The Financial Aid "Kill Zone" in America - A Model

Paying for College
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<p>Okay, silly question, please don’t flame me…I am not choosing a side in the class war, but here’s what’s bemusing to me:

  1. People with pretty high efcs seem frustrated that they are denied access to federal aid.
  2. People with really low efcs seem frustrated by the former’s frustration.
  3. In what way would Federal money actually benefit earners who garner high EFCs? Clearly, they would not expect grant, reserved for $0 - $5k efc proportionally (eg families earning $>20k - $40k…). That leaves a maximum of $5500 in loans available for a freshman…$3500 direct deferred interest and $2000 unsubsidized. (No point in counting work study since you can work without it…)</p>

<p>I guess I am thinking that high EFC families would have the capacity to either negotiate loans independently of FAFSA and even, with a heloc, get better interest rates, or still yet, use some of the assets that created the high EFC to begin with. Typically, the low EFC families don’t have the assets to form the security for such loans, which is why I thought the loan programs for the students existed.</p>

<p>In other words, it’s not all it’s cracked up to be down in the cheap seats. A $5500 loan on its own will not get a kid through a state school, much less a private.</p>

<p>So…the real issue is what the individual institutions do about the EFC in their provision of institutional aid…and the only reason high EFC folks actually want a lower EFC (without making less money…) is to benefit from institutional grants/aid or to narrow the gap, right? </p>

<p>There is more or less a solution, but I can’t really see it flying in the U.S.
In Canada, all institutions are publicly funded, and the tuition levels are (as such) more on par with state u’s costs…and there’s a heck of a lot less merit kicking around, and not always the gleaming infrastructure or low s-t ratio enjoyed at some privates here. The loan amounts vary by provincial program (hybrids with the feds) but in Ontario, for example, allow for enough to actually pay for tuition and almost all of living expense (provided a kid works while in school). Of those loans, part of the loans given to the poorest are converted to grants, and everyone is entitled to a $4000/year loan forgiveness grant at the end of the process if the total borrowed exceeds about $30k.</p>

<p>Tuition is pretty much the same wherever you go to school from province to province, since the funding is generally federally centralized (though in part through province.)</p>

<p>Bear with me here…IF every school were publicly funded (and yes, the middle and upper class would bear that in taxes…) and if there were no such thing as “OUT OF STATE” tuition rates, AND there was less institutional aid available, would it actually improve the equity and access to education and lighten the load on the middle class? Would people CARE then if they received FAFSA loans?</p>

<p>I do wonder what would happen under this model. I do wonder if the US would retain its innovation.
At any rate, enough musing. It is what it is. OP Duke, I loved your analogy, btw.
Cheers,K</p>

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<p>umboFever09 is absolutely correct!</p>

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<p>Oh, I just thought Duke was in the highest income bracket of the three scenarios he laid out. As I read it, he self-reported the 200K-plus income.</p>

<p>And, it is not flaming to ask someone representing this income bracket to explain why they cannot afford college tuition. I mean, I just do not understand save for extenuating circumstances. </p>

<p>Finally, I have an advanced degee and I am a teacher,hence my low income. Yes, I could have gone into advertising and made more money, but if everyone chose their career based on the salary, most of you would not be here gnashing your teeth over college, would you? Nope. Someone graded your papers, prepared lectures, took you on field trips, and wrote your recommendation letters. Would you also demand that those in the military who receive financial aid return to school in order to acquire training to make more money? Or would you prefer them to stay in the military and protect and defend?</p>

