Falling Through the Cracks of Financial Aid for Middle Income Students
Aid & Affordability
When conversations about college affordability come up, one large group that is unfortunately overlooked is middle-income families. The challenge in education financing today is building on the success of need-based aid to create solutions that address the gaps for middle-income families without undermining the progress made for low-income students.
“Middle-income families are increasingly relying on Parent PLUS loans and private loans which place students in far more precarious financial positions”
The Middle-Income Squeeze
Middle-income families face a distinct and growing financing hurdle. They earn too much to qualify for generous grant aid like Pell Grants, but not enough to comfortably absorb the rising costs of college, according to a Bloomberg analysis. Federal data show that the net cost for low-income students have decreased since 2009 thanks to expanded institutional and government grant aid as well as scholarships, but middle-income students have not experienced the same relief.
As seen in the figure above, middle-income families are increasingly relying on Parent PLUS loans and private loans which place students in far more precarious financial positions than those solely borrowing from Direct Loans. The result is a significant contribution to the negative enrollment trend, depicted below. This trend became especially pronounced during periods of financial instability, such as the COVID-19 pandemic. From 2019 to 2023, middle-income students experienced a sharper decline in enrollment than both their low- and high-income peers. In some institutions, the share of students from middle-income families has been steadily shrinking, even as their share of the broader population remains significant.
“From 2019 to 2023, middle-income students experienced a sharper decline in enrollment than both their low- and high-income peers”
What Middle-Income Families Actually Want
Many middle-income students are forced to adjust their college plans due to these financial gaps, and cost becomes a major factor in their choices. A polling found that “cost is the most important reason” for why students drop out or pause their education. It’s a common story for middle-income students to opt for the cheaper state-school than to attend their dream college, despite being accepted. According to an article from the Hechinger, one pair of parents touring colleges with their daughter admitted, “our goal is for her to not fall in love with any school, knowing that, being in the middle, we might not be able to afford it”.
This scenario is highlighted by a glaring statistic: Middle-class make up at elite institutions has remained the same in 1913 and 2013, with the current trend being a gradual decline of middle-class student attendance after the surge introduced by the GI Bill in 1944. The reason is simple; those who do attend pricier schools frequently take on more debt. For example, a growing number of selective colleges (Rice, Liberty, Grinnell, etc.) are investing millions to provide new scholarships for middle-income families, precisely because without aid those students would borrow heavily or not enroll.
“Middle-class make up at elite institutions has remained the same in 1913 and 2013”
Reports from organizations like Sallie Mae and the College Board make it clear that middle-income families today must put together savings, scholarships, and loans, often without knowing whether it will be enough. This middle-income squeeze drives students away from selective colleges, into high-debt, or out of college altogether. Advocates have proposed solutions ranging from more generous grant aid to “no-loan” policies, as well as clearer, more predictable financial aid offers. And while these options sound good on paper, they may not be practical for some institutions due to budgetary and resource constraints.
Ultimately, the effect is that middle-income students may graduate with more loans, drop out without a degree, or choose not to enroll in a college at all because the “piece-meal” aid approach left their full financing needs unmet. If colleges want to recruit and retain these students, they’ll need cost-estimate tools to eliminate surprises and better financial aid strategies to ensure a family’s demonstrated need is fully met—implemented in a way that doesn’t take from the success of financial aid for students from other socioeconomic backgrounds.