<p>I’m having a hard time understanding the logic behind schools that meet full demonstrated need, but do it with all grants for lower-income kids, and with more loans for middle-income kids.</p>
<p>As a middle-income family, not only are we asked to make a family contribution that will be a major stretch for us, but then the aid package includes 7500/year in loans for S. (This is in addition to a reasonable student contribution and employment income expectation.)</p>
<p>Lower-income students get all their need met via grants from the same school (and of course lower family contributions).</p>
<p>Considering that our family contribution is already a stretch for us, and we have two more college-bound kids coming up behing him, we will not be helping S pay back his loans when he graduates. He will be just as low-income (or not) as others graduating in his major. So why is he expected to take on loans when other students are not?</p>
<p>I don’t mean for this to come off sounding bitter, because I’m really grateful for the aid he was given, that will make his first choice school a reality for him. And I don’t mind that he has some skin in the game at all. I’m just really wondering what the logic here is. Why aren’t kids from low-income families expected to take on any loans (at those schools that have similar policies)? These are top colleges that have these policies – isn’t the expectation that all kids graduating from such a school will have the means to pay back some loans?</p>
<p>I think the idea is that lower income families will not have a future income that can absorb that debt. (I understand you don’t feel that you will either because of your younger kids, but as a general class, families with higher incomes and higher income potential will generally be more able to absorb that.)</p>
<p>And I once read an article, too, that said those very selective, very generous school that do not include loans for lower-income kids do so because lower-income families are much more debt adverse (for the reason explained above), so the schools were not achieving their goal of attracting the most desirable lower-income students because they are more inclined to take fat merit awards from lower tier colleges rather than take on loans.</p>
<p>Anyway… I’m not defending or criticizing the practice, just sharing two things I read related to your question.</p>
<p>It is also a fact of life that the low-income kids often still take out loans in order to cover some of the extra expenses for college anyway, such as travel, laptop, off-campus meals, books and extra fees. They, unlike many middleclass kids just can’t go to their folks when their laptop gets fried, or when they would like to come home over Spring Break. </p>
<p>They still qualify for these loans and many kids in my area take them. Also, the kids take out the loans to cover the family EFC and their own contribution expectations.</p>
<p>Low income students do have Stafford loans. I would think that lower income students would have a more difficult time obtaining private loans because their parents, as co-signers, may not qualify due to their income and asset levels. Middle-class and upper income people qualify for larger loans and at a lower income rate.</p>
<p>Relying on loans could make a college education unobtainable for poorer kids. Recognizing that they have much to offer the school, and out of altruism, the schools offer them grants.</p>
<p>When I was at a private school, I had the opinion that we poor kids got help so that the college could staff the dining halls with federally paid work-study students instead of having to pay townies…</p>
<p>I think the thinking is at the few “no loan” schools for low income kids…</p>
<p>1) When they graduate, their families can’t help them out if they have any income troubles.</p>
<p>2) They may need to still borrow to cover the small amount of EFC the family may have.</p>
<p>Are we talking about kids with 0 EFC at schools that don’t meet full need? Can such kids or families even qualify for non-federal unsecured loans to cover the unmet need? I would guess not since there’s no way to repay them; the kids’ federal repayment burden is quite enough.</p>
<p>When I read posts from kids and parents alike contemplating taking out loans, I take the EFC into consideration. A family with a low EFC is not likely to be able to help out with loans and the loans can hurt an already fragile financial situation. If the family is able to help, and is on even keel, the outlook is different.</p>
<p>The fact of the matter is that schools have limited resources in terms of aid for the kids. Many college that meet full need do preferential packaging on many fronts. Some of them give the most generous packages to those kids they want the most, and the less generous ones, with more self help to the students that don’t make the "A: list. A lot of schools do this when the look at the kids they are accepting. NYU, a school that does not meet full need most of the time, can offer the most generous aid package if it really wants a student. Merit within need. </p>
