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More need-based financial aid is available for the affluent than you might expect.
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By Ron Lieber
College is so expensive that even the affluent can be considered needy.
Oct. 1 is opening day for financial aid season, but the Free Application for Federal Student Aid — the dreaded FAFSA that families were able to start filing on Thursday — is by no means the last aid form that many of them will fill out. If they want a discount on their favored schools’ list prices, which approach $80,000 annually at some private colleges, those forms will help financial aid administrators determine just how needy any given family is.
All that data entry can pay off, because lots of people can qualify for financial aid that is based solely on need. In fact, over a four-year span, families with annual household income of $200,000 can get a third or more of the cost knocked off an education with a $300,000 list price.
But that doesn’t satisfy everyone. Even if you have to pay a mere $40,000 per year — about what a $200,000-earning family could owe at Northwestern, Rice and Vanderbilt, according to the net price calculators on their financial aid websites — that can be a tough check to write. At the same time, outside observers often wonder why a $200,000 family is being subsidized instead of one making $20,000.
A fresh set of families encounters the undergraduate financial aid system for the first time each year, and only a small minority end up understanding exactly what is happening to them. Much of the confusion rests with the fact that there are different kinds of families, different kinds of aid and different kinds of schools.
Those $200,000 families are in the minority of people who are trying to afford college for their kids: There are far more people with much less money hoping that schools will give them scholarship money beyond the maximum $6,345 that the federal Pell Grant makes available to most lower-income families.
The families with less money often end up with less help over all by at least one measure, according to Mark Kantrowitz, publisher and vice president of research at Savingforcollege.com. He has crunched federal data to determine what percentage of their incomes go to the net price they pay to colleges, and his conclusion is that the percentage is higher for lower-income families than for people who earn more.
Then there are the two main types of grant aid — the kind you don’t have to pay back — that come from the schools themselves. Last week, I wrote about the first kind, merit aid discounts, which can be higher if your grades and test scores are better. Merit aid also entices wealthier families to pay, say, $45,000 instead of $65,000 and makes them feel good about the pat on the back that comes from having “earned” a $20,000 “scholarship.”
The second kind, need-based aid, is the subject of this column — and what would be available to a $200,000 family at Northwestern, Rice and Vanderbilt. (Rice and Vanderbilt do offer some merit aid, too, while Northwestern offers “talent” scholarships to musicians.)
Undergraduate institutions distribute need-based aid in many different ways. A few admit applicants no matter how much financial help they need and agree to meet every dollar of their need without asking families to borrow a cent. Others have the same admissions rules but do ask families to borrow.
Still more admit everyone who needs help but may not give him or her enough grant money to be affordable. And then there are those that reject at least some qualified students because of their financial need. (In Jeff Selingo’s new book, “Who Gets In and Why,” he explains what happens at Lafayette College when it struggles through that particular situation.)
Students whose parents earn $200,000 and who get into Northwestern, Rice and Vanderbilt are theoretically among the lucky ones. Those schools are resource rich and pretty generous, though they start with list prices ranging from just over $69,000 to just over $79,000.
I ran the numbers for a theoretical $200,000 family from Ohio. I gave it $200,000 in home equity, $50,000 in a 529 college savings plan and no other children in college, and used the schools’ net price calculators. They produce nonbinding estimates, but they’re usually pretty accurate.
The schools would ask this family to pay between $39,000 and $45,000 for one year. That means students from those $200,000 families can save about $25,000 per year or more off the total retail cost of attendance.
Again, these are estimates, and the numbers might change when any such family formally applies for aid, especially for those that have their own businesses, which can offer parents various ways to alter compensation.
Many colleges treat home equity as an available asset, and they have different ways of doing so. Northwestern’s net price calculator presents a worst-case outcome for a family when it comes to home equity, said Phil Asbury, the university’s director of financial aid. Once humans review an application, the result can only become more generous.
Still, even $40,000 is a lot to fork over out of $200,000. The formulas in play generally assume that higher-income families can devote a large fraction of each extra dollar that they earn, beyond what they need to cover basic necessities, to the annual college bill.
