Sometimes these families don’t hit the $265k range right until college starts. The family wasn’t near that prior to college and couldn’t save as much. Now they don’t get any FA and only have a percentage saved for college. Sure that’s a nice income but might not go very far in high COA area, especially if there are younger kids.
@chmcnm Thank you. Yes, that makes sense. I know everyone’s situation is different and that it’s hard to contextualize a family’s ability to pay just by looking at the FAFSA. I think it was the concept of calling a higher EFC a ‘penalty’ that confused me since I’m not sure why having savings and being able to pay for college could ever be seen as a bad thing. It’s not as if people in that income bracket would qualify for financial aid, right? So I don’t see the upside to not having savings.
Maybe the resentment is coming from feeling as if people are paying for private k-12 school and then getting merit scholarships that reduce the college tuition? But they’re still shelling out a lot of money for their child’s education, so it doesn’t seem like lavish or irresponsible spending. Just a different–and personal–choice.
Somehow a thread about a donut hole started by @CupCakeMuffins made me hungry 
However, such a family has been living on a much lower income until recently. Are you assuming that a family with a recent large increase in income immediately ratchets up its base level of other spending to consume all available income, leaving none for things like kids’ college?
There’s a second part of the equation. Aging parents and retirement. You hit your mid forties to fifty and finally start making good money. You haven’t been able to put away as much for college or retirement as you wanted to but you saved a little. You have 2 or 3 kids at $80k+/year COA for colleges over the next 6-10 years.
Once you hit 50 in the private sector you’re a liability and that’s assuming you stay healthy. The 50’s aren’t kind to many people.
But let’s say you suck it up and spend all disposable income on colleges for the next 6-10 years. Now you’re at least 55 years old and can finally start saving for retirement assuming you’re healthy, still have a job, and don’t have to help your aging parents very much. It’s not a comforting thought. That’s why I think HS kids and parents are starting re-evaluate the cost and value of higher ed. They’ve seen what its done to people who’ve gone into debt or delayed saving over the last 10-15 years.
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@mom517 I have kids in one of those excellent public school districts near you. The other component is that my kids are well-prepared for college. Some of the smaller private schools really hand-hold their kids - and when those kids get to a large U, they are overwhelmed.
I also see the unrealistic expectations at our public school - both with admissions and with aid. Many of my kids’ friends are paying for their own schooling (paying parents back), but still looking at $60-80k/yr. they don’t understand the impact of crippling debt.
Honestly, I think the high EFC penalty is one of the lies CC tells you.
That only if you hadn’t lived frugally and saved. That if only you had spent that money. Spent on vacations and luxury cars.
That magically there would be a pot of money waiting for you if only you had spent that money instead of saved.
Exactly.^^^ If you earn above the median income, regardless of the circumstances, you should have been able to save the equivalent of $300K per kid for college along with a good amount for retirement and the only possible reason you didn’t is because of luxury purchases. Not because of the cost of housing or childcare or traveling to visit aging parents. Or that you think taking a reasonably priced family vacation is a great benefit to a family in which both parents work.
You understand it pretty well. It makes as much sense as calling the price of food at Whole Foods a “SNAP penalty” or calling apartment rent a “Section 8” penalty. People making enough money to pay for something being expected to pay for it.
I thought that income was the main EFC driver for schools that offer great need based aid. If 2 families each earn $256k/year is one getting $0 from a $60k/year school and the other getting a huge grant?
Schools that offer great need-based aid tend to look at wealth as well as income – including things like savings, investments, the value of a family business, home equity, and even retirement savings. As we know, a certain former real estate developer who claims billions of dollars in net worth (and whose most skeptical critics would admit he has hundreds of millions of dollars in net worth) filed some tax returns a while ago – around the time at least one of his first-marriage children was in college – showing negative income.
No college would have/should have given someone in that position a $0 EFC. He could afford to pay for his kids’ college, and presumably did. (Who knows? Maybe his wealthy father paid for a lot of it as part of his estate planning.)
In any event, what that means is that hardworking, frugal families who have saved a lot of money and invested it productively are wealthier than spendthrift families with the same earned income but higher spending rate, and thus they wind up with higher EFCs from colleges that look at wealth as well as income.
Wouldn’t savings, assets, debt make a difference? If income was the only factor, they won’t ask for anything but a W2.
It’s unlikely to have a $60k/year difference in EFC but it can easily be big enough to make a college affordable.
With $256k income, college FA will be minimal at best unless there are multiple kids in college.
Yes, assets can matter at lower incomes.
But someone with high assets and income but is resentful of poorer people getting college FA could (two years before kids go to college) give away all their assets to charity (maybe even a college which would give the kids a development hook) and take a low income job instead of their high income job.
The vast majority of colleges in America aren’t going to scrutinize your finances to suss out if you’re a spendthrift or have the first dollar you ever made.
Why? Because they don’t meet full need, and have no problem accepting a needy student and offering nothing but the federal loan and the Pell.
The CC wisdom that the thrifty family is getting $%^& assumes that everyone knows when their kid is in first grade if the kid is going to get into a meets full need school, or if little junior is heading off to Eastern State (where they don’t meet need).
If only we were all so wise.