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How Low Income Undergraduates Financed Postsecondary Education:1992-93

Financial Need

Method for Assessing Financial Need

To assess a student s need for financial aid, a financial aid officer starts by establishing an appropriate budget that takes into account direct educational expenses and reasonable living expenses. Direct educational expenses include tuition, fees, books, and supplies. Living expenses include room and board if living on campus, or rent and food if living off campus; personal expenses; transportation; and any special items a student requires, such as child care or special equipment needed because of a handicapping condition.

What the family is expected to pay is calculated using a formula that takes into account family income and assets, the size of the family, and the number of other family members enrolled in postsecondary education. This calculated amount becomes the expected family contribution (EFC) and is independent of where the student chooses to enroll. In other words, the EFC is the same regardless of whether the student chooses an institution with a tuition of $1,500 or $15,000. The student is eligible for the amount of financial aid needed to make up the difference between the EFC and the budget, although there is no guarantee that the financial aid funds will be available to meet the need fully.

Over the years, the methodology used to calculate the EFC has changed many times as policymakers have attempted to achieve both simplicity and fairness and to ration limited funds. Each adjustment to the formula has changed who is eligible for financial aid and how much. The debate over whose income and assets should be included and how they should be treated continues. Some issues that still exist include the age of the student at which the parents income should no longer count; how a noncustodial parent s or stepparent s income should be treated when parents are divorced; what assets should be sheltered; what percentage of their assets parents should be expected to contribute; and how much the student should be expected to earn.

In 1992-93, there were minimum EFCs (although these have since been eliminated). The minimum EFC for dependent students was $700 for the first year and $900 afterwards; for single independent students, it was $1,200. There was no minimum EFC for independent students with dependents.

Figures 6-8 show the relationship between the average budgets for full-time, full-year students at various types of institutions and the average EFCs at each income level in 1992-93. The difference between the budgets and the EFCs was the average amount of financial aid for which students were eligible at each income level.

On average, families with incomes under $50,000 would have been eligible for some financial aid to support a dependent full-time, full-year undergraduate at an average-cost postsecondary institution of any type in 1992-93 (figure 6). With higher incomes, families were eligible for financial aid only at the more costly institutions. Full-time, full-year single independent students with incomes under about $20,000 would have been eligible for some financial aid at an average-cost postsecondary institution of any type (figure 7). Independent students with dependents of their own had the lowest EFCs, on average, because they had no minimum EFC. With incomes under $50,000 they would have been eligible for financial aid to meet the average costs of attending any type of institution full time, full year (figure 8).

The discussion of costs and financial aid that follows is limited to low income students who attended full time, full year because of the difficulty of making comparisons among students whose attendance patterns vary as widely as those in the group of students who attend part time and/or part year. Forty-four percent of low income dependent students attended full time, full year, as did 38 percent of low income single independents and 27 percent of independents with dependents (table 3). The discussion is also limited to undergraduates who attended only one institution, because of the need to have a consistent picture of aid and costs. One percent of all full-time, full-year undergraduates attended more than one institution during the 1992-93 academic year.

Figure 6 Average expected family contribution for dependent students, by family income: 1992-93

Figure 7 Average expected family contribution for single independent students, by family income: 1992-93

Figure 8 Average expected family contribution for independent students with dependents, by family income: 1992-93

Budgets and Costs

Turning specifically to low income students attending full time, full year, average budgets ranged from $8,100 at public less-than-4-year institutions to $15,500 at private, not- for-profit 4-year institutions (table 7). For dependent full-time, full-year low income students, the average budget was about the same as the average student-reported costs at each type of institution, but for their independent counterparts (both single independents and independents with dependents), the average student-reported cost tended to be higher than the average budget.

