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College Student Loans are Limited for Students from Working Wealthy Households

Scholarships, gifts from relatives, and the tooth fairy are not reliable college funding sources. And it may come as a surprise to many that Federal financial aid is not likely either. The above chart Student Loan Comparison[1] summarizes the student loans available for college students. Student loans are offered to students and/or parents based upon their financial situation.

The college will calculate your student’s financial need by determining the student’s “cost of attendance” minus “grants and scholarships” minus “expected family contribution”. The “expected family contribution” is a complex formula, but the primary drivers of the formula are household income and assets of both parents and student.

For simplification purposes[2], households with annual income less than $50,000 or so and no assets will have low or zero “expected family contribution”. As a result, student financial aid awards will be high and they will most likely qualify for federal grants and all types of the student loans available. Students from households with income more than $50,000 or so and/or some assets probably will not be eligible for federal grants and Perkins loans, but will have access to either (or combination of) Federal Subsidized and/or Unsubsidized Stafford Direct Loans with less favorable interest rates and repayment terms. The “expected family contribution” for these households ranges from about $5,000 to $15,000 per school year.

Students fromWorking Wealthy households with income more than $100,000 will qualify for only Unsubsidized Stafford Direct Loans. The “expected family contribution” for these households will be over $15,000 and possibly 100% of the cost of attendance. Higher income households may consider Federal Direct Plus Loans, if needed. These loans are made with the parent, not the student, and by law the parents are responsible for them.

Contact our office for more information about planning for college or questions about information in this article.


[2] College financial aid is a complex formula driven by many factors. As a result, the figures quoted in this article are not precise, do not apply in all situations, and are not intended to be used for making specific college funding decisions. Always rely upon actual financial award estimates and packages provided by your student’s college.

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