But shouldn’t a $200,000 family have been saving all along? I put the question to Yvonne Romero Da Silva, who brings a Massachusetts Institute of Technology math degree and years at the College Board to her role as vice president of enrollment at Rice. (The College Board developed the aid-determination formula behind the CSS Profile, the other major aid form that many private colleges and universities use.)
Ms. Romero Da Silva could not say for sure whether the people who invented the College Board aid formula were assuming that more-affluent families would or could have been setting money aside. But the formula does give people in jobs like hers flexibility to define fairness as best they can and in their own way.
“We are not looking to pull every asset that families have at their discretion,” she said. “But there is a sense that some assets a family has could be put toward paying for a student’s education.”
If you’re a renter, for instance, would you want schools to ignore some other family’s large pile of home equity in doing the need-based financial aid math? Many private colleges and universities do examine it.
As to the question of whether the least needy are getting more than their fair share of aid, it is indeed tempting to send in every small violin from the Rice University undergraduate orchestra for its $200,000 families that have to pay $40,000. The school could devote all of its aid budget to lower-income families instead. So why doesn’t it?
Here, Ms. Romero Da Silva was politic, noting that Rice accepts every person it deems qualified regardless of financial need and discounts the bill accordingly. Not every college can afford that. Rice broadcasts its attempts at equal-opportunity generosity in plain English and round numbers on its website.
“We are not taking from one group and giving to the other,” she said.
The financial aid process can feel painful for everyone. For members of the upper-middle class, there is often an added element of surprise. Many of them don’t study up ahead of time the way lower-income people might, because few people warn those with a bit more money how complicated things can be for them, too.
When people immerse themselves in the details, they may realize earlier on that their “felt need” is much higher than what their child’s target schools are willing to offer.
So this is as good a time as any to remind everyone with younger children to do the math and test some net price calculators long before a child’s senior year. It’s also wise to do some research on schools that are sure to be affordable.
“Families always have the option of sending their kid to an in-state public college,” Mr. Kantrowitz said, addressing those parents who feel compelled to stretch for the expensive private institutions. “This is in some ways a matter of choice, not of necessity.”
Ron Lieber has been theYour Moneycolumnist since 2008 and is the author of the forthcoming book, "The Price You Pay for College." @ronlieber • Facebook
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FAQs
What a $300 000 college might cost a $200 000 family? ›
All that data entry can pay off, because lots of people can qualify for financial aid that is based solely on need. In fact, over a four-year span, families with annual household income of $200,000 can get a third or more of the cost knocked off an education with a $300,000 list price.
Will I get financial aid if my parents make over 200k+? ›The good news is that the Department of Education doesn't have an official income cutoff to qualify for federal financial aid. So, even if you think your parents' income is too high, it's still worth applying (plus, it's free to apply).
How do I calculate my Expected Family Contribution? ›- Add up total annual parent income. Use both taxable and nontaxable income, including any amount put toward retirement that year.
- Subtract allowances for federal taxes, state taxes, and Social Security paid.
- Subtract an Income Protection Allowance (IPA). ...
- Subtract an Employment Expense Allowance.
During the 2021/2022 school year, the average parent covered about 43% of their student's college costs using income and savings. Parents covered an additional 8% of that cost by taking out loans, according to the Sallie Mae study. The average total parent contribution came out to $13,000 per year.
Is 200k a year a lot for a family? ›Even if you reside in a high cost of living area like Manhattan, $200k a year would put you in the top 25% of households according to the U.S. Census Bureau. Yes, that's the top 25% among some of the highest earning households in the world.
Is 300k enough for a family? ›Although $300,000 is a lot compared to the median household income in the United States of ~$76,000 in 2023, it's not an outrageous sum of money. Once you pay taxes and look at the realistic income statement I've put together for this article you'll see the income is reasonable.
What can I do if my parents won't pay for college? ›- Fill out the FAFSA.
- Apply for scholarships.
- Get a job.
- Look into tax credits for qualifying college expenses.
- Minimize your college costs.
- Research tuition assistance programs.
- Consider taking out federal student loans.
There is no set income limit for eligibility to qualify for financial aid through. You'll need to fill out the FAFSA every year to see what you qualify for at your college. It's important to make sure you fill out the FAFSA as quickly as possible once it opens on October 1st for the following school year.
