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Report on families and financial aid

The federal report, “Middle Income Undergraduates: Where They Enroll and How They Pay for Their Education,” was one of the first detailed studies of these families.

Even though 31 percent of middle-income families have the entire cost of attendance covered by financial aid, there is widespread angst among middle-income families that while they earn too much to qualify for grant assistance, they are too financially strapped to pay the spiraling cost of higher education.

For the purposes of the federal study, middle income is defined as those families with incomes between $35,000 and $70,000. The good news is that 52 percent of these families received grants, while the balance received loans. Other sources of aid, including work-study, also helped close the gap.

So how did these families do it?

Finding student aid

The best place for middle-income families to start the financial aid information search is their high school guidance office. It has a lot of good information on aid and valuable leads on local scholarships. Most guidance officers report that there are far fewer applicants for these locally based scholarships than one would expect. Read the literature that they send home, and be sure to apply. A few of those $500–$1,000 scholarships add up!

Second, be sure to attend a financial aid for college awareness program. If your school does not offer one, contact your local college’s financial aid office and see when and where they will be speaking. You can get a lot of “inside” information on how the process works.

Next, be sure to file the correct applications for student financial aid. Remember, each school will have a different set of requirements. All schools will require the FAFSA. Many higher-cost, private colleges will also require the PROFILE application. Other schools will have their own institutional aid application. Watch the deadlines! It is imperative that you meet the school’s published application deadline.

Tax credits as a form of financial aid for college

An often overlooked source of student financial aid are the tax credits given to middle-income families. Rather than extending eligibility for traditional sources of grant assistance, Congress and the president have built into the federal tax system significant credits for middle-income families. While it may take 7–8 months to get, families in this income group can safely count on receiving about $1,500 per student. This is real money in your pocket. You do not need to itemize your deductions to get this credit.

Lower-cost schools and financial sacrifices

One way a family can make college more affordable is by choosing less expensive colleges. In this income group 29 percent choose to enroll in low- to moderate-cost schools. These include schools where the total cost is less than $8,500 per year. In this sector we find community colleges and lower-priced state colleges and universities.

But almost half of middle-income families choose schools in the upper-level tier, with costs ranging up to $16,000. The remaining 23 percent enrolled at the highest-tier schools, with costs above $16,000. Clearly, while cost is a factor, middle-income families are not limiting their choices based on cost alone.

The report shows that families pay these higher costs with a combination of family assets, current income, and long-term borrowing. This is often referred to as the “past-present-future” model of financing. Just by looking at the Expected Family Contributions it is clear that there is a significant gap in what families need and what the student aid process can provide. Families are closing this gap by making financial sacrifices, especially if they think their child is academically strong.

Finding the right financial aid information for you

Millions of middle-income families send their children to college every year and only 8 percent attend the lowest-priced schools. By using the concept of past-present-future financing, institutional assistance, meaningful targeted tax relief, and student earnings, you can afford even the highest-cost schools.