Turning The Tide: Colleges That Have Actually Reduced Student Debt
Key Insights:
- All 18 of the top colleges that reduced debt by $5,000 or more over the 10-year period analyzed are private institutions, with nine being for-profit.
- The top five institutions reduced student debt between 35% and 74%, resulting in cost reductions between $9,000 and $25,000.
- While debt reduction strategies are unique to each school, common patterns include increased access to scholarships and grants, incentives and discounts for specific student groups, and prioritizing student affordability over other initiatives.
For millions of graduates, the American Dream feels shackled by student debt. Federal student loan borrowers owe roughly $37,000 on average and those with private loans owe nearly $55,000. Because of this financial burden, borrowers are delaying milestones like homeownership and having children, and their mental health is suffering from the weight of it all. Out of the grappling with student debt, half still owe $20,000 two decades after starting their education.
While student debt (and inflation) continue to climb, a select group of colleges have resisted the trend. These institutions have reduced the median debt their students take on, but do they offer a blueprint for a brighter future? In this article, we spotlight the colleges with the biggest reductions in student debt and explore the strategies and characteristics that have enabled them to do so.
The Basics of Student Debt
Before delving into these success stories, it's helpful to understand the landscape of student debt. Student loans, offered by both federal and private lenders, serve as a financial lifeline for many aspiring scholars. Federal loans are backed by the U.S. government and typically come with lower interest rates and more flexible repayment options. Private loans are offered by banks and credit unions and often have higher interest rates and stricter terms.
There are three types of federal student loans:
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Subsidized federal loans are awarded to students based on financial need. The government pays the interest on the loan while the student is in school at least half-time and during deferment periods.
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Unsubsidized federal loans are not based on financial need. Students are responsible for paying all the interest on the loan from the time it is disbursed.
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PLUS loans are federal loans for parents of undergraduate students and graduate or professional students to help cover the cost of attendance.
The accumulation of student loans, especially over the course of a four-year degree, can result in a hefty financial load that lasts decades. For many borrowers, student loan payments become a significant monthly expense, rivaling housing costs and car payments.
The Student Debt Crisis
Student debt isn't just a numbers game 鈥� it's a lived reality for millions. The $1.75 trillion owed in student loans impacts the financial standing, life plans, and health of individuals and their families. A survey by the found that 51% of student loan holders say their debt has hindered their ability to purchase a home. This financial strain also takes a toll on mental health, with reporting that nearly 80% of respondents experience anxiety because of their student loan debt.
We also see the student debt crisis contribute to widening wealth disparities. People of color bear a disproportionate share of the debt burden, with 86% of Black students taking out loans, versus 68% of their white counterparts. According to the , Black students are also three times more likely than white students to default on their student loans because they have fewer socioeconomic resources to fall back on.
Institutions Slashing Student Loan Debt
Despite the growing student debt crisis, some colleges and universities have kept costs from rising. To identify colleges that have successfully reduced student debt, we analyzed data from the College Scorecard for the 10-year period spanning from 2010-11 to 2020-21. We focused on 18 institutions that have lowered their median student debt by $5,000 or more during this timeframe.
Colleges with $5,000+ Student Debt Reduction
Out of the 18 schools listed, all are small to medium-sized private institutions, and nine of them are for-profit. The prominent presence of for-profit institutions in this list raises a question about whether affordability comes at the expense of educational quality.
Research by the suggests this may be the case. They found that for every tuition dollar collected, the average for-profit college spends just 29 cents on student instruction, compared with 84 cents at private nonprofit colleges and $1.42 at public universities. For-profit college students are also more likely to struggle with repaying their loans. While for-profit colleges enroll just 8% of all students, they of student loan defaults.
2011 and 2021 Debt Comparison
Top 5 Schools Leading the Charge in Debt Reduction
Private institutions are leading the charge in student debt reduction, likely because of the greater flexibility they have in rate adjustment and resource allocation. Over the 10-year period analyzed, the top five institutions reduced student debt between 35% and 74%, resulting in cost reductions between $9,000 and $25,000.
1. The University of the Potomac
The University of the Potomac is a private, for-profit university in Washington, D.C. In a move to make education more affordable, the reduced domestic tuition costs in 2017 by 55% for associate and bachelor鈥檚 degrees and by 37% for master鈥檚 degrees. They also began offering no-interest payment plans to domestic students and locked in tuition rates for the duration of a student's program. These measures have reduced student debt by more than $25,000 from 2010 to 2020.
Additional financial benefits offered by the university include a 20% discount for families with multiple students enrolled. With 88% of its undergraduate population , students at University of the Potomac may also have more financial wherewithal to contribute to their education.