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<p>I am in the same boat as many other upper middle class Americans. Only in the past few years has my father earned an income over 100k after more than doubling his salary. Not only do colleges assume that my family has saved a certain amount of money based on his current salary, but we are also hit with $15k for health insurance that was paid for by the company when he was making less. My father now makes $180k/year, but after taxes, mortgage payments, health insurance, electric, tv, internet, phone, gas, clothes, food, car, house/car maintenance, car insurance for 2 teen drivers, extracurricular activities, a modest vacation, and a small amount put away for retirement, my parents still had to take out a loan to cover the $15k for the AC unit and the $5k sewage pump that died last year. Family of 5 with 1 in college. We are not living an extravagant lifestyle, yet there is literally no money left at the end of the year for school without dipping into retirement or maintenance funds. As a result I have to go to my safety school and still take out $15k/year as I cannot afford any private institutions without putting myself well over $100k in debt. So basically what I am saying is that even a family making $200/year, unless they have had that income level for quite some time and have lived well below their means, is unlikely to be able to afford $50k for college.</p>

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<p>LindaCarmichael has a point. As a society, are we not better off ensuring access to education for all of our members, whether their families work on wall street or main street? The problem here doesn’t actually seem to be FAFSA itself (though it could sure use some improvement.) The problem is that we have a two-tiered education system: one for the “rich” and one for the “poor”, or simply put, privates and publics. This is further exacerbated by the “out of state” tuition factor that limits choices as well. This is why the middle to upper middle class feels so squeezed…they’re living inside the expectation that it is POSSIBLE to attend a private (or an out of state public) when that has clearly become less fiscally accessible than it was in the past. Yet the privates exist, and/or we are raised with the expectation of state mobility, so students like jvgig grow up with the reasonable expectation that a well-run family with means can access it.
(And yes, jvgig, I consider your family well run…you have health insurance, teen car insurance, retirement savings, etc. Those things should not be “luxuries” but in fact it seems they increasingly are…although I realize they are the outcome of wise choices, planning and sacrifice…!)</p>

<p>In jvgig’s case, FAFSA would not make a dent in his $50k/year dream school, nor directly make it any more accessible. So again, the real issue is fiscal access to private institutions that drive off the FAFSA formula. The privates could solve this by reinstating merit, and then make the merit need blind, thereby balancing the desire for socioeconomic diversity with the idea of true justice for ALL applicants. But I believe they would then need another funding source in order to be able to do so. And I’m not sure how they could get there from here. Surely someone has investigated ways to solve this phenom?</p>

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<p>Thanks to jvgig for shedding some light on where the money goes.</p>

<p>While thinking about this thread, what I notice is how very accomplished students in the higher income bracket sometimes express entitlement to attend a private college. Is there something wrong with a public college? A community college? I am also wary of the high, high GPAs I see. That is high school, folks. Do not assume that because of your stellar performance in high school that college will be the same for you; and this is the real world:</p>

<p>someone who goes to a community college with their AP credits, takes 21 units a semester and goes to summer school, can transfer early to a four year school, spend less, and be in grad school or in a paid job or internship even sooner. So go for it. Think outside the box. The prevailing thought is a four year college with dorms and matching bedspreads. </p>

<p>In the USA, there is affordable education for ALL. Do you really think that you will be the only one at State U with perfect SATs or the only one at community college with a 4.0?</p>

<p>Talk amongst yourselves.</p>

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<p>^^ The irony of your use of the word “entitlement” to describe the concerns of the higher income bracket students is apparently completely lost on you.</p>

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<p>Well, if you and your family really, really wanted to afford an expensive school, here are some things you could have done/can do:</p>

<p>Buy a cheaper house (lower mortgage payments)
Not have cable TV (you can get four to eight FREE channels)
Not have high-speed internet (this one I wouldn’t recommend)
Get rid of the landline if you have cell phones
Lower the cell phone bill by removing features
Drive less by using carpool and public transportation (if applicable)
Buy clothes from cheaper places and buy them less often
Eliminate cars and car insurance for the teen drivers
Eliminate the vacation, no matter how modest
Participate in free extracurricular activities
Put off getting the AC unit (a lot of people live in this world without AC… it sucks, but it’s not the end of the world)</p>

<p>Compared to the lifestyle of many, your lifestyle is pretty extravagant. I’m just saying - step outside the box and take a look around. If your lifestyle is not set up to pay for $50,000 a year, then either change your lifestyle or don’t go to a school that costs $50,000 a year. College is a privilege, not a right. It isn’t the government’s job to pay tuition for you - I’m thankful they even offer to do so in part. It certainly isn’t the college’s job to pay tuition for you - that’s like asking a car dealer to buy the car for you!</p>

