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Why Making Less Won't Save You More on Financial Aid

Another one of my pet peeves is hearing somebody quip that their family actually could have saved more money by making less money to qualify for more institutional financial aid from a school like Cornell. There's usually a twinge of resentment and jealousy in their voice as they consider those lucky students who had to endure the hardships of a childhood in poverty before landing a full need-based scholarship for college.

Typically, the narrative comes from a parent who might say, "I only work part-time because the college will take away our daughter's scholarship, and we'll be poorer, if I worked full time". Or it might be from a disaffected student who says, "My father makes $300,000 a year but if he took a lower paying job we'd actually have more money from all the financial aid I'd get."

I'm sorry to say, folks, but it's just not true. When it comes to need-based financial aid, the more money your family makes, the more income you'll have at the end of the day, even after accounting for the higher tuition bill. In nearly all scenarios, there's no point at which you would be richer were you making less money.

Consider this table I put together based on the chart that the Provost published last year showing the estimated cost of Cornell by income bracket. I estimate each family's tax incidence (assuming no deductions) using this handy calculator and the 8% payroll tax, and net out the remaining cost of Cornell from the post-tax income:

Yep, your family would really be better-off financially if you father decided to quit his corporate law job to start a new career teaching in public schools. Or not.

Matthew Nagowski | Posted on January 14, 2011 (#)

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