Financial aid officers ... say some middle- and upper-middle class families may not have saved enough [for their children's college education] in part because they thought, incorrectly, that financial aid would compensate. But financial aid calculations focus on assets (other than a home) and past, present and future income, and while such calculations allow for living expenses, the assumed lifestyle may be more austere than what many families have enjoyed or are willing to accept.

"We can't be awarding financial assistance based on discretionary choices" parents have made in spending their money, Ms. McGuire said. "You say that as nicely as you can: I can't give you more money because you have a large consumer debt. I have got to have an analysis that is not rewarding you for discretionary spending."