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<p>The scenario of 2 families making the same income, one saves for college, the other spends on new cars, vacations, etc… The one that saves is then penalize with less aid. The reward that is built into the system for those who don’t save is just galling!</p>

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<p>Adding to the problem is the excessive tuition increase EVERY year. State schools and privates. Investments go down ( a lot) and increases go up (a lot). Bigger gap. Tuition is up 700% from what I paid 25 years ago. Call it the “Education Bubble”. A couple more down market years and watch it burst!</p>

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<p>^^I agree. I would like to see an unbiased analysis of what has caused this increase. And I am hearing, from many other parents at many schools, that merit scholarships have been pared dramatically. And the schools heavily advertise their 100% needs-met aid. I have to believe this plays a large role. 25 years ago, I had no money for college, and worked my way through. I don’t recall this massive amount of aid available to me because my parent’s weren’t “rich.” Or maybe I did know of it, and wanted to earn my own ticket. Life and the sense of “entitlement” sure have changed.</p>

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<p>^^ applicannot: “If your lifestyle is not set up to pay for $50,000 a year, then either change your lifestyle or don’t go to a school that costs $50,000 a year. College is a privilege, not a right.”</p>

<p>EXACTLY! Well put. But I suspect you are implying that this set of rules applies only to the “rich” guy making $140K, and not the “poor” guy making $40K? That’s the hypocritical part of this that is driving the argument basic here. Again, as you said “If your lifestyle is not set up to pay for $50,000 a year, then either change your lifestyle or don’t go to a school that costs $50,000 a year. College is a privilege, not a right.” FOR EVERYONE. Right? Although I suspect you meant to add “for people richer than me”, I still agree that you captured the point perfectly and I totally agree.</p>

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<p>There are many excellent points on both sides. These are certainly discussions that we would not feel comfortable having at a little league game or some other event that we would all be at as parents. I do have alot of compassion for the middle guys here, they are hurting the most. The model hurts them and they are not living lavish lives. They are having to turn down expensive colleges. Some privated do give need blind merit scholarships and these seem to be the best option for them. The bubble bursting analogy was a good one.</p>

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<p>Just want to say that living for a family of 5 on $50,000 with a $180k salary is very tough, if not impossible. Health insurance (15000), electricity (5000), mortgage (15000), and food (18000 assuming $10/person/day) already over that point. So because you are expected to pay almost the full price for health insurance, you are now running around with no clothes, no car, no gas, tv (a luxury yes, but not an extravagant one), internet, cell phones, no retirement options (work for a nonprofit company with no stock options), activities, or vacations, yet alone the ability to replace things as they break/become obsolete (due to my brother’s allergies/other respiratory health problems an AC unit is a necessity as it also pulls air through a filtration system). Now all that work you did, as a parent, to go to college and earn a degree and work your way up the corporate ladder so that you can provide a comfortable life for your wife and kids is now gone. </p>

<p>I do not know where the financial aid money comes from, but assuming part comes from tuition, I believe that the system is very unfair to those who do not have the means to be able to afford full tuition, yet are expected to pay it. If the money just came from donations and were distributed on a curve so that everyone up to say $250k got some money, and nobody went for free. I mean come on, it is perfectly reasonable for a kid from a household making $40k to be expected to pay $5-10k. Graduating with $40k (even less if the student gets a job) in loans is better than I can ever hope to do and after college, you are on your own, completely independent of your parents to pay them back and hopefully making a good salary to make those 4+ years of education worthwhile. </p>

<p>As of now, I will not be attending a private university because of cost, yet the state school still costs $22k and I will be taking out over $50k in loans to cover most of it all of which I, not my parents, will pay back.</p>

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<p>I have not read this entire thread, but I am impressed with Duke’s reasoning, esp for a student. I am not sure I could have stated it so precisely ;)</p>