Table 7 Average cost, budget, expected family contribution, financial need, and percentage with need for low income undergraduates attending full time, full year, by dependency status and type of institution: 1992-93

                     Attendance-           Expected    
                      adjusted   Student    family     Financial Percent
                    total costs1 budget2  contribution3 need4    with need
   Total               $12,631   $10,916    $1,607     $9,421    99.4
Institution type                                               
 Public less-than-
   4-year               10,085     8,106     1,067      7,035   100.0   
 Public 4-year          11,414     9,696     1,805      8,004    99.2
 Private, not-for-
   profit less-than-
    4-year              12,078     10,061      999      9,062   100.0
 Private, not-for-
  profit 4-year         17,256     15,478    2,148     13,594    98.8
 Private, for-profit    14,068     12,929    1,181     11,811    99.7
   Total                11,347     10,957    1,924      9,270    99.3                                                                                           
Institution type                                                  
 Public less-than-
  4-year                 7,230      7,156    1,319      5,837   100.0
 Public 4-year           9,876      9,316    2,044      7,515    99.1
 Private, not-for-
  profit less-than-
   4-year                9,105      9,303    1,610      7,693   100.0
 Private, not-for-
  profit 4-year         16,063     15,452    2,140     13,743    99.2                                           
 Private, for-profit    12,144     12,921    1,613     11,308   100.0   
                            Single independent
   Total                12,627     11,224    2,493      8,834    98.8                                                                                           
Institution type                                               
 Public less-than-
  4-year                 9,438      8,506    2,194      6,304   100.0                                     
 Public 4-year          11,458      9,949    2,370      7,637    98.9
 Private, not-for-
  profit less-than-4-year  -          -        -          -       -
 Private, not-for-
  profit 4-year         18,116     16,120    3,105     13,207    97.5                                                                       
 Private, for-profit    13,906     13,321    2,583     10,995    99.0                                     
                        Independent with dependents
   Total                13,941     10,543      337     10,201   100.0
Institution type                                                  
 Public less-than-
  4-year                11,740      8,277      273      8,004   100.0                                     
 Public 4-year          13,940      9,871      367      9,504   100.0            
 Private, not-for-
  profit less-than-
   4-year               14,311     10,682      261     10,420   100.0                                                  
 Private, not-for-
  profit 4-year         18,584     14,393      466     13,928   100.0                                                                      
 Private, for-profit    14,767     12,735      339     12,383   100.0                                     

- Sample size was too small for a reliable estimate.

1 Student-reported annual living expenses adjusted for months enrolled.

2 Budget established by institution.

3 Amount family expected to pay.

4 Student budget minus expected family contribution. In this table, the difference between the average student budget and the average expected family contribution is not exactly equal to the average financial need because of missing data for each variable.

NOTE: Averages computed including zero values.

SOURCE: U.S. Department of Education, National Center for Education Statistics, 1992-93 National Postsecondary Student Aid Study (NPSAS:93), Undergraduate Data Analysis System.

Expected Family Contributions

The average EFC for low income students who attended full time, full year was $1,600 in 1992-93 (table 7). Because the EFC is independent of the cost of attending, the differences in average EFCs across institution types reflect the differences in the income, family size, and dependency status of the students who attended each type of institution. Among low income students attending full time, full year, the average EFC was greatest ($2,500) for single independent students, who are expected to contribute a substantial part of their income and savings to supporting their educational costs. The average EFCs for dependent students and independent students with dependents were about $1,900 and $300, respectively.

Financial Need

A student s need for financial aid is the difference between the institutionally determined budget for the student and the student s EFC. Virtually all low income students enrolling full time, full year (99 percent) had financial need in 1992-93 (table 7). The average need (including the few with zero need) was $9,400. As would be expected given cost differences, the average need for low income students varied by type of institution, ranging from $7,000 at public less-than-4-year institutions to $13,600 at private, not-for-profit 4-year institutions.

Among low income undergraduates enrolling full time, full year, dependent and single independent students had similar financial need, on average ($9,300 and $8,800, respectively). The average financial need of independent students with dependents was somewhat greater ($10,200). This reflects the fact that they had no minimum EFC and may also be related to the types of institutions they attended. Independents with dependents had a greater propensity than other students to attend the higher cost private, for-profit institutions; however, they were also more likely to attend the less costly public, less-than-4-year institutions (see table 3).

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