Do I have to claim my parents income for financial aid? ›If you're considered a dependent student for Free Application for Federal Student Aid (FAFSA®) purposes, you'll need to provide information about your parent(s) on the application.
What is considered a high Expected Family Contribution? ›The overall average EFC is about $10,000, with an average of about $6,000 for students at community colleges and $14,000 at 4-year colleges. Slightly more than half of students have an EFC of $2,500 or less. Slightly more than 10% have an EFC greater than $25,000.
What is considered family contribution? ›
The Expected Family Contribution (EFC) is a measure of your family's financial strength. We calculate your EFC according to a formula established by law. The formula considers your family's taxed and untaxed income, assets, and benefits (such as, unemployment or Social Security).
Does Expected Family Contribution include housing? ›The total cost─which includes tuition, fees, housing and meal plan, and indirect expenses─minus your EFC is how much financial aid they estimate you'll need to attend the college.
How much does the average Canadian pay for college? ›On average in Canada, university tuition costs around: $36,100 per year for international undergraduate students (Statistics Canada, 2022) $21,100 per year for international graduate students (Statistics Canada, 2022)
How do most parents pay for college? ›Most families pay for college using some combination of savings, income and financial aid. Financial aid is money you receive to help cover college costs. Some financial aid, like grants and scholarships, doesn't need to be repaid.
How do most families pay for college? ›Most undergrads have help from parents to pay for college. Many also receive grants, borrow student loans, or work part time. Find out how the average student covers the cost.
How much is $200000 a year per month? ›$200,000 yearly is how much per month? If you make $200,000 per year, your Monthly salary would be $16,667. This result is obtained by multiplying your base salary by the amount of hours, week, and months you work in a year, assuming you work 40 hours a week.
How many people make over 200k in Canada? ›| Income in Canadian dollars | Number of people |
|---|---|
| Persons with income of $100,000 and over | 3,081,930 |
| Persons with income of $150,000 and over | 1,047,240 |
| Persons with income of $200,000 and over | 513,450 |
| Persons with income of $250,000 and over | 302,050 |
So while it's comforting to know that it's possible to live on $30,000 a year, it's also a good idea to aim higher and save more when you're young, because you can't know for certain what the future will cost and you may want some flexibility.
Is $300000 a year middle class? ›Earning $300,000 a year is still considered middle class in this U.S. city—it's not New York or LA. Around half the American population is considered middle class, according to the most recent Pew Research data. But being middle class looks different depending on where you are.
How long can you live on 300K? ›Example 1: Modest Living
This is also not accounting for rising costs due to inflation, large, unexpected costs and taxes. On the other hand, if they're able to continue to live this affordably, they can estimate their $300,000 in savings will last approximately 25 years.
How much is $300000 a year per month? ›
$300,000 yearly is how much per month? If you make $300,000 per year, your Monthly salary would be $25,000.
Can parents be forced to pay for college? ›Even though it's only fair for you to pay for your child's tuition, you don't have any legal obligation to do so in California.
Are parents obligated to pay for college in Canada? ›Although parents are not obliged to contribute to their child's post-secondary education, the amount that should be provided is one of the factors used to assess students' eligibility for a Canada Student Loan.
What if my parents are rich but won t pay for college? ›If your parents or guardians refuse to pay for college, your best options may be to file the FAFSA as an independent. Independent filers are not required to include information about their parents' income or assets. As a result, your EFC will be very low and you will probably get a generous financial aid offer.
At what age does financial aid stop using parents income? ›You can only qualify as an independent student on the FAFSA if you are at least 24 years of age, married, on active duty in the U.S. Armed Forces, financially supporting dependent children, an orphan (both parents deceased), a ward of the court, or an emancipated minor.
How much can my parents make and still get financial aid? ›There is no income cut-off to qualify for federal student aid. Many factors—such as the size of your family and your year in school—are taken into account.
Do you get more financial aid if you live with parents? ›Schools then offer a financial aid package covering the difference between attendance costs and expected family contribution. Students who live at home enjoy lower attendance costs than those who live on campus or independently. As a result, these students may receive lower financial aid awards.