<p>It is true that if you are at the top of the income heap that gets ‘free’ school and another person at the bottom of the heap that is mostly or close to full pay, the difference in the families may not be that significant.</p>

<p>Many years ago, before the new home equity limits to % of income and other new no loan programmes, we had a friend who was blessed with admissions to HYP with a full financial aid package, no loans, etc. My kid did not get in and adding further ‘insult to injury’ the next tier of schools had packages with huge loan componenets.</p>

<p>Now the difference is even more significant between HYPS and other with no loans, and limiting HE to a % of income, and now having a certain limit to parental EFC based on higher incomes…not getting into HYPS schools with great packages for some families means a drop all the way to local state public as the middle category school USC/NYU/Vandy/SMU/Emory/etc may be extremely unaffordable as compared to the top schools.</p>

<p>The more generous financial aid now from those top schools means that not only did you not get the prestige or the experience or the connections, but the same FAFSA EFC family may have had no loans at HYPS and over $100k in loans at a slightly lower ranked private school.</p>

<p>If one is paying attention, the pain of not getting in to a top school, with less than 10% admittance rate is now even more painful.</p>

<p>I do wonder about people who attended some of these schools with these amazing new packages, but who attended at great family sacrifice prior to the new aid policies and who graduated with huge loans, I wonder how they feel about the new policies??</p>

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<p>No, I agree that the statement works for any family. There are several options for financing a even a private, expensive college education: loans, a part-time job, merit-aid, outside scholarships, and out of pocket contributions are only five options. The people here who are complaining about having to pay $50,000 a year for college didn’t seem to have students that qualified for merit aid. Let’s say, without taking into account need-based aid (pretend it doesn’t exist), how a student could pay for a college that costs about $50,000 a year. </p>

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<li><p>The college that the student chooses to go to has a generous merit aid program and the student qualifies. My two favorites, GW and AU, have fantastic programs (GW is need-conscious merit aid, though). The students works hard, really hard, and manages to qualify for $25,000 in merit aid (check out the AU boards - this is quite possible). That brings the COA down to $25,000.</p></li>
<li><p>The student works throughout the year and over the summer. Since he or she doesn’t want to work a lot during the year, he or she makes about $5000 for the whole year. The student does get some spending money from his or her parents (and books are often included in the COA at these top schools), so $4000 of that goes toward the COA. That brings it down to $21,000.</p></li>
<li><p>The student doesn’t have any out of pocket contribution, but he or she has been able to win a couple of local scholarships (in my area, this is very easy, but of course it depends). That brings the COA down to $20,000.</p></li>
<li><p>The student is willing to take out $40,000 in loans in order to go to this expensive, private university. That brings the COA down to $10,000 a year.</p></li>
<li><p>Now it comes down to the out of pocket contribution. Clearly, many people think that one third of the income is too much. So, let’s put the figure at a trivial 5%. Now, I think it’s reasonable to say that ANY income could afford to give 5%. That means even someone making $10,000 a year could be expected to give 5%. That’s more than fair. Someone with a family that brings in less than $40,000, as you are implying, would be hard pressed to come up with $10,000. Their 5% contribution is $2000. At the rate of just 5%, that’s about $2000. Someone with a family making $180,000 or more has a 5% contribution of $9,000.</p></li>
<li><p>Now it comes down to financial aid. The student who makes $40,000 a year is left with $8000 to pay and the student who makes $180,000 a year is left with $1000 to pay, even though the two students did exactly the same thing and worked exactly as hard as one another. This is where need-based aid comes in to make up the difference. Those two students are of equal merit and made equal contributions to their own education - the last step depends solely on the ability of the parents to pay. Since the student is equal in merit and equal in hard work, and because each student’s family has altered their lifestyle about the same about (5%), need-based aid comes in to make the playing field even. Also consider that the student with the family income of $40,000 is more likely to be (but not necessarily) a minority or a first generation college student. So, the college/government decides to pay that last $8000 for the low-income student as opposed to the last $1000 for the higher-income student. Need-based aid is important because it essentially does the same thing as affirmative action: it levels the playing field. Both systems have antiquated means and can certainly be considered unfair, but they do so to create equal opportunities. What I’m saying is, in this model, both students have done exactly the same thing. But one is at a disadvantage because his or her parent(s) are of a lower-income. That’s where need-based aid comes in and that’s WHY need-based aid exists. It doesn’t exist to lower the COA for all families; it exists to lower the COA for students who have worked as hard but still find themselves at a disadvantage.</p></li>
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<p>The “college is a privilege” statement works equally toward students with low incomes and students with middle and upper class incomes. It’s a matter of applying to the right schools, working hard, making lifestyle sacrifices, taking out loans, and then, as a last resort, leveling the playing field.</p>

