In the coming days/weeks, expect the following:

1) Other colleges will follow Williams’ lead and add back loans for financial aid. Look for Amherst, Bowdoin, Dartmouth and Haverford in the first wave.

2) No meaningful criticism of this move from the constellation of “aid experts.” Why? First, the people making these decisions and the people commenting on them travel in the same circles. Why criticize your friends when you can praise them instead? Indeed, in many cases, they are the same people (Morty, Cappy Hill, Mike McPherson)!

3) Unjustified claims that instituting loans might have positive effects by causing students to take their Williams education more seriously. Poppycock! Recall Wick Sloane’s ’76 story from three years ago:

True story, from when Princeton eliminated loans. I called a Williams trustee I’d known for 25 years. Why did Princeton beat Williams to this? Williams can afford it.

“Oh, we talked about this,” said Trustee. “We think it’s wrong to give something away that’s worth $50,000 a year (cost, not price, of Williams back then) without any obligation, without ’skin in the game.’”

I sought clarification. I’m paraphrasing, but the answer was that it’s wrong to give anyone a Williams education for nothing. Students need to feel the investment, hence ’skin in the game.’ Trustee agree that whether Williams could eliminate loans was not a financial problem, given the endowment. The issue the board debated was whether “giving” a Williams education was the right move from a moral, not a financial, perspective. Several others at this trustee discussion, verified the use of the term ’skin in the game’ and the substance of the decision not to follow Princeton.

“Wait a minute, Trustee,” I said. “Your entire education, Williams and all, was a gift outright from your parents, as was mine. No one required us to have ’skin in the game.’ You mean that wealthy students don’t need skin in the game but poor students do?”

Thus was a friendship incinerated. Trustee had no answer.

Because there is no good answer. If you believe that X is a good idea for non-rich students, you ought to believe that it is a good idea for rich students. If taking out loans is good for Sue, coming from a family of school teachers, then it is good from Sarah, coming from a family of investment bankers. Do the rich Trustees of Williams make their children take out loans? Hah!

It will be especially annoying if “aid experts” suggest that this will have any good effects. There is, obviously, no scholarly evidence that increasing a student’s loan burden will cause him to take his education more seriously. If anything, the main effects would be problematic.

n the early 2000s, a highly selective university introduced a “no-loans” policy under which the loan component of financial aid awards was replaced with grants. We use this natural experiment to identify the causal effect of student debt on employment outcomes. In the standard life-cycle model, young people make optimal educational investment decisions if they are able to finance these investments by borrowing against future earnings; the presence of debt has only income effects on future decisions. We find that debt causes graduates to choose substantially higher-salary jobs and reduces the probability that students choose low-paid “public interest” jobs. We also find some evidence that debt affects students’ academic decisions during college.

Making students take on debt causes them to make choices that are different, and generally less desirable, then the choices that would have otherwise made. By reinstituting loans, the Williams Administration has demonstrated its priorities.

Perhaps Adam Falk will revisit this decision once he takes office in April . . .

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