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How Low Income Undergraduates Financed Postsecondary Education: 1992-93


For students considering pursuing a postsecondary degree or certificate, one of the most critical deciding factors is their ability to marshal the necessary financial resources. Paying for undergraduate education has always been seen as primarily the family s responsibility to the extent they can afford to do so. Tapping their own resources, students and their families use current income, savings, and borrowing against assets. Students sometimes work while still in high school to earn money for college, and the majority work while enrolled in postsecondary education. Parents may start saving for their children s education many years before the child enrolls. Sometimes they take an additional job or borrow against assets such as a house. Low income families rarely have substantial savings to draw upon or assets to borrow against, and are unlikely to have very much discretionary income after paying for housing, food, clothing, and other basic necessities. In short, without financial assistance, postsecondary education would be out of reach for most low income students.

The federal government has established a broad range of student financial aid programs to provide low income students with the opportunity to participate in postsecondary education. Some of this aid has been in the form of grants, and some in the form of loans and work study. States and institutions do their part, too. Many states provide substantial funding for postsecondary institutions, allowing them to keep tuition well below the actual cost of educating a student, and some have their own student financial aid programs as well. Institutions and other organizations have also helped by providing large amounts of need- based aid. In 1992-93, the federal government awarded $23.4 billion dollars in general aid to postsecondary students; states, $2.1 billion; and institutions and other organizations, $7.3 billion.

This report examines how low income students pay for their postsecondary education, focusing on the importance of financial aid. The report begins by describing the demographic and enrollment characteristics of low income undergraduates and by comparing their characteristics to those of other undergraduates. It then examines low income students educational costs, financial need, and their use of financial aid and other sources of financial support. Finally, it compares the persistence and attainment of low income and other students.

The primary source of data for the analysis was the 1992-93 National Postsecondary Student Aid Study (NPSAS:93). These data are supplemented with data from two other postsecondary education surveys: NPSAS:90 for information not available from NPSAS:93 on students reasons for choosing institutions; and the Beginning Postsecondary StudentsLongitudinal Study (BPS:90/94) for information on persistence and attainment for NPSAS:90 students who began their postsecondary education in 1989-90.

Definition of Low Income

For this analysis, low income undergraduates are defined as students with a family income below 125 percent of the federally established poverty threshold for their family size. For 1991, the poverty thresholds and 125 percent of these levels were as follows:

            Family     Poverty      125 percent of the
             size      threshold    poverty threshold
              1          $7,086        $8,858
              2           9,165        11,456
              3          10,860        13,575
              4          13,924        17,405 
              5          16,456        20,570
              6          18,587        23,234

This definition has several advantages. First, it is independent of who goes to college. In other words, the low income students in this analysis are poor relative to the general population, rather than just the lowest income students who enroll in postsecondary education. Second, the federal poverty levels are stated in terms of both income and family size, allowing for appropriate comparisons between single students and students in larger families. Third, the poverty levels are adjusted for inflation and updated annually, permitting meaningful comparisons over time.

The decision to use 125 percent of the poverty threshold as the cutoff for this study was partly practical, reflecting a desire not to go too far above the poverty level, but at the same time to get a large enough sample to be able to find differences among subgroups. It is worth noting that 125 percent is also a commonly used cutoff point for reporting on low income families (see the Statistical Abstract of the United States, for example).

Overall, 20 percent of all undergraduates enrolled in 1992-93 were low income according to this definition (table 1). Low income students made up roughly similar proportions of the total student population at public less-than-4-year and 4-year institutions, and at private, not-for-profit 4-year institutions (17 percent to 19 percent) (figure 1). Private, for-profit institutions, in contrast, had a much larger concentration of low income students (42 percent). However, relatively few students (only 8 percent of all undergraduates) enrolled in this type of institution (see table 3).

Table 1 Percentage distribution of undergraduates according to income status, by selected student and institutional characteristics: 1992-93

                             Low income         Not low income
  Total                          20.2                79.8        
 Male                            17.9                82.1        
 Female                          21.9                78.1 
Race ethnicity                                                   
 American Indian/Alaskan Native  35.2                64.8        
 Asian/Pacific Islander          21.8                78.2        
 Black, non-Hispanic             32.8                67.2        
 Hispanic                        30.6                69.4        
 White, non-Hispanic             17.0                83.0        
Dependency status                                                
 Dependent                       11.5                88.5        
 Single independent              30.7                69.3        
 Independent with dependents     25.8                74.2        
Single parent status                                             
 Not a single parent             17.1                82.9        
 Single parent                   57.1                42.9        
Institution type                                                 
 Public less-than-4-year         17.4                82.6        
 Public 4-year                   19.4                80.6        
 Private, not-for-profit 
  less-than-4-year               27.9                72.1                               
 Private, not-for-profit 
  4-year                         18.2                81.8                            
Private, for-profit              42.2                57.8        
Degree program                                                   
 Associate's                     19.0                81.0        
 Bachelor's                      18.3                81.7        
 Certificate/formal award        29.3                70.7        
 Other undergraduate             20.2                79.8        
Attendance status first term enrolled in 1992-93                 
 Full-time                       24.7                75.3        
 Part-time, half-time or more    20.5                79.5        
 Part-time, less than half-time  10.9                89.2 
Delay in postsecondary enrollment                                
 No delay                        14.9                85.1        
 1 year                          23.3                76.7        
 2 4 years                       28.9                71.1        
 5 years or more                 23.8                76.2        

NOTE: Percentages may not sum to 100 due to rounding.

