July 8, 2012

You Are Not Entitled to Financial Aid

Pardon me for a few minutes while I get out my soap box and vent a little bit...

What would you do if I told you that I was making a 6 figure salary and I was surprised that the government wouldn't give me food stamps?

What if I was sitting on a $500,000 house and had $500,000 in the bank and I was upset that I didn't qualify for a welfare check?
What if I got mad that my unemployment checks end when I got a job?
What if I retired with  $2,000,000 in the bank and then complained loudly because the government wouldn't pay for my nursing home bills when I became ill?

I think usually most people would consider me unrealistic and simply confused if I thought I ought to qualify for government handouts in those situations.

Now lets look at similar situations where people complain about not qualifying for financial aid:

We can't get a Pell grant cause we make over $100,000.
The government won't give us any aid cause they say we have too much money.
My son worked last summer and now he's being punished because they reduced his aid.

People say stuff like this all the time with a straight face and honestly feel somehow as if they're being abused by the government cause they don't get a free check.

[edit : I should point out that I'm mostly directing this little rant of mine at the parents who whine about not qualifying for aid.   Financial aid is based on the parents assets and income level.  There are instances where the kids can get a raw deal if their parents don't qualify for aid due to income but refuse to pay or manage their money poorly.  Being the child of a financially irresponsible parent is another issue.]

Financial aid is need based.

That means that financial aid is for people who have financial need.   If you have a good paying job and money in the bank then you do not have financial need and you won't qualify for financial aid.  
Financial need does not mean that you need some money because you already spent all of your money.  Financial need does not mean financial want.   If you have a solid income and / or financial assets then you are able to contribute to your own college costs.  

Let me repeat this so it is emphasized.. ..   Financial aid is for people who have financial need.

Nobody is entitled to financial aid.

I find it quite surprising how many people really feel ENTITLED to financial aid.   Some people actually sound quite upset and complain loudly about how they couldn't get financial aid.   People talk about being 'punished'

Financial aid is a free handout from the government, its really no different than food stamps or welfare checks.   Its not an insurance system and you didn't pay into the financial aid program.   It doesn't operate like social security or unemployment benefits.   Nobody promised that everyone would get free government money to pay for college.

Institutional financial aid is different

Some financial aid comes straight from the university.   That financial aid is handled by the university based on whatever rules they feel like making.   If you have a beef or complaint about the financial aid system that the university imposes then that is really a complaint about the university in question.   This is particularly true about private universities.   Its up to them to dole out their free money however they see fit.   If you don't like it then go to another university. 

Public universities and private are already heavily subsidized

Most of the cost of public colleges are not paid for by your tuition bill.   Tuition usually only covers around 25% of the actual costs of a university.   The majority of the money comes from the government in the form of state and federal tax dollars.   No mater how rich you are a public education is significantly subsidized by tax dollars.    Private universities get much less money from governments but they too share in tax money.   If you go to a public school then its its typical for government tax dollars to fund 50-75% of the cost of your college education.   Private schools are more likely to get 10-25% of their money from tax funds.    [edit : note that state funding for public universities varies substantially from state to state and the numbers I cite here are rough representative figures, not exact averages or anything.]

You probably DO get free money

Most people DO qualify for tax credits or tax deductions.   This is another form of financial aid for college.   Whats the real difference between getting a $2000 Pell grant and getting a $2000 tax credit?   Not much actually.  Either way its $2000 free money from the government.  It seems most people don't even consider or realize there are significant tax cuts available for college, yet this is free money that the vast majority of families qualify for.

Between government subsidies and tax credit government pays the large majority of public college costs

If you go to a public college and qualify for tax benefits as most people can then the government is paying the majority of your college costs.

Lets look at an example...
Go to a state college with a reasonable $7,500 tuition rate.   You fill out the FAFSA and get a big fat 'denied' because you make a whopping $80,000 a year and you've got a few thousand in the bank.   The government says you don't qualify for any aid.   Oh no!!    Why won't the government help you?!?    Don't they know college is super expensive?    Well in fact they do know that.  The government pays 50% of the bills at that college via tax funds and grants.   Tuition only covers 25%.   The other 25% is generated by the college itself from misc. things and gifts.   If the tax dollars went away your tuition bill would have to triple to cover the difference.   Plus you qualify for a $2500 tax credit.   Altogether you'll end up paying $5000 of that $7500 tuition rate and the actual costs for that college are triple that.   You may not get financial aid but the government is paying 76% of the cost of your public college education.

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