Debt-Capping at Northwestern

[premed2]

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I am seriously thinking about going to Northwestern next year, but am worried about the high cost. I heard something about the debt capping program, but am not clear on how it works. Can anyone give a good summary of how it works? As of now, my EFC for FAFSA is zero, so all of my loans will be need based. So does that mean my borrowed debt will be capped around $140,000? Any help would be appreciated!! Thanks!

 

[Wrigleyville]

At the end of the 4th year, they total up everyone's debt and determine an average debt for the whole class. They then forgive the debt of anyone who has more than the debt cap up to the amount of the cap, which is based on how much scholarship/financial aid cash they have to distribute.

So let's say the debt cap is 130,000.

At the end of 4th year:

Student A owes 160,000.

Student B owes 180,000.

Student C owes 125,000.


Student A would have 30,000 of debt forgiven, down to the debt cap of 130,000.
Student B would have 50,000 of debt forgiven, down to the debt cap of 130,000.
Student C would have no debt forgiven, because they are already below the debt cap.

The system is confusing as all hell, and I wish they would just do financial aid up front like everyone else.

 

[rebeclette]

Yeah, it is really confusing. The part that got me that it said ELIGIBLE debt in something that I was reading about it, so I'm not really sure if many people owe money that isn't eligible for their repayment of somehting. I guess the financial aid office needs to be contacted.

Fingers crossed for a fat envelope this weekend! I was at work when they may have called.

 

[Auricae]

I posted on this a while back. I copied and pasted what I wrote before below:

So I spoke to a financial aid officer there, and here is the example he gave me of how debt cap works:

Assume that after you turn in your financial paperwork, it is assessed that you should contribute 10,000 per year. However, your budget for the year is 60,000. Therefore, you will have to take 50,000 in need-based loans. After 4 years, you will have accumulated 200,000 in need-based loans. Therefore, NU will knock off the extra 65,000 so that you only owe 135k (the class average).

But the above scenario assumes you were only expected to contribute 10,000. If you are more well off, you could be expected to contribute 20, 30 or even 40 thousand, which qualifies you for a much smaller need-based loan, although you can still get normal loans if you really can't pay the contribution they expect.

So lets assume you have to contribute 30,000 per year. Then, you would qualify for a need-based loan of around 30,000 each year x 4 years, which is 120,000. Therefore, you would not benefit from the debt-cap at all.

If they ask you to contribute 30,000 and you end up taking out loans for the entire amount (60,000 each year, or 30k in need-based loans and 30k in regular loans), you end up with 200k + in loans, but the debt cap doesn't help you since your need-based loans are still under 135k even if your total loans exceeds this amount.

In conclusion, they will only knock off need-based loans that exceed the class average, but not normal loans, and the amount of need-based loans you will be granted depends on how much they expect you to contribute out of your own pocket. So if you are expected to contribute a lot, you won't benefit from the debt-cap.

I guess my conclusion is: NU will expect most people to contribute a significant amount, qualifying them for little need-based loans and making it unlikely that they will be able to use the debt cap. Of course, some people will benefit, but I am guessing the majority will be at or below the debt cap.

 

[Bones2008]

Originally posted by Auricae
Of course, some people will benefit, but I am guessing the majority will be at or below the debt cap.

If the debt cap is the class mean, wouldn't that mean about half (assuming a normal distribution) would be at or above the cap?

 

[DrWuStar]

also keep in mind that northwestern has one of the strictest policies for classifying students as independant vs. dependant. you are only considered independent if you have earned at least $2000 for at least 30 months. otherwise, they are going to count your parents' income and expect them to contribute, so your need-based loans will be lower. to me, it seems the debt cap is only going to benefit students who meet the criteria for independant and students whose parents make such a small amount of money that they can not be expected to contribute.

 

[Auricae]

For those confused by the debt-cap system, let me break it down as simply as I can.

Basically, if you are a really "needy" student, you are guaranteed to not owe more in loans than the class average. You could owe less due to grants, but the most you will owe in loans will never exceed the class average.

If you're not a really a needy student, you're crapouttaluck. In this case, expect to pay (or owe) the full tuition minus whatever grants they offer you.