And, They’re Off: How Families From Different Incomes Perceive Financial Aid

So we're about to start another financial aid season. Many of our schools are just revving up I've already received the information to start the application for my own children! What are parents thinking as they get their own links to various aid application sites? For this blog, let's just look at their economic circumstances. We can split parents very roughly into three economic groups:

  1. Parents whom we will describe as lower class cannot afford your school and will need financial aid (up to 100%) in order to come to it. The last decade has been tough on families in this income bracket. A recent research study from the Pew Research Center (September 2012) notes that "The percentage of Americans who say they are in the lower-middle or lower class has risen from a quarter of the adult population to about a third in the past four years" ( Not only that, but 49% of these individuals do not believe that hard work will change their circumstances and say that they are not as healthy or as happy as they were four years ago. Equally significant, 84% said they had to cut back on spending in the past year. For our schools, this is a challenging and challenged group of families. Just to note that 15% of Americans are considered to be in poverty, a proportion that hasn't changed much over time.
  2. Parents whom we will tend to think of as middle class are an interesting group because different commentators and the families themselves don't quite know how to categorize the middle-class family. If we go by median income, then Census Bureau numbers identify that as $50,054, 8% less than in 2007. ( Political leaders use different numbers. Governor Romney declares that anyone earning up to $250,000 is middle class. That's a big difference! The Census Bureau Report (DeNavas-Walt, Carmen, Bernadette D. Proctor, and Jessica C. Smith, U.S. Census Bureau, Current Population Reports, P60-243, Income, Poverty, and Health Insurance Coverage in the United States: 2011, U.S. Government Printing Office, Washington, DC, 2012). For people in the middle of income earning, they have not had much cheer about. "Real median income declined for family households between 2010 and 2011, by 1.7% to $62,273 (Table 1). This was the fourth conŽsecutive annual decline." For all in the 2nd, 3rd, and 4th quintile of wealth, their income has dropped in the last four years.
  3. Parents whom we will think of as upper class are relatively untouched by the recession, the downdrafts that every one else feels and have seen their income continue to grow. These are people in the top quintile of wealth. They are and are staying wealthy.
Table 1: Distribution of net worth and financial wealth in the United States, 1983-2010

Total Net Worth
Year Top 1 percent Next 19 percent Bottom 80 percent

Financial (Non-Home) Wealth
Year Top 1 percent Next 19 percent Bottom 80 percent
The top 20% is where the vast majority of your parents come from in most schools.

Note that all these numbers are, of course, across the population as a whole. There is a lot of economic migration. Individuals in your schools sometimes can have dramatic changes in economic circumstances. Again, the Census Bureau notes: "The proportion of households in the bottom quintile in 2004 that moved up to a higher quintile in 2007 (30.9 percent) was not statistically different from the proportion of households in the top quintile in 2004 that moved to a lower quintile in 2007 (32.2 percent)."