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<p>Here’s the problem with this description. If you haven’t saved or unable to scrape up at least a good portion of $50,000 a year for school, then either don’t go to a school that costs $50,000 a year or only go to a school that costs $50,000 a year if you are able to make other sorts of contributions (see above). Why do you have to go to a school that costs $50,000 a year? I don’t know where you live, but some states have really, really good in-state colleges (NY, CA, NC, PA, and MD College Park are just a couple of examples). If you aren’t fortunate to live in a state with a really good in-state school, a lot of schools similar in rank to Elon (I don’t know the ranking system well) have an COA of about $35,000. That’s a savings of $15,000 in one fell swoop. State schools are usually around $20,000 or $25,000, so that’s a savings of $20,000 or $25,000 in one fell swoop. </p>

<p>A student who graduates from a university that costs $35,000 is on the same playing field as a student who graduates from a university that costs $35,000. The US has never had a president who went to Elon? Be the first. Whatever you are trying to do, don’t say you have to go to one of these $50,000 universities just to do it. Work hard where you can afford it. Be the best in your field and let THAT take you to the top. Don’t depend on a brand-name school to get you a good job.</p>

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<p>I agree that this is a conundrum because in-state schools are not fully funded. Now it’s up to you, the student, to decide if you’d rather take out $88,000 in loans or if you’d rather go to a community college (I, for one, would rather take out $88,000 in loans). The only way to get around this problem would be to have looked at private colleges that offer great merit-aid programs. Unless you are a C student (which I am assuming you’re not, since you got into a $50,000 a year school), you WILL qualify for merit aid SOMEWHERE. </p>

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<p>My problem is, why can’t your family of $180k contribute at least $10,000 a year? This is why I’m asking you to make sacrifices. That person who makes $40,000 is going to make some serious sacrifices to come up with the $5,000 to $10,000 you suggest. That’s between 12.5% and 25%. That means that you are expecting a family of $180,000 to reasonably (your own word) contribute between $22,500 and $45,000. That not only pays for the state education entirely, it almost pays for the private education. You are saying that it would be perfectly reasonable for your family to contribute $22,500 to $45,000 a year for an education, and yet you are saying your family simply cannot do that because of subjective, personal reasons.</p>

<p>I sympathize with you. You are in a bad situation. I agree. It’s not pretty. Unfortunately, with an income of $180,000 comes a lot of fiscal responsibility. You either need to make sacrifices, pick the right schools, or take out almost $100,000 in loans. I’m sorry. THOSE are your options. The system may not seem fair to you, but that’s the system.</p>

<p>On a side note, do you mean a mortgage of $15,000 a MONTH? I can’t even fathom that. Then again, I live in a house that is smaller than a double-wide trailer and that was only $30,000 when my grandmother bought it fifty years ago. What kind of house do you live in!? I want to live there! ;-)</p>

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<p>^^ applicannot, your summary in the previous post basically says that folks who cannot afford $50,000 a year for a (elite / Ivy / top echelon) school should apply to other second-tier or state schools that cost less. Why does that advice only apply to the family making $130K, and not to the family making $50K? If you can’t afford it, then don’t do it. Ok I get that. But to tell the $130K family that they need to fork over $45-50K of their take home pay (or take loans so that the forking over is deferred, with interest), while requiring the family making $50K to make no adjustment whatsoever to their standard of living, seems to me to be the definition of socialism. </p>

