Some students are getting debt relief from an unlikely source — their school.
Washington College, a small liberal arts school in Maryland, will pay off what graduating seniors borrowed for their last semester at the school.
The program, called Dam the Debt, begins this year and is funded by private donations. It will cover the entire amount borrowed in federal subsidized loans for the semester, no matter the amount. This year, 119 grads will be eligible and the average award will be $2,630, the school said.
The program only covers a small portion of debt for most students — about 10% on average. Those graduating with loans this year borrowed an average of $25,794 over their four years at Washington College.
Graduating seniors qualify as long as they took out a federal loan for their last semester. But students who paid out-of-pocket won’t get anything back.
More than two-thirds of the student body borrow federal money to attend Washington College, according to the Department of Education.
“We want our students to be both academically and financially prepared when they graduate from college,” said college President Sheila Bair, also a former chair of the FDIC.
Since taking the helm last year, Bair has made it her mission to make the college more affordable and to highlight what she believes is driving tuition and student debt up across the nation, like cuts in state aid, easy student access to federally-backed loans, and poor financial management at some schools.
Bair is raising money for a new scholarship program that will offer a free ride to some low-income students each year.
She also froze tuition at $42,844 for next year, just below the average price at private colleges. That doesn’t include the cost of room and board, which is about $10,000 annually. But more than 90% of students at Washington College get scholarships or grants and don’t end up paying the full price.
So far, the Dam the Debt program has raised nearly $1 million from private donors over the next four years.
Bair is committed to continue raising money for the program. Among those who have donated so far are BB&T, TD Bank, Santander Bank, online lender Avant, robo-advisor Blooom, and school alumni.