From “No Debt” to “Low Debt”: Why We Changed Our Financial Model
Students engage in group presentations in course workshops.
For many institutions, the “no-debt” model has functioned as a compelling vision for higher education. The promise is straightforward: students graduate without loans, free from long-term financial obligation, and positioned for immediate independence.
At The Institute, this vision has shaped institutional practice through a combination of tuition strategy, scholarship structure, and work-based learning. However, both our own student feedback and broader higher education research suggest that a strict no-debt model, while principled, can introduce structural pressures that undermine other core aspects of student formation. As a college committed to making disciples, anything that undermines student formation ultimately undermines our mission.
This article compares the no-debt and low-debt models to explore which better supports the overall student experience.
The no-debt model led to offering classes in the early morning or evenings. With low-debt, we are able to downsize a student’s workload, bringing classes back to normal day time hours, creating healthier margin in student schedules.
The Strength of the No-Debt Model
The no-debt model is rooted in legitimate concerns. Over the past two decades, student loan debt in the United States has risen to over $1.7 trillion, raising questions about the long-term viability of traditional financing structures.[1]
In response, no-debt models aim to:
reduce financial risk for graduates
discourage over-borrowing
cultivate discipline through work-based contribution
For our college, we favored this approach because we wanted to see future ministers not held back from getting involved in mission work, church planting, Christian education, or ministry work related to large student loans.
Our no-debt Model worked in conjunction with our ProDev student work program. In our new low-debt approach, ProDev is limited to a maximum of 20 hours per week. By participating, students earn a $12,000 scholarship along with an hourly wage, keeping their education affordable.
Structural Limitations of a No-Debt Approach
The challenge is not the intention of the model, but the means required to sustain it. The means fall not only on the institution, but on the students themselves.
Work Intensity and Academic Tradeoffs
No-debt systems often rely on significant student work (internships, work study, etc.) to offset costs. While student employment can support academic success at moderate levels, research consistently demonstrates that excessive work hours introduce diminishing returns.
Research from the National Center for Education Statistics suggests that students with substantial work commitments while enrolled are more likely to experience lower academic performance and reduced persistence toward a degree. While moderate employment can complement the college experience, excessive work commitments often create academic tradeoffs that become increasingly difficult to sustain over time.[2]
This introduces a tension within no-debt models: the very mechanism designed to reduce financial burden can compromise academic engagement and long-term outcomes. For institutions that seek to develop students academically, spiritually, professionally, and relationally, this tradeoff deserves careful consideration.
Financial Pressure and Student Persistence
Financial stress remains one of the most significant predictors of student attrition. The Hope Center’s #RealCollege survey consistently finds that a substantial percentage of students experience financial insecurity, which directly impacts their ability to remain enrolled.[3]
Rigid financial structures—especially those that require consistent labor output without flexibility—can intensify this pressure. In such cases, students may not incur debt, but they may also struggle to persist to graduation.
Perceived Value and Student Choice
Students increasingly evaluate higher education through a cost-benefit framework. Research from Strada Education Foundation indicates that students prioritize clear connections between cost, experience, and career outcomes when making enrollment decisions.[4]
In practice, some students express a willingness to take on modest, controlled debt if it allows for a more balanced and sustainable college experience. This reflects a shift in how value is perceived—not simply as the absence of debt, but as the alignment between cost, experience, and outcome.
These findings do not suggest that debt is preferable to affordability. Rather, they suggest that financial policies should be evaluated by how well they support student persistence, formation, and long-term success. If a modest amount of carefully managed borrowing allows students to flourish academically and graduate with manageable debt, it may better serve the institution's educational mission than eliminating borrowing altogether.
Throughout the 25-26 academic year, Institute staff hosted a series of “Reshaping Discussions” to hear from students the successes and challenges of their college experience. The no-debt model was a repeated them, with students wanting more time to focus on their classes and social life.
The Case for a Low-Debt Model
A low-debt model reframes the goal. Rather than eliminating borrowing entirely, it seeks to limit debt to a level that is manageable, strategic, and supported by post-graduation outcomes.