Do colleges look at parents income? ›If you're a dependent student, the FAFSA will attempt to measure your family's financial strength to determine your expected family contribution. Therefore, your family's taxed and untaxed income, assets, and benefits (such as funds collected through unemployment or Social Security) should be entered into the FAFSA.
Why do schools ask for parents income? ›It ensures that your school gets all of the funding and benefits available to support teachers and students. Also, even if your child does not eat school lunch, students who qualify for free lunch also can receive other benefits like: Fee waiver for afterschool programs.
Do universities ask about parents income? ›Other information, such as parents' occupations and family income, are required only if you are applying for the Educational Opportunity Program or an application fee waiver. The campus Admissions Offices and Financial Aid and Scholarship Offices maintain the information provided on the application.
What is Expected Family Contribution for college? ›
Your Expected Family Contribution (EFC) is an index number used to determine your eligibility for federal student financial aid. This number results from the information you provide in your Free Application for Federal Student Aid (FAFSA®) form. Your EFC is reported to you on your Student Aid Report (SAR).
What is excluded from Expected Family Contribution? ›Your primary residence home equity is excluded as a counted asset. There is an allowance amount based on the tax-filing status and the age of the oldest FAFSA-filing parent. The asset amount that exceeds the allowance amount will be multiplied by 5.64 percent to arrive at the parent asset calculated amount.
What EFC is too high for financial aid? ›Any person with an EFC number at 0 will receive the maximum amount of student aid, while a number over 5273 will result in no aid at all. The numbers, and the amount awarded, fluctuate annually. The closer you can get to zero, the more federal dollars you'll have to help pay for tuition and fees.
Does expected family contribution include scholarships? ›The EFC is not used for merit-based scholarships, private student loans and Parent PLUS loans.
What is your personal contribution to your family? ›we should make them responsible towards their daily activites,duties,behaving well,respecting elders,loving younger,helping people and not polluting enviroment means we also should make them knowledgeable about the important of nature and they should be obident in their study.
What does an EFC of $50000 mean? ›An Expected Family Contribution (EFC) of $50,000 means that the family is expected to contribute $50,000 toward the student's education expenses for the academic year.
Is college financial aid based on income or assets? ›The information you report on your FAFSA form is used to calculate your EFC. The EFC is calculated according to a formula established by law. Your family's taxed and untaxed income, assets, and benefits (such as unemployment or Social Security) all could be considered in the formula.
Do parents assets affect financial aid? ›Parents' unprotected assets include balances in savings, checking and brokerage accounts, investment real estate other than the primary home, 529 college savings, ETFs, and mutual funds. The parent's protected assets are not counted when calculating financial aida eligibility.
What is an example of Expected Family Contribution EFC? ›For example, if your college's total COA is $30,000 and your EFC is $12,000, you could expect to receive up to $18,000 in need-based aid, such as Pell Grants, subsidized loans and work-study programs.
How does Canada pay for free college? ›University tuition is subsidized by governments for Canadian citizens, which makes it less expensive for them than for international students.
How much is 1 year college fees in Canada? ›
Top Institutes for 1 year courses in Canada
The undergraduate courses are also important since they prepare the foundation for pursuing further higher education in Canada. The cost of attending undergraduate one year courses in Canada ranges from 4,000 CAD to 20,000 CAD (2 lakhs to 12 lakhs INR).
How much does a Graduate make in Canada? The average graduate salary in Canada is $69,211 per year or $35.49 per hour. Entry-level positions start at $51,081 per year, while most experienced workers make up to $129,466 per year.
Is parent paying for college a gift? ›Because parents are deemed to have an obligation of support for their children, so, most payments for college expenses would not constitute gifts for gift tax purposes.
Should parents pay for kids college? ›Requiring your child to pay their own college tuition could help them develop personal responsibility and understand the impact of their decision making. Allowing a student to cover their own college expenses can also help them understand personal finance and learn the value of a dollar.
What percent of people's parents pay for college? ›Recent studies show that 85%³ of parents pay at least a portion of their child's tuition. And considering college tuition has been on the rise for the past two⁴ decades, parents have begun to leverage savings, retirement accounts, and equity to cover the cost of higher education.
How does the cost of college affect families? ›College tuition isn't cheap, creating burdens for families with limited resources and students who take out loans to cover expenses. Depending on the location of the college or university, it might also affect the frequency of visits and reduce family time together.
