To ease the financial burden on students and their families, a small percentage of U.S. colleges have “no-loan” policies, eliminating federal loans from financial aid packages in lieu of scholarships, grants and work-study.
The idea is that students will graduate without owing money. But the details on eligibility vary by college, so it’s important that prospective students look at the fine print.
“To be sure you’d actually have no loans at a no-loans college or university, going in you want to know as much as possible about the school and how the school determines aid,” says Kate Wood, a lending expert at NerdWallet, a personal finance company.
Cost is a leading factor in the college decision-making process for most families, according to Sallie Mae/Ipsos’ “How America Pays for College” annual report.
Tuition for both in-state and out-of-state students at U.S. News-ranked public schools increased about 3.3% and about 3.7%, respectively, between 2024-2025 and 2025-2026, per U.S. News data. The average price at all ranked private colleges rose by about 3.3%.
[Read: When Should High School Students Start Their Scholarship Search?]
When inflation is factored in, tuition and fees at private ranked colleges increased 0.6%. At public ranked schools, they increased about 0.5% for in-state students and about 0.9% for out-of-staters, according to U.S. News data.
Average total student loan debt hovers near $30,000, according to data provided by nearly 1,000 colleges to U.S. News.
“No-loan policies give students who demonstrate academic merit but lack the means to attend these schools the chance to pursue their dreams without accumulating significant debt,” Wood wrote in an email. “This can allow students to feel less pressure to try to finish school early, to go after a high-earning major that doesn’t necessarily interest them, or to hold down a non-work study job while enrolled.”
Here’s what families should know about no-loan policies.
What Does No Loans Mean?
Some schools offer a no-loans financial aid package to all applicants regardless of their financial need and require no minimum contribution from the student. Others make their no-loan policy available only to certain demographics or those with certain qualifications. Duke University in North Carolina, for instance, provides full-tuition grants and financial assistance to cover housing, meals and other expenses for in-state and South Carolina-based students with annual family incomes of $65,000 or less.
“A no-loan policy means that qualifying students will have 100% of their financial need met by the college or university, in the form of grants, scholarships or work-study — often a combination of the three,” Wood says. “The idea is that the student shouldn’t have to borrow money to go to college. Instead, they’re receiving forms of aid that don’t require repayment.”
According to data submitted to U.S. News by about 1,086 ranked schools in an annual survey, 17 schools reported a no-loan financial aid policy without a minimum student contribution. Seven of those schools reported meeting full financial need with a no-loan policy for each enrolled student eligible for federal loans.
The amount of need-based aid a school offers is usually determined by the information a family provides on the Free Application for Federal Student Aid, known as the FAFSA, and sometimes the College Board’s CSS Profile, a separate financial aid application that more than 300 colleges, universities and scholarship organizations require.
“We’ve met families where they’ve been told, ‘Don’t even waste your time filling out the FAFSA or CSS Profile,” says Jocelyn Pearson, founder of The Scholarship System. “‘You’re not going to get any money.’ Those assumptions can cost families a lot of money. The only way to even begin tapping into this money, whether at no-loan schools or not, is with FAFSA. Families should not just rule themselves out from the beginning.”
[Read: 5 Myths About Parent Information on the FAFSA.]
The CSS Profile may be requested instead of or in addition to the FAFSA.
“Because the CSS is only used to determine institutional aid, colleges and universities use their own formulas to calculate families’ expected contributions,” Wood says. “Some items may be weighted more or less heavily, or be partially excluded to shield some of the families’ assets or income.”
The FAFSA, on the other hand, determines eligibility for federal aid, but many states and colleges also use the form to calculate their own aid.
If a student qualifies for a no-loan policy at a college, it’s important to understand the requirements to maintain the financial aid each year, which is often submitting the FAFSA, Pearson says.
“We don’t want to lose access to these incredible agreements by missing requirements or by not doing the FAFSA each year,” she says. “So just knowing that it’s not ‘set it and forget it’ once we head to college. We’re looking at our financial aid package, agreeing to it, accepting it and filling out FAFSA every single year our student is in college.”
No-Loan Schools Aren’t Free
Just because a college has a no-loan policy doesn’t necessarily mean the cost of attendance is zero dollars. Most no-loan colleges aim to cover each family’s demonstrated financial need — the difference between the cost of attendance and the student aid index, which is calculated based on information provided on the FAFSA.
Even at a no-loans institution, some families and students may still need to borrow money to cover college costs, experts say.
“Just because the math works on paper doesn’t necessarily mean footing your part of the bill will be easy,” Wood says. “If something unexpected occurs that affects a family’s ability to pay, they may end up needing to borrow.”
At the no-loan policy colleges with income cutoffs, for instance, there may be students “who have financial need, but their families’ incomes fall above the no-loans threshold,” Wood says. “While the school may offer them some amount of grant, scholarship or work-study aid, they may need to take out loans to cover some of their costs.”
[Read: FAFSA Deadlines to Know]
Before borrowing, students and parents should understand the differences between private and federal student loans.
“Federal student loans give all applicants the same interest rate and don’t consider ability to repay,” Wood says. “With private student loans, your credit score and finances will determine the interest rate you’ll be offered and the terms of the loan. That can force parents to either take out the loan themselves or cosign with the student, because the student may be unable to qualify on their own or might be offered lackluster terms.”
Ultimately, families should take advantage of all opportunities for “free” money to cover college costs, like scholarships, experts say.
“Choosing a school that’s no loans, that’s a huge chunk of debt-free money,” Pearson says. “But also tapping into scholarships, tapping into state scholarships, tapping into local scholarships, any kind of sources of debt-free money, that’s how you can really stack up different strategies to get to a debt-free degree. Because it’s very rare these days with the price tags of colleges that one strategy will get you to that free ride. It’s really a combination of decisions.”
For complete financial aid data, full rankings and much more, access the U.S. News College Compass.
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‘No-Loan’ Colleges: What to Know originally appeared on usnews.com
Update 11/25/25: This story was published at an earlier date and has been updated with new information.