At The Institute, this philosophy means limiting certified student loans to no more than $5,000 per academic year, preserving affordability while providing families with greater financial flexibility.
This approach aligns with guidance from the Consumer Financial Protection Bureau, which recommends that students avoid accumulating more total student debt than they expect to earn in their first year after graduation.[5]
Borrowing and Completion
Contrary to common assumptions, moderate borrowing is not inherently detrimental. Recent research published in the American Economic Review found that increased access to student loans improved degree completion and later-life earnings for financially constrained students, suggesting that carefully managed borrowing can support educational attainment rather than hinder it. [6]
Similarly, Brookings has argued that the long-term consequences of student debt depend less on borrowing itself than on students' ability to complete their degrees and realize the earnings associated with them.[7]
This distinction is critical. The primary issue is not the presence of debt, but its scale and its relationship to completion and employment.
Restoring Balance in the Student Experience
By allowing for measured borrowing, low-debt models reduce the need for excessive student work. This creates space for:
deeper academic engagement
participation in formative campus experiences
long-term sustainability across a multi-year degree
The result is a more balanced model of student formation—one that integrates financial responsibility without overwhelming other dimensions of development.
Aligning Cost with Outcomes
Low-debt models are most effective when paired with strong academic and professional pathways. When students graduate with both limited debt and meaningful work experience, the financial investment is supported by increased earning potential and clearer occupational direction.
This alignment is essential. Debt, when present, must be justified by outcomes.
For the first time, in Fall 2026, Institute students will have the capcity for private loans. To ensure reasonable borrowing, the borrowing limit will be set at $5000 per year.
A Strategic Shift
The movement from “no debt” to “low debt” is a refinement of the financial stewardship colleges – especially Christian colleges – are called to.
A low-debt model recognizes that:
Sustainability over four years matters more than short-term financial constraints
Student formation includes academic, professional, and relational dimensions
Flexibility can support completion without encouraging excess
For institutions committed to developing capable professionals, the question is not simply how to eliminate debt, but how to structure cost in a way that supports both completion and long-term readiness.
Conclusion
The no-debt model offers a compelling vision, but it requires conditions that are not always conducive to student success. A low-debt model, grounded in research and responsive to student experience, provides a more adaptable framework.
It maintains a commitment to affordability while recognizing that limited, strategic borrowing can support a more complete and sustainable educational experience.
When borrowing is limited and tied to strong educational outcomes, student debt can relieve short-term financial pressures without creating long-term financial hardship. For many students, that balance may represent the most sustainable path to completing a degree while preserving future vocational freedom.
For Christian colleges, financial stewardship is not simply an economic concern but a discipleship concern. The goal is neither debt for its own sake nor debt avoidance at all costs, but wise stewardship that equips graduates to faithfully pursue the calling God has placed before them.
References
1. Federal Reserve Bank of New York. Quarterly Report on Household Debt and Credit.https://www.newyorkfed.org/microeconomics/hhdc
2. National Center for Education Statistics. Undergraduates Who Work. U.S. Department of Education, 1998.https://nces.ed.gov/pubs98/98084.pdf
3. The Hope Center for Student Basic Needs. #RealCollege Survey.https://hope4college.com/research
4. Strada Education Foundation. State of the Consumer.https://stradaeducation.org/reports/state-of-the-consumer
5. Consumer Financial Protection Bureau. How Much Should I Borrow in Student Loans? Last reviewed May 14, 2024.https://www.consumerfinance.gov/ask-cfpb/how-much-should-i-borrow-in-student-loans-en-579/
6. Black, Sandra E., Jeffrey T. Denning, Lisa J. Dettling, Sarena Goodman, and Lesley J. Turner. “Taking It to the Limit: Effects of Increased Student Loan Availability on Attainment, Earnings, and Financial Well-Being.” American Economic Review 113, no. 12 (2023): 3357–3400. https://doi.org/10.1257/aer.20210926
7. Kelchen, Robert. “The Relationship Between Student Debt and Earnings.” Brookings Institution, September 23, 2016.https://www.brookings.edu/articles/the-relationship-between-student-debt-and-earnings/
