Financial Aid and Access to Higher Education

One of the primary barriers to college enrollment is the financial outlay required to attend. According to the College Board, during the 2009–2010 school year, the average total cost of a public [Page 910]4-year college or university was $15,213. This amounts to about 30% of the median annual family income. Concerns about affordability are even greater at private 4-year colleges and universities, which had a total cost of $35,636 that year.

To help families deal with the expense and encourage college enrollment, the federal and state governments spent more than $168 billion in 2008 to 2009 on financial aid, which primarily takes the form of grants that do not have to be repaid and loans that must be repaid after graduation. The largest aid program is the federal Pell Grant, which is targeted to low-income students with financial need. Student loans have grown in importance since 1992, primarily through the federal Stafford Loan Program. States and colleges also give significant amounts of financial aid, which can be awarded according to student need or merit. There are also work subsidies (i.e., the federal work study program), tax credits, and other tuition remission programs.

Years of research indicate that financial aid influences the postsecondary decisions of students. For example, a 2000 study by Susan Dynarski found that the Georgia Helping Outstanding Pupils Educationally (HOPE) scholarship increased college attendance by 4% to 6% per $1,000 in grant aid. In a 2003 study, Thomas Kane examined the Cal Grant (which offers financial aid and grants to any qualifying college, university, or technical school in California) and found that it had a substantial impact on college entry. Research indicates that financial aid can affect college choice and persistence. Grant aid appears to especially influence the decisions of low-income and minority students.

Although aid is important to supporting college access, after several decades of policies and programs there are still significant gaps in college access by income, race, and ethnicity, even after accounting for differences in achievement. These gaps may result partly from the significant needs many students still have after receiving all of their financial aid. Moreover, the receipt of financial aid is predicated on navigating a lengthy and complicated application process. There is consequently a continuing debate about how to improve the financial aid system.

Some aid programs and policies have been more successful than others have in improving college access. The visibility and design of the aid policy is significant because the most successful programs are well publicized and relatively easy to understand and apply for. Policies need to balance the need to target limited resources at specific groups (e.g., needy students) with the fact that making the aid application and award processes too complicated is likely to deter students. Need-based grant aid is more effective in increasing access for low-income students than other forms of aid are. Research indicates that loans, when compared with grants, are less effective in increasing enrollment. Student debt can also negatively influence educational decisions. There are also concerns among educators that some students are averse to taking out loans.

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