When Students Pay Less, Everyone Wins
“At the end of the day, giving students access to financial aid that doesn’t weigh them down with debt isn’t just good for them, it’s good for schools too.”
Financial Pressures on Students
With rising financial pressures on both students and institutions, concerns about the future of U.S. higher education loom larger than ever. As tuition continues to rise and the student debt amount balloons, the consequences are clear: students are defaulting on loans, leaving college without a degree, or choosing to forgo college altogether.
Shifting the conversation, however, we can see how reducing financial stress leads to success for both students and the schools that serve them. Although existing financial aid strategies play a critical role in student financing, there is still room for existing innovations like income-based repayment programs and other aid-expanding initiatives to tackle the student debt crisis
Higher Enrollment
Enrollment is one of the clearest indicators of institutional success. Given that cost is a leading factor for students choosing to or choosing not to attend college, it can be reasoned that lowering upfront costs leads to higher enrollment. Indeed, very conservative estimates suggest that a 10% drop in cost results in a 1% increase in enrollment. Other studies report that reducing tuition by $1,000 can increase enrollment by 3–4%.
These growth figures, however, understate the impact that bolstering aid programs can have for certain institutions. Colleges looking to fill seats or expand access will see an even greater return on investment. Furthermore students from lower-income backgrounds who may be highly price-sensitive respond much more strongly to tuition discounting and aid efforts, with studies showing a 7-10% increase in enrollment for every 10% drop in cost (Reed College Elasticity Case).
“Giving students access to financial aid that doesn’t weigh them down with debt isn’t just good for them, it’s good for schools too”
Higher Yield
Yield, or the percentage of admitted students who enroll after being admitted, is another vital metric for institutions. A strong yield not only signals prestige and desirability, but also reduces class size fluctuations and budgeting risks. Much like enrollment, affordability plays a major role for students deciding to matriculate.
For loan-averse students, programs with lower upfront costs and safer, income-based repayment structures are far more appealing than ones with higher out-of-pocket costs. Income-based models offer more predictability and reduce the stress of debt, making students feel more confident in their college decisions.
Across 54 institutions that eliminated loans from their financial aid packages, yield was found to have grown by 2–4%. The impact was even greater for low-income students, with a 3–6% boost in matriculation rates at no-loan schools.
While these examples focus on grant aid and no-loan policies, income-based repayment programs can produce similar results by reducing financial risk. Scholar Basis conducted a population-level survey of over a thousand respondents with our partners at Qualtrics, and found that 55.6% of respondents said that they would prefer a generic income-based loan over a smaller grant, with 51.3% specifically favoring our Basis Zero model over equivalent grant aid.
Graduation
Graduation rates reflect both student success and institutional effectiveness. One case study at the University of Utah evaluated an Income Share Agreement (ISA) program that employed the income-based repayment model. Among participants, 90% graduated, compared to the university’s overall bachelor’s completion rate of 67–70%.
More broadly, research shows that each additional $1,000 in grant aid improves student persistence, defined as the percent of students that returned for their second year, by 3–5% and increases degree completion by about 2.5%.
Alumni Participation
Reducing student debt can also strengthen long-term alumni relationships. Studies show that graduates with large loan burdens are less likely to donate to their alma mater. By lowering financial pressure, it not only benefits students during their time on campus, schools also build alumni loyalty and engagement after graduation.
A compelling example in progress is Hope College’s “Hope Forward” program. Students attend tuition-free in exchange for a voluntary commitment to contribute a portion of their future income. While it’s still early to measure alumni giving outcomes, the program reflects a belief that safe, values-aligned repayment systems can inspire long-term generosity.
Conclusion
At the end of the day, giving students access to financial aid that doesn’t weigh them down with debt isn’t just good for them, it’s good for schools too. Flexible, low-risk financial aid creates better outcomes across the board. It drives enrollment, increases yield, improves graduation rates, and fosters stronger alumni engagement.
The real question is how schools can offer this kind of support sustainably without sacrificing existing budget pieces or institutional revenue.
That’s why we created Basis Zero: a 0% APR income-based repayment program that delivers the upside of expanded aid without increasing budget strain. In fact, schools using Basis Zero can maintain or even grow their long-term revenue.
If your institution is exploring smarter ways to support students, we’d love to talk. Learn more here.