2. Heritage University
Heritage University is a private, nonprofit university in Toppenish, Washington. Over 95% of Heritage students , averaging $14,011 per student. Over the 10-year period analyzed, Heritage reduced student debt by $11,000, or 43%.
University administrators at Heritage emphasize making education accessible, saying that students who are Pell-eligible and meet certain criteria will be able to attend Heritage with "." The school also offers various scholarship programs, including the Yakama Nation Full Circle Scholarship and the Dreamers Scholarship, which support students from diverse backgrounds and financial situations.
3. South College
South College is a private, for-profit college in Knoxville, Tennessee. With 60% of students , South College has been able to reduce their overhead costs and keep tuition rates low. The institution received over $6 million in in 2021, which it used to provide emergency financial aid grants to over 7,800 students. This likely contributed to the school's ability to reduce debt by nearly $10,000 over the 10-year period 鈥� a 35% decrease. South College also offers various institutional grants targeting first responders, military personnel, and pharmacy students.
4. Carlos Albizu University - Miami
Carlos Albizu University - Miami is a private, nonprofit university in Miami, Florida. At Albizu, 86% of students are , meaning they receive need-based aid that doesn't require repayment. This could be a contributing factor to how the university managed to reduce student debt by 63% over the 10-year period analyzed.
Albizu also accepts funds accrued through the Florida Prepaid College Program, which allows eligible students to use funds they have accrued in their accounts to offset the cost of tuition. In addition to federal scholarships and grants, the university offers 20% tuition discounts for specific groups, such as teachers, military personnel, and Miami Dade College graduates.
5. Visible Music College
Visible Music College, is a private, nonprofit college in Memphis, Tennessee. The college reduced student debt by over $9,000 鈥� a 50% decrease 鈥� over the 10-year period studied. While the exact cause of this reduction is unclear, the school focuses on affordability through various scholarship opportunities, like the which offers tuition waivers of up to $3,000 in exchange for campus service.
Other scholarship programs are available for military veterans, those involved in the community, and those who have received ministry training at partner schools. Recent to pay off the mortgage of the school's downtown building also suggest a strategy to keep overall costs in check for students.
Note: The data gathered only includes the median debt for students who have completed their degrees. Graduation rates at the top five institutions range from 39% to 63% based on .
The Positive Impact of Reduced Student Debt
Reducing student debt benefits graduates and society. For individuals, a lower debt burden translates to reduced financial stress and more career flexibility. This freedom can improve mental health and give graduates confidence in their ability to achieve life milestones like homeownership, entrepreneurship, or starting a family. From an economic perspective, lower student debt translates to increased consumer spending power. With more disposable income, graduates can contribute to local economies and stimulate growth.
The success of these institutions in reducing student debt may also hold policy implications. By studying their strategies, lawmakers can glean valuable insights into potential reforms at both state and federal levels. For example, lawmakers could help institutions ease student debt by advocating for no-interest payment plans, similar to those at the University of the Potomac; increasing grant and scholarship aid for underrepresented students, as Heritage University has done; or expanding the amount of Pell Grant recipients, like those attending Albizu University.
Counter Arguments and Considerations
The success of these colleges in reducing student debt is commendable, but there are potential counterarguments and considerations worth mentioning:
Accessibility: Critics might argue that these institutions, despite lower debt figures, may not be truly accessible to all students. Factors like selective admissions standards or high upfront costs (even with scholarships) could still limit access for students from disadvantaged backgrounds.
Scalability: The question remains whether these models can be effectively scaled to larger and/or public institutions. Public universities often have different financial structures and serve more diverse student populations. Strategies that work for smaller, specialized colleges might not translate easily to larger institutions with broader academic offerings.
Trade-offs: A necessary consideration is the potential for trade-offs made to achieve lower student debt. Did these institutions reduce costs by cutting back on essential resources? Did they limit academic program options, reduce faculty support, or diminish student services? Investigating these possibilities is key to understanding the long-term impact on educational quality.
The Path Forward
Recent data from the offers hope for a more affordable future 鈥� at least for some. Between 2018-19 and 2023-24, average in-district tuition and fees at public two-year colleges fell by 15% or more in ten states. Federal, state, and institutional grant aid has also increased by a whopping 365% since 1992. These trends indicate that change is possible, but much work remains to be done.
The path forward will require acknowledgement of the complexity of this issue. While the success stories of these institutions offer valuable insights, a one-size-fits-all approach won't work for reducing student debt. Each school will likely need tailored solutions that achieve lower costs for students without compromising educational excellence. Continued innovation and collaboration will be crucial to achieving this equilibrium.
Methodology
OnlineU used data from to compare median graduate debt across U.S.-based colleges. We analyzed reported graduate debt data for the 2010-2011 and 2020-2021 academic years. For the purposes of this report, we only looked at schools that have reduced debt by $5,000 or more.