High incomes limit financial aid

Dear Liz: As an avid reader for years I have never felt as compelled to write as I did after reading your column regarding college financing. I disagree that college financial aid is based primarily on income or that “typically [parents are required to] contribute less than 6% of eligible assets.”

We filed a Free Application for Federal Student Aid for our daughter, and our expected family contribution was calculated at $43,000. The school offered my daughter just $2,000 in work study, at a university with a $38,917 annual tuition. Our combined income is $175,000 and our liquid savings (not including retirement accounts) is $145,000.

We could pay 6% of our income (about $12,000) or 6% of income plus savings ($19,000) per year without taking loans, but not $38,000. I have attended several “paying for college” seminars and found their estimated contributions quite sugar-coated compared with the reality.

Rather than paying 6%, is the reality 25% of our income? Please let me know if we have done something wrong, and how to rectify it.

Answer: The 6% limit on eligible assets is not a cap on how much you’ll have to pay for college. As the original column said, income weighs more heavily in financial aid calculations than assets, and your income is high.

The federal financial aid formula assumes families with high earnings have more disposable income to pay for college than lower-earning families. The formula also assumes high-income families have had ample opportunities to save for college, whether or not they actually have.

You could use the net price calculator on the college’s website to see whether your liquid savings are having an effect on your expected family contribution. At some schools, using savings to pay down a mortgage or other debt could result in a lower expected contribution.

But you still might not get aid, even if you could move the needle on your expected contribution. Many colleges “gap” their students by not supplying enough aid to meet all their needs. And while some private colleges offer merit (rather than need-based) scholarships to attract the children of wealthier parents, top-tier schools tend not to, because they know they can attract excellent candidates without such help, said Lynn O’Shaughnessy, author of “The College Solution: A Guide for Everyone Looking for the Right School at the Right Price.”

Even if your family doesn’t have financial need according to the formula, your daughter is still eligible for federal student loans of as much as $5,500 in her freshman year. Federal student loans are flexible debt with fixed interest rates and many repayment options, so they shouldn’t be feared, especially in reasonable amounts. If, however, you would have to borrow much more, and that borrowing would interfere with your plans for retirement or other financial goals, you probably can’t afford this school and need to start looking for colleges you can afford.


  1. I am sorry but my husband may earn a lot but the kids will need to pay for a lot their education so they will understand the cost of it. For colleges to assume that mom and dad are fitting the bill is not right. Kids need to have an active role in paying for their college so they don’t waste money.

    • Thanks for commenting. Your husband’s high income will limit how much financial aid your kids can get. That’s just reality, right or wrong. Your kids may rise to the challenge of trying to pay education bills that have doubled in real terms since 1980, or they may join the many who drop out because they have to work too many hours, or the legions who have borrowed more than they can repay. I agree that children should help with their education costs with part-time jobs and summer work. Expecting them to pay all or most of the bill, though, may be expecting too much.

  2. Wow! $175K per year and you don’t feel as though you have enough to send your kids to school and that the kids should be paying “a lot” of the cost?? I am speechless… Try paying the bills, the mortgage, saving for college and for retirement on about a quarter of that.

  3. The problem is that the colleges don’t require the parent’s income to be reported, the federal government does on the FAFSA form. Colleges make this assumption because most parents do contribute, at least in part, to their children’s education. As someone who had to pay their own way (because of my parent’s inability to contribute), despite their higher incomes, I can tell you that it made zero difference to my university (a state school) that my parents contributed nothing to my education. There was little to no adjustment to help me (the adjustments that were made were just for more loans) despite multiple visits to financial aid every semester.

    Students can be accountable for the cost of their education by being held responsible for some of the cost of education. Based on my experiences as a recent college graduate who paid my own way, if your family has the means to contribute and you don’t at all I find that behavior highly immoral given the real cost of higher education these days. You are not teaching your child a lesson about responsibility, but rather setting them up for failure (academic or financial or both).

  4. My husband took out student loans for his education, and despite BOTH his parents being on disability the government deemed him ineligible for Pel grants. Guess that part time job he had delivering pizzas was more lucrative then he thought! So here we are, a whole heap in student loan debts later, unable to save for OUR kids college because we are so busy paying for his. My kids better work hard to get scholarships because they are pretty much on their own for college at this point.
    Sallie Mae is a mean !$%&*.

  5. I tried college right out of high school with mommy and daddy footing the bill I didn’t understand things. I dropped out right after my mother’s death. I am now 40 going back and really understand the value. We will help our kids and my husband is prepared to pay for my 2 older children but they know that the parents all 4 of us will only foot the bill to a point. We make over $200,000 year but I also take care of my dad and helping my now single parent sister. I guess we are trying to make sure that the kids don’t think that because we have this they get this lifestyle right out of school. We worked for it, we also do without the latest and greatest things to have what we do. I still won’t buy a brand new car because I refuse to buy something that will instantly lose value.