4 Reasons the Middle Class May Be the Hardest Hit by Student Loans

February 13, 2014

The middle class in America is a pretty comfortable place to be in most instances. You may not be living the luxe life, but you’re not going without and that’s a good thing most of the time. But when it comes to affording college, middle is not the best. Consider these four reasons that kids from middle class backgrounds get the shortest shrift when it comes to paying for college and student loans.

#1 Parental income disqualifies them from aid

It doesn’t take that much income for a college to decide that your family can afford exorbitant out-of-pocket costs. The amount that your parents are expected to pay – the “family contribution” – usually far exceeds what you can actually afford to pay. And because free-to-the-student financial aid resources (scholarships, grants, etc) are limited, they will go to the poorest students first.

#2 Parental income means fewer resources

The middle ground is tricky. Your parents’ income is too high to get you the best financial aid, but too low to make a significant contribution without putting your parents in the poor-house. That’s not fair to them – they’ve got to live, too – and it makes middle class students more likely to borrow than to put financial stress on their family.

#3 Scholarships often have a need component

Even if you’re a smart cookie and have the GPA that will qualify you for many scholarships, many often have a need-based component, as well. If you’re the lowest income applicant, you may stand a chance, but another less-academically qualified applicant with greater financial need may take it out from under you. This can force more borrowing.

#4 Richer aid packages go to lower income students

The finite pool of aid resources that aren’t tied to athletics or over-the-top academics are meted out based on family income, so this is one time when it pays to not have much money. Is this fair? Should aid be strictly merit-based to reward hard workers, or is it okay for need to be such a major component in awarding financial aid? Is there a better way?

A study out of Dartmouth College found that students from middle class backgrounds have higher student loan debts than those from either lower or higher income backgrounds. Dartmouth sociology professor Jason Houle, who conducted the study, said, “Students just beyond typical financial aid cutoffs are saddled with a disproportionate amount of student loan debt .”

The study found that lower-middle income students typically had 59% more debt than the average borrower and upper-middle income students had 30% more. The most shocking statistic out of the study is that students from families with income greater than $100,000 had 240% less debt than lower-income students. These are great observations, but offer insight without solutions.

Cutting off money to lower-income students isn’t a good idea and discriminating against students from higher income families also seems unfair. What we should be looking at is making college costs more reasonable and the cost of student loans lower – but primarily the former. Lower college costs will benefit everyone from every background…

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