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Financial Aid Not Just for Low-Income Families

Think you make too much for your child to get a need-based grant or a scholarship? Even families with six-figure incomes qualify at some schools. 

Adam Zoll, 03/28/2013

Spring is the season when college admission hopes are realized or dashed. For many high school seniors, the next few weeks will determine not only which schools offer to enroll them, but how much they'll be asked to pay for the privilege.

A key part of this equation often is whether admission includes an offer of financial aid and the amount awarded. For upper-income families, financial aid may be an afterthought. They may not even bother applying, assuming they make too much to qualify. But financial aid comes in many forms, and even higher-income families get aid in certain circumstances.

Whether your child is headed to college in the fall or will just be starting preschool, understanding how financial aid works and the role your family income plays can help you better prepare a college financial plan.

Aid Helps Reduce Some--But Not All--of the Burden
First, let's go over some financial-aid basics. About two-thirds of undergraduate students receive some form of financial aid. However, about 38% of this aid comes in the form of federal loans, which must be repaid. (Yes, the federal government considers loans--both subsidized and non-subsidized--to be a form of student aid in that they help students who might otherwise not be able to afford college.) About half of all undergraduate students received grants--which do not need to be repaid and thus amount to free money to attend college--during the 2007-08 academic year, the most recent available from the U.S. Department of Education. Many students receive both federally subsidized loans and grants.

Even with loans and grants widely available, the amount provided is rarely enough to cover all college costs. In fact, during the 2011-12 academic year, college undergraduate students received an average of $13,218 in financial aid per full-time equivalent student (a calculation that incorporates part-time students into the mix), including an average of $6,932 in grants and $5,056 in the form of federal loans, according to the College Board. (Private student loans were not included in the study.) By comparison, average published college costs--including tuition, fees, and room and board--at four-year public colleges averaged $17,136 (in-state) and $29,703 (out-of-state) that year, while the same costs at not-for-profit private colleges averaged $37,971.

Since federal student loans are readily available--in particular unsubsidized Stafford and Parent Plus loans--and since most families are more interested in financial aid that does not have to be repaid, we'll focus our attention on grants and scholarships and how much income is too much to qualify for these benefits.

Grant Availability Varies by Source
Bear in mind that grants and scholarships can be need-based or merit-based, and come from four primary sources: the federal government, state governments, private sources, and the colleges themselves. Because each source uses its own criteria for providing aid, it's difficult to say with certainty that students from mid- to upper-income families will or won't qualify in all cases. However, a closer look at the numbers can lead us to some conclusions:

Federal grants targeted at lower-income families: The table below shows the percentage of undergrads receiving federal grants and the percentage receiving federal loans by family income for the 2007-08 academic year (the most recent data available):

Adam Zoll is an assistant site editor with Morningstar.com


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