Who Gets to Have Financial Aid?

I admit at the outset of this post that I do not have children. However, I do have a niece in 5th grade and a nephew in kindergarten. Several years ago I created a 529 account for their college tuitions with Wells Fargo. I put in a small sum each month through payroll deduction and have had the satisfaction of seeing that amount grow significantly. The 529 program even has an automatic adjustment: it goes for riskier (and therefore more profitable) ventures early on, then, as the child gets closer to college, it becomes more conservative to maintain the buying power of the account. I’ve been thrilled to be their benefactor, not to mention watch the money grow.

As a college counselor I’ve always been more than a bit taken aback when middle and upper middle class parents, people who should know better, ask, when their high school senior children are in my office talking about college, “Where are we going to get the money?” There’s no denying that college is expensive, with several schools recently breaking the $50K mark. College costs a lot. But I have to ask these parents (in my head, usually), “You’ve had this child for 17 years, did you not see this coming??” Many of the parents I’ve worked with over the last few years have advanced degrees, many generations of college-going in the family, and even experience teaching in colleges and universities, so surely they had some idea that their children would need tuition money when they turned 18.

It’s fairly ridiculous to see a prosperous adult sputtering over the cost of college as though it were an unforeseen event like an auto accident. I feel sorry for those people. I have even heard some parents who HAVE saved for college lamenting that they’ll now have to use Joanie’s college fund for, well, COLLEGE! (I’m not making this up…)

I also wonder whether, as with many things, financial aid, which is supposed to be sort of a stopgap measure to help people, has turned into its opposite, a reward for not planning ahead. Families who could have saved but didn’t throw themselves on the mercy of colleges and ask for help. When they get it, others see how easy it is and figure they don’t have to do too much to get the prize. I realize this is overstating the case, of course: Plenty of middle-class families struggle to pay their bills and keep up with day-to-day expenses, having little margin for long-term saving. But I’m not talking about those families. I’m talking about families who earn plenty and should know better. (I’ve also noticed that college reps talk about FA as if it’s all gift money, de-emphasizing the loan part as if students or families shouldn’t have to take ANY financial responsibility for their educations. This seems fair for students from low-income families, but not for those who could have planned better. Colleges should have the courage to say, “You may not be able to afford us.” And THAT, of course, goes against the ideal of equal access even as it might appeal to the “up by your own bootstraps” myth.)

With the increasing focus on recruiting first generation and minority students, I’d like to make a suggestion that might help colleges make their financial aid budgets go a little farther. It would require more financial accountability from families instead of relying on a snapshot of recent income and so on and would reward those who have planned ahead instead of those who “forgot.” (Steve Martin used to do a bit where he said, “You’ll never have to pay taxes again if you remember two little words when the IRS comes for you–‘I…FORGOT.'”)

Aside from the FAFSA and CSS and any other forms, colleges should also require proof that a family has planned in some way for college over a decent period of time. I’d say from a child’s birth but perhaps that’s too draconian, so let’s say from middle school. It wouldn’t have to be a lot, but it should represent the parents’ commitment to the child’s future. (Remember, it’s one they know is coming, like retirement.) Perhaps for parents who have 401(k) accounts some of this can be credited to the child’s college, although the 529 programs seem perfectly adequate.

I’m not suggesting that this kind of long term college saving should equal the total cost of college, but it should represent a reasonable percentage of a family’s income over time and, as I’ve said, demonstrate a significant commitment to the eventual cost of college.

This program would certainly require more paperwork for everyone, at least at first, but if the requirement were simplified to be “every child should have a 529 account or similar” in his or her background (given a certain level of income and education) then it could be simpler. Using this requirement as a yardstick, it’s probable that a good number of families would not qualify for financial aid at some institutions. Therefore not only would the colleges have more money to give to those who really deserve it, they would also have more spaces to fill with qualified minority students because the undeserving (those who didn’t plan) would not be able to afford the tab.

With the need to “fill beds” paramount, this kind of proposal is probably dead in the water for most colleges. However, if they adopted the idea and agreed not to begin applying it for another six years or so, they’d give people time to adjust and think ahead. Big announcements could be made, and along with information about classes and so on they could send out suggestions about long-term saving for college. Each college could decide for itself what a reasonable financial commitment over time could be (although competition might drive that expectation too low unless there was an overall agreement about a floor of some kind) and each could be flexible, especially in the first few years. Ultimately, people would get used to the idea, and, not incidentally, the savings rate in the U.S. might rise somewhat from its current miserable single-digit amount.

I don’t know how a joint announcement through NACAC or ACE or whoever would go over with anti-trust people, but it seems to me this proposal isn’t about setting levels of FA but about repositioning schools in relation to their applicants and families in a way that might make everyone more responsible. I think this idea is worth debating so the vast amounts now spent on financial aid can be rewards for those who really saved and genuine help for those who really need it.