<p>So it makes sense that they give fewer loans to those less likely to be able to repay them. Economic disadvantages are an issue in admissions and for scholarships. Why would you think it should extend to financial aid packages?</p>
<p>I know how you feel. I am worrying about what my kids’ costs are going to be this year. We didn’t qualify for any financial aid and I fully understand why, but we have put ourselves in a situation where we have obligations that have to be juggled, and it’s not going to be easy next year. I feel that the cost of college has gotten to a point where it is truly crazy, but then I thought that 20 years ago and things have only accelerated. I think that in time, only those truly well to do and those students who are wanted enough by colleges that they will discount the prices via scholarship will be able to afford to attend all but the local state schools. I hope that a realization comes to put the money in those resources and the state school so that they become the the better academic alternative, much the way public schools are where most kids go for k-12. Fewer kids go to private schools, and very few to boarding schools. Why this pattern breaks at college, I don’t know.</p>
<p>Mathmomvt, are the loans in excess of the $5500 in Stafford that are being offered to your son the Perkins loans?</p>
<p>I ask, because the Perkins are usually given to those with exceptional financial need and are loans that are supposed to go to the neediest as opposed to those who are not. Are you sure that the school is giving these loans to the “middling” need kids instead, or is this just the word you are getting?</p>
<p>@vonlost, no I’m talking about schools that do meet full need, and meet it without loans for students with family income/assets below a certain level (even if not 0 EFC) but with loans (even in excess of the usual 5500 for freshmen) for students whose families have somewhat higher incomes (but still with substantial need considering their large COA).</p>
<p>@cptofthehouse, my S is being offered 3500 in unsub Stafford and 4000 in loans directly from the institution (which are at a higher interest rate but I believe do not accrue interest while he is in school)</p>
<p>We haven’t done the math yet, but if it turns out to be more advantageous, can my son automatically take 5500 in Stafford unsub loans and reduce his institutional loans to 2K?</p>
<p>The overwhelming majority of schools in the country do not meet 100% demonstrated need. Money is the number one obstacle that prevents low income students from graduating college. FOr many students, between financial aid packages that have big gaps or large plus loans that parents do not have the means to repay, this means either not going to school or once there, they may have to drop out because it is too expensive to continue.</p>
<p>Money in either exhorboriant loans, or money from the student previously working to help maintain the family (now no longer there to help support the family) to students sending home part of their financial aid (whether it is work study money or pell distributions) to help assist the family.</p>
<p>As someone previously mentioned just because a low income student is getting no loans in their financial aid does not mean that they are graduating debt free. Some students are borrowing money for the incidential things that you are taking for granted; purchasing books, a computer, student fees, the required school health insurance plan (because many of these students do not have health insurance or may be underinsured), transportation getting back and forth to school. </p>
<p>If your son is fortunate enough to be attending one of the handful of elite schools that have enough money to offer low income students no loans in the financial aid process, he is recieving a discount on his education because it cost more than the cost of tuition to educate him at that school.</p>
<p>While you state that it is not your intent to come off as bitter, you sound like the man who complained that he had no shoes until he met a man who had not feet!</p>
<p>Just to put this in perspective- how many schools offer to meet full need with no loans? Very, VERY few. Of those that do, it is VERY difficult for low income students to get in anyway simply because they didn’t have the resources that middle and upper income students did during their childhoods. </p>
<p>So while yes, a very select (and lucky) few get these dream FA packages without loans, it really isn’t very many- unlike what reading a lot of the threads on this forum would have you believe. </p>
<p>And as one of those low income kids, I can tell you that my first year at my U was supposed to be loan free due to a special FA program. I ended up taking out about $2k in loans anyway for a computer, books, and a few other things that were necessary because my parents couldn’t help. The next year, my parents’ income was raised by about $1,000 (to a whopping $20k or something like that) and I was no longer in that no-loans category so I got about $10k in loans just like everyone else (which were mostly replaced by outside scholarships). I was lucky because some of those loans were Parent Plus loans and my parents would not have qualified for them. My parents are poor and their credit sucks. I am 20 and already my credit is better than theirs. If I did need to take out larger loans, then I would not be able to attend the school (which is a state school btw, not a fancy private one or something) because my parents wouldn’t be able to take out the loans. </p>