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

Figure 1 Percentage of undergraduates who were low income, by type of institution: 1992-93

Certain groups were particularly likely to be in the low income category, most notably minorities and single parents (table 1). In 1993-94, about one-third of black, non-Hispanic, Hispanic, and Native American undergraduates and more than half (57 percent) of single parent undergraduates were low income. In contrast, 17 percent of white, non-Hispanic undergraduates and 17 percent of undergraduates who were not single parents were low income.

Income and Dependency Status

Although the definition of low income used in this analysis has no connection to the financial aid system, it is important to understand that whether or not a student was categorized as low income was related to the student s dependency status for financial aid purposes. Whose income is counted in the calculation of the student s family income varies with dependency status. From a financial aid perspective, there are three quite distinct groups of undergraduates:

1) Dependent students (48 percent of all undergraduates)

Undergraduates less than 24 years old are considered dependent for financial aid purposes unless they meet one of the criteria for independence described below, which relatively few do. The vast majority (87 percent) of undergraduates less than 24 years of age were considered financially dependent in 1992-93 (table 2). Under current financial aid policy, the parents of dependent students are expected to pay for their children s education to the extent they can afford to do so. Therefore, dependent students eligibility for financial aid takes into account parents incomes and other aspects of their financial circumstances whether or not the parents actually contribute.

For this analysis, dependent students who came from 4-person families were defined as low income if their parents income was less than $17,405. The level was lower if the family was smaller and higher if the family was larger. In 1992-93, 12 percent of all dependent undergraduates were from low income families (table 1).

Table 2 Percentage distribution of undergraduates according to dependency status, age, and marital status, by income and dependency status: 1992-93

                                                   Low income
                       All    Not low                   Single      with
                     students income  Total Dependent independent dependents
  Total               100.0   100.0   100.0   100.0    100.0      100.0 
Dependency status                                               
  Dependent            47.9    51.2    26.2   100.0      (*)       (*)   
  Single independent   20.5    18.3    32.0    (*)     100.0       (*)   
  Independent with    
     dependents        31.6    30.5    41.9    (*)       (*)      100.0                                         
Dependency status (less than 24 years old)              
  Dependent            86.9    93.9    52.4   100.0      (*)       (*)   
  Single independent    5.5     2.6    20.1    (*)     100.0       (*)   
  Independent with  
    dependents          7.6     3.5    27.5    (*)       (*)      100.0                                                 
  Less than 24 years   55.1    54.5    50.1   100.0     31.4       33.0 
  24 29 years          17.1    15.7    25.6    (*)      46.2       26.0 
  30 years or older    27.8    29.8    24.3    (*)      22.4       41.0 
Marital status                                                  
  Not married 
    or separated       74.5    72.4    82.2    97.7    100.0       59.3 
  Married              25.5    27.6    17.8     2.3     (*)        40.7

* Not applicable.

NOTE: Percentages may not sum to 100 due to rounding. Percentages for all students include students with missing income data. Therefore, the percentages for all students may be higher or lower than the percentages for low income and not low income students. For example, the percentage of all students less than 24 years old (55.1 percent) is greater than the percentages for both low income students (50.1 percent) and not low income students (54.5 percent).

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

2) Single independent students (20 percent of all undergraduates)

Undergraduates 24 years or older are considered financially independent of their parents for financial aid purposes, regardless of their parents incomes and whether or not their parents provide them with any financial assistance. In 1992-93, about two-thirds of single independents were at least 24 years old and therefore were considered independent simply because of their age (table 2). For single independent students, family income includes only the student s income.

Undergraduates less than 24 years old were considered financially independent of their parents if they were not claimed as a tax exemption by their parents for the 2 years before the beginning of the academic year for which they were applying for financial aid and had at least $4,000 in financial resources; if they were military veterans; if they were wards of the court; or if both parents were deceased and they had no legal guardian. In 1992-93, only 6 percent of all undergraduates less than 24 years old met one of these criteria.

About one-third (31 percent) of all single independents were defined as low income for this analysis (that is, they had incomes of less than $8,858) (table 1). Some of these students may have had low incomes temporarily because they were enrolled in postsecondary education and not working or only working a limited amount. Others may have had low incomes on a longer term basis because they had difficulty finding steady work or a well-paying job (they might have been returning for further education to improve their employment prospects). Low income single independents may or may not have come from disadvantaged backgrounds; their parents incomes were not considered in assessing their need for financial aid.

3) Independent students with dependents (32 percent of all undergraduates)

Undergraduates with dependents of their own are considered financially independent of their parents regardless of their age. Spouses count as dependents except in the rare instance where a student is married and still claimed as a tax exemption by his or her parents; in such cases, the student would still be considered dependent. In 1992-93, 32 percent of all undergraduates and 8 percent of undergraduates under 24 years of age were independents with dependents (table 2). For purposes of determining eligibility for financial aid, a married independent student s family income includes the student s and his or her spouse s income.

Twenty-six percent of all independents with dependents were in the low income category (table 1). This group includes a relatively large number of single parents (59 percent of low income independents with dependents were not married or were separated) (table 2). Also likely to be in the group of low income independents with dependents are married students with spouses who were also students and married students with children whose spouses worked only part time or not at all.

To summarize, figure 2 shows the distribution of the entire undergraduate population by income and dependency status in 1992-93. Almost half (48 percent) of all undergraduates were dependent. However, relatively few of them came from low income families. Larger proportions of single independents and independents with dependents were low income. Because spouses are considered dependents for financial aid purposes, many students in the independents with dependents category have a spouse who works. Thus, it is not surprising that a greater proportion of single independents, who have only their own incomes to rely upon, would be in the low income category.

Figure 2 Percentage distribution of undergraduates by income and dependency status: 1992-93

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