Parents Who Won't Pay: Expected Parental Contributions and Postsecondary Schooling

Charlene M. Kalenkoski, Ohio University

The Expected Parental Contribution (EPC) parents are asked to make toward their child's postsecondary education is determined according to a federal financial aid formula based on parents' ability to pay. However, not all parents are willing to make their expected contribution. Using High School and Beyond survey data from the U.S. Department of Education, this paper shows that schooling outcomes for children whose parents who do not make their expected contributions are lower than for children whose parents do. It also estimates the impact of financial aid policy on families' behavior and conducts a simulation to determine whether changing the EPC to reflect actual parental transfers would improve schooling outcomes for children with under-contributing parents. Simulation results indicate, however, that while scholarship and grant awards for students with under-contributing parents would increase, the overall effect would be to worsen, rather than improve, schooling outcomes for these students.