<p>Hope this answers some of your questions.</p>
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<p>I’m well aware of that. I’m talking only about schools that do.</p>
<p>Several here have made good points about lower-income kids needing to borrow for incidentals that higher-income parents may be paying for (such as transportation home or health insurance) or that they might receive as graduation gifts (new laptop). Also the issue of lower-income families being more risk-adverse when it comes to debt. And although it hasn’t mentioned, I wonder if there is an acknowledgement that the lower-income student will be more likely to end up helping support their family when they get out of school. </p>
<p>Our S’s school will allow students (of all income levels, and even if they already have substantial loans in their package) to take out additional institution-backed loans to cover things not in the COA such as buying a computer, student health insurance, joining the fitness center, etc.</p>
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<p>I understand that. I’m asking what the logic is behind having such a policy, <em>for those schools that have such a policy</em></p>
<p>I think you’ve answered your own question. It’s harder for poor students to get loans, repay them, etc especially since they’re starting out with little or no parental help and may in fact have to help their parents out rather than the other way around (as is my case). Plus, it’s a way to ensure some diversity at top schools.</p>
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<p>I started out with the premise that that is untrue, and I still dispute both of these factors. </p>
<p>Student loans (up to 5500 freshman year, and more thereafter) are available to all students regardless of family income, lack of credit history, etc.</p>
<p>And a student from a poor family with a degree from a given college has the same resources to pay back loans as a student from a middle-income family with a degree from the same college – whatever job they each got on graduation. Middle-income parents have to take out their <em>own</em> loans to meet the parental contribution expectation. They are not able to help their kids pay back their student loans any more than poor parents are.</p>
<p>The point about the student form a poor family needing/wanting to help out their family after graduation makes sense though. The cost of health insurance is also a very valid point that I hadn’t thought of before. And, yes, in an emergency, middle-income parents probably still have more resources than poor parents, even if the middle-income parents are maxed out on parent plus loans and have taken any equity out of their home to pay the family contribution. So, my question is answered with these reasons. </p>
<p>Thanks for the feedback and sorry if I offended anyone by asking.</p>
<p>*Are we talking about kids with 0 EFC at schools that don’t meet full need? *</p>
<p>No…because those are the “no loan” schools for low income kids.</p>
<p>Frankly, I get very worried when I see low-income kids taking on serious debt. They often have no one to advise them about debt, and they often think that a salary of $40k per year is a LOT and therefore they will “easily” be able to make huge loan payments after they graduate. They don’t often realize that their jobs will likely require them to live in cities that have a higher COL than where their low-income family lives, so their dollars will not stretch as far. And, as singles, they will pay a good amount in taxes, unlike their families.</p>
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Is this the general rule, that schools not meeting full need (most schools) don’t require loans for 0 EFC kids? How is the unmet need paid? Not by the schools; they’re not meeting need. Not by the parents; they don’t have the money. 
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<p>No. Meeting need is based on the following criteria:</p>
<p>Cost of attendance - EFC (parent + student) = demonstrated need.</p>
<p>Schools that do not meet 100% demonstrated need (most schools) GAP. it is up to the student and his/her family to figure out how to fill the gap.</p>
<p>Schools can meet demonstrated need in the following manner</p>
<p>Entitlement Aid (money that the student is entitled to by the state/federal government if they meet the criteria example: pell grants)
Work study
Loans: stafford (subsidized/unsubsidized) Perkins (if the school has the funds) institutional loans, Parent loans
Institutional grant aid: which does not have to be paid back (some schools will call it scholarship)
Merit scholarship- student receives a scholarship based on merit (good grades and scores). The school will usually stipulate a requirement for keeping/ renewing the scholarship.</p>