When (and Where) Financial Aid Falls Short
by Stephen Wells
December 31, 1969
Every year at this time, as college financial aid awards roll in for the high school seniors Iâm working with, I realize anew how the federal calculations for financial âneedâ are totally unrealistic for the middle class.
This yearâs case in point is an academically mid-level student whose father earns over $90,000 a year. Sounds like a lot, but it goes much farther in, say, the Midwest than it does in northern New Jersey, a distinction that the government doesnât factor in when creating the formula that leads to determining an Expected Family Contribution (commonly called the âEFCâ) for every student who files a Free Application For Federal Student Aid (âFAFSAâ).
This studentâs mother has a serious disability brought on by an auto accident many years ago, so she receives Social Security Disability Income as well, making the familyâs Adjusted Gross Income for 2014 approximately $115,000.
The familyâs savings are negligible, but the student has $11,000 in savings which â not knowing the FAFSAâs methodology â his parents left in his name rather than putting it in theirs. This added $2,200 to their EFC, an amount that could have been avoided with proper planning.
In this case, that turned out to be a minor addition, though, for their overall EFC was $26,000. That means colleges are basing their financial aid offers on the assumption that the family can afford to pay more than a quarter of its after-tax dollars for a freshman year of college.
This is unrealistic. It basically says that these parents need no financial help to send their son to a state school in New Jersey, and makes the reach for a private college, or state university outside New Jersey, truly a Herculean stretch.
Can anyone be surprised we have a student loan crisis in the U.S.?
The one thing this family can do is explain the motherâs disability situation to the college their son is leaning toward, in the hope of getting some consideration. Because of the medical condition, it isnât even as if their after-tax income doesnât have some encumbrances that wouldnât normally exist.
The other disclosure the parents should make is the amount of debt theyâre carrying, and the cost of their monthly debt service. A cloying curiosity of the FAFSA is that it requires you to report your assets, but has no interest in knowing your liabilities.
How much influence arguments such as 1) residing in a part of the country with a higher cost-of- living, 2) special circumstances, and 3) legitimate debt will have depends upon two things: the policies of the given college, and how much that college wants the student in question.
At this point in the process, though, the familyâs options are limited. Far too often, costs of various institutions arenât factored into the choice of schools to apply to, and methods of covering the costs arenât explored early enough â which are things I always keep in mind when advising students and parents. It isnât just a matter of coming up with a list of colleges that are within a studentâs academic reach, but learning what type of environment the student wants as well as getting a sense of the familyâs financial needs, and trying to marry the two.
Until something is done about the cost of college and the debt that currently accrues to the majority of students attending, all we can do is stay focused on trying all we can to minimize that debt as much as possible in every studentâs case.