<p>so the marginal financial aid “tax rate” for a family earnings 60K is 28% and for a family earning 220K is 44%. The latter family also faces a 33% federal marginal rate and perhaps a 5% state rate, which works out to a total marginal rate of 44% + 33% + 5% = 82%.</p>
<p>I’m sorry, I still don’t understand how you arrive at those specific numbers with respect to income. Do you mind showing me the reasoning you’ve used here?</p>
<p>So what is the significance of these marginal tax rate numbers?</p>
<p>Are you simply dressing up, in another way, the claim that overall, low income families have more opportunities with respect to higher education than high income familes because of need based financial aid?</p>
<p>Cobrat, if a private institution wishes to give merit aid to lure top students away from other schools, I don’t see a darn reason why it shouldn’t. If a rich kid earns a merit scholarship honestly and fairly, more power to him or her.</p>
<p>High marginal tax rates discourage work and create what economists call a “deadweight loss”. The negative consequences of need-based financial aid should be weighed against the positive ones.</p>
<p>A rich kid who is also a top student can be a great asset to the kinds of colleges that tend to give merit aid, i.e. “second-tier” LACs–especially if his or her family supports the institution with donations during or after the time the student is there.</p>
<p>OK, thanks, now I get it. So if I’m at that 60K level and paying 0 in tution, and then there’s a possibility for me to earn an extra 10K next year, I have to think about whether or not I’m going to want to do that. I might be worried that my extra 10K would go toward tuition–I might decide not to earn that extra 10K if it’s all gonna be eaten up towards tuition, or worse.</p>
<p>Sure. We see these questions on CC all the time…how a raise might affect FA. How a house sale or an inheritance might. </p>
<p>
</p>
<p>Sure. The institution gives merit aid to kids it wants for some reason, in these cases often for stats. D1 schools give merit for athletic ability, because they want good sports teams. Music schools give merit for musical ability, because they want good musicians. None of these merit awards have anything to do with income.</p>
<p>But just as schools can decide to recruit kids for academic stats or sports or music (or art or dance or whatever) ability, or offer scholarships to leaders or kids who write a good essay or perform a lot of community service or were born in the county or are third generation Methodist etc etc etc), so they can also choose to use funds to recruit lower income kids and, yes, minorities. Because they want to fill their institutional needs and they get to define what those are.</p>
<p>The “full pay” students who don’t earn any of those merit scholarships are “subsidizing” the musicians and athletes and artists and community leaders and Methodist ministers’ kids just as much as they can be said to be subsidizing the poor kids.</p>
<p>*High marginal tax rates discourage work and create what economists call a “deadweight loss”. *
So are you saying, for the extra $173,600 in tuition cost between a 70 k family and a $220,000 family, that extra 150k in earnings per year- and what that affords a family- isn’t worth the effort?</p>
<p>Or looking at it in a little quantitative vacuum?</p>
<p>Agree with PG, Sally and OHmom. Institutions give out non-need based aid in many forms, to lure desired students to their instituition. They can cherry pick students with any of a variety of talents (academic, athletic, artistic). Why shouldn’t they? Should financial incentives be given only to those with low incomes? Not in my book. Need based aid and merit aid are different animals.</p>
<p>And, it’s misleading to use H as an example. The average school out there won’t offer $50k-plus to a 70k family. In general, on CC, we talk of EFCs at roughly 25-33%. And colleges still don’t meet need.</p>
<p>So, the 70k- assuming the low end of a 17k EFC- and the probability of gapping- who’s worse off?</p>
<p>They are different but they have some similarities. Both allow colleges to get the student body they want. </p>
<p>I know some feel that there should be no merit aid; that all aid should be need-based (and obviously some feel the opposite, or that there should be none for anyone). </p>
<p>^^^That’s what I was trying to show with the TU example. You don’t see what Beliavsky calculated for the ‘marginal rates’ at Harvard at your typical school. At most schools, you don’t see a 44% ‘marginal rate’ with respect to need based aid between 220K and 230K, you see 0.</p>
<p>What is being implied, I think, is that there is an opportunity for some schools to look at a “one price for all strategy”, that might have significant appeal to the $220k family, in certain instances. There are places that are beginning to consider this.</p>
<p>Maybe we’ll just have to agree to disagree, but I do feel there’s something off with colleges granting merit aid without accounting for income when many of the same colleges are citing lack of funds as causes to substantially cut FA or scholarships which are merit & need based. One extreme case I know of is NYU which grants few merit awards for extremely high elite-level stats, miserly sums of financial aid for lower SES families*, and most of everyone else is full pay or taking out ridiculous loans. </p>
<p>It’s something which has caused much umbrage from those who feel this reduces access for students from lower SES backgrounds and a few holding the old fashioned notion that there’s something morally offensive about someone from a wealthy/well-off home to be taking financial subsidies from an institution when they don’t really need it. </p>
<p>Especially if the institution concerned is a public one or receives government subsidies as with most private colleges. </p>
<p>Also, I find it interesting you implied that if one’s against merit aid that one’s not for meritocracy. </p>
<p>That cannot be further from the truth speaking for myself. </p>
<ul>
<li>During an era when 1 year at NYU was around 31k, I received 8k in FA/scholarship. Like myself, most classmates from similar lower SES backgrounds were given similarly miserly levels of FA and yet, were given near-full/free ride need & merit based scholarships to peer or more often…more highly regarded colleges including the Ivies or topflight LACs.</li>
</ul>
<h2>I think it reduces access to NYU, not to colleges both more and less prestigious than NYU.</h2>
<p>In a case like this, good low SES students will choose the Ivy, topflight LAC or whoever offered the better package and that is, IMO, NYU’s loss.</p>
<p>Merit based scholarships are also an old fashioned notion. The idea that someone should get money for college because they demonstrated high academic achievement is much older than any notion of financial subsidies for lower income students.</p>
<p>Schools want to get the best students they can. If I had to guess I would say the vast majority of full pay students come from families where there is money, but not unlimited amounts of it. Most are the children of professionals who work for their money. There are many fewer trust fund babies. My son falls into this category. He is the son of an attorney, not a prince. In order to get those students in the door some schools have decided to offer them a financial incentive to attend. Just because a student comes from a wealthier background that doesn’t mean that money has no value to them.</p>