September 10, 2008

Will my kids be eligible for financial aid for college?

The other day Free Money Finance posted to say We're Getting Zero Financial Aid for Our Kids

When a child goes to college they figure out how much the student and parents ought to be able to afford to spend towards the students college expenses based on their income and assets. Financial aid eligibility is a basic formula of the Cost - Expected Family Contribution (EFC) So if the college costs are $20k and your EFC is $5k then you're eligible for up to $15k of aid. Now this doesn't necessarily mean you'll get that much aid but that you might need it.

I found an EFC calculator on the College board site. I found a second calculator for EFC at the site. You can use these calculators to determine how much your family is expected to contribute to college.

The calculators ask for your annual income, cash on hand and other assets. They count the value of real estate investments. With my current income level and my investments the two calculators estimate that my families expected contribution would be $32k to $35k just for the parents contribution.

I have a good income and assets so I can afford quite a bit to pay for college $30k a year is a lot to spend though. But still the formula is to figure financial need and I can't say I need aid. If you have a high income and assets then you're unlikely to qualify for any financial aid.

From this Financial Aid 101 guide at the Journal of Accountancy it says:
"Families with high income and assets often are ineligible for financial aid. If parents’ income is in excess of $100,000 and assessable assets are higher than $100,000 (referred to as the 100-100 rule of thumb), their EFC (of $30,139) significantly reduces their eligibility for financial aid."

So will my kids be eligible for financial aid? No, probably not.

Photo credit by Nav A.

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