How can a middle class family pay for college? ›Students and families who do not qualify for Federal Pell Grants and Institutional need-based aid have several different options including scholarships, Federal Work Study, Federal loans for students, Federal loans for parents, private educational loans, and family savings and out-of-pocket payments, including payment ...
Does anyone pay full price for college? ›Roughly 90 percent of people do not pay the full price. They get some kind of a discount.
Is $200 a week good for a college student? ›The consensus among the hundreds of parents who did send their college students spending money was that the range should be between $25-$75 a week for a student living on campus. The most common answer was $50 a week or $200 monthly. Students who had cars on campus needed more than those who didn't.
How do families afford college? ›Most families pay for college using some combination of savings, income and financial aid. Financial aid is money you receive to help cover college costs. Some financial aid, like grants and scholarships, doesn't need to be repaid. Financial aid can also come in the form of loans — money you have to repay.
How do middle class families afford private college? ›
Students and families who do not qualify for Federal Pell Grants and Institutional need-based aid have several different options including scholarships, Federal Work Study, Federal loans for students, Federal loans for parents, private educational loans, and family savings and out-of-pocket payments, including payment ...
What is a good amount of money to have for college? ›Ideally, you should save at least $250 per month if you anticipate your child attending an in-state college (four years, public), $450 per month for an out-of-state public four-year college, and $550 per month for a private non-profit four-year college, from birth to college enrollment.
How to live off $3,000 a month? ›- Maintain a Monthly Budget. ...
- Use Low-Risk Investment Accounts. ...
- Track Your Monthly Living Expenses. ...
- Think! ...
- Put On Your Apron and Start Cooking at Home. ...
- Look Beyond Walmart & Target to Save Money. ...
- Optimize your Credit Card Usage. ...
- Avoid Impulse Buying.
Earning $10 per hour is important because it can help you out with your budget and expenses. If you are a student, you may be looking for small jobs to help you pay for tuition. This amount can also support your lifestyle in some states in the US, especially if you are still living at home.
Is 13 dollars an hour good for a college student? ›If you are in high school or college and have support from your parents, then this is great spending money for you. However, if you are making it on your own, $13 per hour will not make ends meet each month. For most people, being at minimum wage is common and the goal is to make your way up the payscale and quickly!
Do most parents pay for college? ›Recent studies show that 85%³ of parents pay at least a portion of their child's tuition. And considering college tuition has been on the rise for the past two⁴ decades, parents have begun to leverage savings, retirement accounts, and equity to cover the cost of higher education.
Do all parents pay for college? ›Are parents legally obligated to pay for college? State law rules that the obligation to financially support your kids ends when the child turns 18. That means parents have no legal obligation to pay for their child's college education — with one exception.
How to afford college without parents? ›- Fill out the FAFSA.
- Apply for scholarships.
- Get a job.
- Look into tax credits for qualifying college expenses.
- Minimize your college costs.
- Research tuition assistance programs.
- Consider taking out federal student loans.
If your family's income is less than $85,000, you'll pay nothing. For families who earn between $85,000 and $150,000, the expected contribution is between zero and ten percent of your annual income. Families who earn more than $150,000 may still qualify for financial aid.
How much money does the average middle class family have? ›Pew defines “middle class” as those earning between two-thirds and twice the median American household income, which in 2021 was $70,784, according to the United States Census Bureau. That means American households earning as little as $47,189 and up to $141,568 are technically in the middle class.
What is a realistic budget for a college student? ›
What is a good college student budget for the academic year? College Board data shows that students who spend moderately should prepare a 12-month budget of approximately $27,200. An acceptable lower budget would be around $18,220 per year.
How much is too much to pay for college? ›Whether you're a student or parent, you may be grappling with some tough decisions about student loans. The general rule is to make sure you don't borrow so much that you'll be paying more than 10% of your expected gross income. The best way to cut down on the total cost of college is to plan ahead.
Is it worth paying a lot of money for college? ›Despite the high costs associated with going to college, it can be worth it for many people. You may very well find that your investment pays off in the long run, by allowing you to build a well-paid, successful career. Not to mention the invaluable life experience and connections you gain at school.