A Failing Financial Aid System Keeps Students Out of College

Mary Borg, an economist at the University of North Florida in Jacksonville, says unrealistic aid rules are one reason her low-income students joke that UNF stands for "U Never Finish." Many of the biggest aid programs will give money only to students who attend full time. But even those programs rarely give enough to fully fund a student's education. So low-income students end up having to work extra hours to cover the costs, which sometimes forces them to drop a course and go part time, a status that disqualifies them from receiving the rest of their aid and forces them then to work even more hours and take even fewer classes. "We're making the kids from low incomes really struggle," Borg says, while richer kids who can afford to attend full time and get good grades often qualify for full-tuition merit scholarships. "It's a reverse Robin Hood effect," she says. Donald Hossler, an Indiana University professor of educational leadership who also managed the college's financial aid programs, says, "It's like the solutions and problems got shaken up in a garbage can."

Despite the difficulty of navigating the financial aid system, a record 9 million parents and students have completed federal applications so far this year—up 15 percent from last year. That also means a record number of students are likely to be disappointed this year. Because there simply isn't enough grant money to go around, governments and colleges are asking families to kick in what many—such as the Rudolphs of Portland, Texas—are finding to be simply unaffordable amounts of money. Solidly middle class, with a house, pickup truck, and health insurance, the Rudolphs completed a FAFSA that showed Jayme and Rick earned about $84,000 last year from jobs at a natural gas company and a small family business. The federal government calculated they should be able to pay about $7,500 apiece for their two older daughters' college educations. Unfortunately, their oldest daughter, Meagan, received no grants to attend Texas A&M University-Kingsville for the coming year, leaving the family with bills in excess of $15,000 just for her. That meant the Rudolphs would have to come up with more than $20,000 to send both daughters to college this year, a prospect that made Jayme "want to tear my hair out."

Out of pocket. What governments and schools think families can afford to pay differs dramatically from the financial realities most households face. The federal government, for example, calculates its Expected Family Contribution by assuming that a family of five, like the Rudolphs, should be able to set aside for college at least 22 cents of every dollar of income above the first $36,000 or so that it earned. The government arrived at that number by looking at the spending patterns of a low-income family in 1967, then adjusting that 41-year-old budget upward by the consumer price index. Never mind that today's parents are under far more pressure to save for their own retirements, face new kinds of health costs, and are paying unprecedented gasoline and utility bills.

The Rudolphs' budget, for example, has been wiped out because their young son was recently diagnosed with autism spectrum disorder and requires expensive therapy sessions that aren't covered by medical insurance. The Economic Policy Institute calculates that a more realistic minimum budget for self-sufficiency—paying for health insurance, living in a safe house, etc.—for a five-member family in the Corpus Christi region last year was $55,200. In high-rent cities such as Washington, San Francisco, and Boston, it was over $80,000.

The final insult: There's not even enough grant money available to make sure that most parents have to pay out only their EFC. The federal Pell grant, the biggest and most common grant awarded solely to lower-income students, is capped this year at $4,731. That will take care of most costs at community colleges but doesn't begin to cover, say, the $23,000 in-state price tag at the University of Michigan. Fewer than 100 of the nation's 4,300 colleges are able to cobble together enough federal, state, and school money to make sure parents have to pay only their EFC. The rest, on average, come up with only enough to ask the parents for about $5,300 more than their EFC. Most also expect the student to kick in anywhere from $2,000 to $4,000 in earnings and loans. Many, especially big private universities, add $10,000 to the parents' EFC.