HIGHER EDUCATION BUBBLE UPDATE: “No Loans” Policies Falling By The Wayside.

“No loans” policies were the hit of 2007 and 2008, as many of the nation’s most elite (and wealthy) colleges and universities announced that borrowing would be eliminated from the aid packages of students with family incomes below certain levels.

But this particular movement in higher education took off just before the economic downturn hit in the fall of 2008, sharply reducing these institutions’ endowments and forcing many of them into budget-cutting mode. Now, a few years later, institutions are taking steps that reflect very different financial outlooks than those before the downturn. In May, Wesleyan University ended its policy of need-blind admissions, a policy seen by many as (when combined with meeting admitted applicants’ full need) the gold standard of private college admissions. This policy is supposed to mean that applicants can rest assured of their ability to attend if admitted — and that lack of resources shouldn’t stand in the way.

This week, Cornell University announced modifications of its “no loans” program for those eligible for aid. Instead of assuring a “no loans” package to everyone with family income of up to $75,000, Cornell will make that pledge only to those with family incomes of up to $60,000. (The changes will take effect with those enrolling in the fall of 2013, and will have no impact on those already enrolled or who will enroll this fall.) Those in the $60,000-$74,999 family income category will be assured of aid packages that don’t have more than $2,500 a year in loans. For those in the family income category of $75,000 to $119,000, Cornell is increasing the loan share of aid packages from $3,000 to $5,000 a year, while those with family incomes of $120,000 and higher will still be assured of loan maximums of $7,500 a year (unchanged from the policy to date).

The issue of pulling back from some of the pledges made in previous years — generally with much fanfare — is a sensitive one for universities, especially those like Cornell and Wesleyan that would be the envy financially of 99 percent of research universities and liberal arts colleges, respectively, but that happen to compete with the 1 percent with greater resources.

If it’s a loan, it’s not “financial aid.” It’s more like exploitation.

Plus, from the comments: “Colleges can’t afford their own tuition anymore.”