Archived Information

Reauthorization of the Higher Education Act


A Family That Saves Can Be Required to Contribute Nearly Twice as Much to Their Children's Education as a Family That Doesn't

The following table shows the expected family contribution for college of a typical family that has two children, has earnings of $40,000 annually -- roughly equal to median family income for all U. S. families -- and has saved 5% of its income each year for twenty years. It then compares this to the contribution for an identical family which did not save for its children's education.

Expected Family Contributions Over Eight Years

Family Type

Expected Family Contribution for College Under Current Law

Contribution from Saver less Contribution from Nonsaver

Saver (responsible family)

$35,000

 

Nonsaver (spender)

$19,000

$16,000

Contributions for family with two children separated by four years, father age 40 at the beginning of college years.

Under the current methodology for determining family contributions:

Department of Treasury
Office of Economic Policy
March 12, 1998

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