Financial Aid Eligibility (Need)

As indicated earlier, the amount of need-based financial aid for which a student is eligible is calculated by subtracting the expected family contribution from the price of attending. The amount of need-based aid for which a student is eligible reflects both the choice of institution and the family’s financial circumstances. At a given institution, a low-income student would generally have greater need than a high-income one, and a given student would have greater need at a high-priced institution than at a low-priced one. Thus, low-income students at the institutions with the highest prices typically have the greatest need.

Figure 5 presents the relationship between expected family contribution and price for families at various income levels in 2000 and shows the average price of attending the different types of institutions.¹⁰ For any income group, the gap between the average price of attending and the average expected family contribution represents the amount of need-based aid for which the student would qualify. For example, students from families with incomes in the $50,000 to $54,000 range had an average expected family contribution of about $7,000. Therefore, on average, they would be eligible for about $1,500 in need-based aid at a public 2-year institution, $5,400 at a public 4-year institution, $9,000 at a private for-profit less-than-4-year institution, and $17,400 at a private not-for-profit 4-year institution. As discussed later, sufficient need-based aid is not always available to meet the students’ needs.

Students from families with annual incomes under about $55,000 had average expected family contributions that were less than the average price of attending even a public 2-year institution, and therefore they would have been eligible for some need-based aid at any type of institution. Similarly, on average, students from families with incomes between $55,000 and $74,999 would not have been eligible for need-based aid at public 2-year institutions, but would have been eligible at all other types of institutions (although possibly only for loans in some cases). Students from families with incomes of $85,000 or more typically would have been eligible for need-based aid only at the average private not-for-profit 4-year institution.

• Because prices have risen and expected family contribution has declined, average financial need has increased.

As described above, the 1990s brought an increase in the average price of attending college and a decrease in the average expected family contribution at most income levels after adjusting for inflation. Consequently, the amount of need-based aid for which the average full-time dependent student was eligible (i.e., average financial need) increased. For example, the average full-time dependent undergraduate at a public 4-year institution was eligible for $3,800 in aid in 1990 (in 1999 constant dollars) and for $5,100 in 2000 (figure 6). Average need increased at the other types of institutions as well.

¹⁰To illustrate how many students fall into each income category, figure 5 also shows the percentage distribution of students by family income. (back to text)