” said state Representative Natalie Higgins, one of the bill’s co-sponsors.
Henry Morgan, executive director of the nonprofit advocacy group Public Higher Education Network of Massachusetts, and a student at Hampshire College, said revenue from the state endowment tax would raise enough money to make public higher education free for residents, helping a wider pool of students than the private colleges enroll.
Massachusetts has made progress making higher education more affordable in recent years, including launching free community college for all residents earlier this year, and expanding financial aid programs for students at four-year schools. Federal, state, and institutional financial aid now covers tuition at the University of Massachusetts campuses for families with adjusted gross household income of $75,000 or less, for example.
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Opponents of endowment taxes, however, say private colleges are advancing socioeconomic mobility by making high-quality education affordable through financial aid. Excluding loans from financial aid packages is an expensive endeavor for colleges, Levine said, which is why the nation’s wealthiest colleges, with vast resources per student, are likely to offer such programs, and tend to be the least expensive schools for low-income students.
“When you adopt a no-loan program, you’re essentially giving up revenue,” Levine said.
Because colleges rely heavily on endowment returns to fund no-loan programs, Levine said higher endowment taxes could push these wealthy colleges to cut or end programs that not only offer low-income students a prestigious degree, but also a future without the ball-and-chain of big college debt.
Smith College in Northampton eliminated loans from its financial aid packages in the fall of 2022, said Joanna May, vice president for enrollment. Before the policy change, about 37 percent of all Smith students took out loans. Last year, less than 12 percent of Smith students borrowed.
“Part of the goal was to really allow students to think about their post-graduation plans without having to focus as much on how much money they’re going to make right out of college to pay back loans,” May said. “[If] students wanted to do a lower paying job in nonprofit [work] or the arts, they could do that.”
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In 2008, when Bowdoin launched its no-loan policy, 51 percent of college graduates took out loans to fund their education. In 2023, that figure was 22 percent. About 53 percent of first-year students at Bowdoin receive financial aid; the average grant is $68,000 for the entering class. Bowdoin estimates the total cost of attending is about $89,000.
US colleges and universities spend more of their annual endowment withdrawals on financial aid than any other category, including academic programs, endowed faculty positions, and campus operations and facilities, according to the National Association of College and University Business Officers.
Colby College in Waterville, Maine, adopted a no-loan policy in 2008, and it has since increased financial aid for middle-income families. Colby now caps the total amount families pay for tuition, room, and board at various income levels, so families earning up to $200,000 can expect to pay no more than $20,000 a year, and families earning up to $150,000 will pay no more than $15,000 a year. Families earning less than $75,000 pay nothing to attend.
David Greene, Colby’s president, said the college spent about $28 million on financial aid when he arrived about a decade ago; today the budget exceeds $70 million.
“We have just made it an absolute priority,” Greene said. “We need to continue to keep expanding the opportunities that we have for these students, and we’ve got to figure out how to fund them.”
Hilary Burns can be reached at hilary.burns@globe.com. Follow her @Hilarysburns.
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