<p>The issue here is that the current model asks some to contribute nothing from their take home pay, while others are required to contribute 1/3 to 1/2 of their take-home pay for the same education. Everyone should have to pay 10% of their income to go to college. If you make $50K, you can find $5K using the methods you aptly describe in your posting # 48 above, just as the guy making $130K can find $13K using the same methods. Those suggestions were for everyone, right? Or is it only me who is supposed to cancel my cable TV and go with basic cell phone service? </p>

<p>Sending me into the world after college with $200K in debt, while you walk out the door at the end of four years debt free, means that if I have kids, I will be poor enough to get them free rides to college (if the gravy train doesn’t derail before then) because I will never afford a home and will not begin saving until perhaps 10 years out of college. But if I can handle owing $200K in student loans at the end of four years, where is the justification for saying that you can’t? Won’t you get the same job offers as me? Can’t you work same as me to pay back the loans? I doubt it is the government saying that you are incapable of earning enough to repay the loans due to the fact that you grew up in a lower income bracket. What’s the justification for the inequity?</p>

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<p>This is because I assumed a “standard of living” income. I put that at $40,000 a year. It is tough, though not impossible, for a family of four or more to get by on $40,000 a year, depending on the area of the country. I agree that a family making $40,000 or so, and even less, should be able to make a contribution. However, I feel that the contribution should be bracketed. Let’s face it. Giving up 25% of your income is much easier at $150,000 than $40,000 because there are certain costs that we all face - transportation (public or individual), food, clothing, shelter, taxes - that are at a base level. If that base level is even as low as $25,000 for a family of four (try it - it sucks), that leaves an income of $40,000 with $10,000 left but a family of $150,000 with $125,000 left. I’m sorry if that’s “socialism” for you, but when colleges are WILLING to give out financial aid, I think it’s only fair to ask some people to give more than others.</p>

<p>Usually, a family with an income of $40,000 also cannot attend a public school. Even with financial aid, a public school can be expensive. This is why students from low-income families go to private schools - those private schools have DECIDED to give out good merit and need-based aid. A college is a private company that has made its own decisions on who to give money to - it’s like a bank can decide who to give a loan and who not to give a loan. There are federal programs available, some of which are available to everyone (PLUS loans and Stafford loans).</p>

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<p>It is the college’s choice to give out money, because they are a private company. It seems funny to me that you would hold “socialism” in a negative light and yet you are suggesting that colleges be forced to make the same commitments to each individual or that the government take them over in order to enforce your plan. Colleges have a CHOICE just like individuals have a CHOICE. They are private businesses. I don’t really like the plan and it’s clear that you and many other posters don’t, but unfortunately, that leaves us with three options: deal with the system, wait until colleges themselves decide to change, or apply federal pressure not unlike your “socialist” standards.</p>

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<p>Here’s a justification for you: you have the option to go to a school that’s NOT going to cost you $200,000 in loans. Why would a college CHOOSE to give need-based aid to a family that they deemed - and have the right to deem - not needy? Go to a college that’s cheaper or apply to a school that gives out great merit aid, just like a low-income student chooses to apply to schools that are cheaper or schools that have great need-based financial aid.</p>

<p>In short, the system we have now is capitalism. Private colleges are private businesses that can make their own choices freely. If you were to require colleges to give out money to students that covered all but 10% of that student’s income, that would certainly be socialism - in fact, it would be communism (assuming by socialism you meant Swedish models). It would be mandating private businesses to do something, therefore making them less private.</p>

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<p>applicannot your analysis of the dilemma of the $40,000 app
is pretty accurate. Since in many states this app can’t afford
the flagship state they are forced to seek a private school that
is willing to accept them with need based aid. Unfortunately that
college is becoming harder and harder to find, forcing low income
apps down the academic “food chain” into the lower level states
and community colleges.</p>