Financial Aid

Over the course of the twentieth century, the United States has built one of the largest and most comprehensive public educational systems in the world (Fischer and Hout, 2006). For decades, families and individuals have relied on federal and state support for contributing to the costs of higher education, government recognizing the benefit of an educated citizenry. However, since the Great Recession of 2008, government has moved in a direction that has placed the burden of higher education on families and individuals (Hiltonsmith and Draut, 2013; Cahalan et al., 2016; Poutré et al. 2017).

While it is true that Federal Pell Grants continue to provide support for lower income students and the “Title Four” program under the Department of Education provides low-interest loans to students, given the climbing costs of tuition, this assistance increasingly does little to relieve the burden on students and families trying to cover remaining costs (Burd, 2016; Huelsman, 2016; Richard Scott and Biag, 2016; Poutré et al. 2017). Education is still crucial to socio-economic mobility (Greenstone et al. 2013), and so the ever-widening gap between cost and affordability threatens a path toward greater security and opportunity in America (Huelsman, 2016; Webber, 2016; Poutré et al. 2017).

For more than two decades now, the cost of higher education in the United States has risen by 1.6 percentage points more than inflation every year (Economist, 2014). On average, low-income students finance an amount equivalent to more than 100 percent of their family’s annual income to attend one year at a four-year college (National Center for Education Statistics, 2012). Outstanding student debt in the United States has grown to approximately $1.4 trillion (Board of Governors of the Federal Reserve System, Consumer Credit – G.19, 2017).

A report (2017) by the Institute for Higher Education Policy, “Limited Means, Limited Options: College Remains Unaffordable for Many Americans,” looked at net prices for over 2,000 colleges from the perspective of 10 theoretical 21st-century student financial points of view. Report findings indicated that students from the highest income quintile could afford to attend 90 percent of colleges within the reviewed sample, while low- and moderate-income students with fewer financial resources could only afford 1 to 5 percent of those same colleges. Very few colleges used in the study met a reasonable threshold of affordability for students of modest means (Poutré et al. 2017). The conclusion: higher education has become unaffordable for low- and moderate-income Americans.

The report (Poutré et al. 2017) suggests interventions to address affordability:

  • Federal Pell Grants should be protected, strengthened, and award amounts increased. They are essential to supporting both access and retention (Bettinger, 2004) for low-income students. Based on the report’s findings, doubling the dollar amount of Federal Pell Grants would markedly increase the number colleges available to low- and moderate-income students and their families.
  • States need to invest more in public higher education and provide more to need-based students. Since the Great Recession of 2008, states have reduced funding and higher education institutions, in turn, have made up the difference by increasing tuition. This has resulted in greater financial burden on students and their families. Recent free-college proposals (e.g., New York State, Rhode Island, Tennessee) signal greater state and public interest in improving college affordability, but these programs must be designed as first-dollar (supplement existing funding) rather than last-dollar (subsidize high-income students who do not need assistance) programs, in order to ensure access for students who have the greatest need.
  • Colleges should manage institutional costs to concentrate expenditures on students. Colleges must examine their budgets and prioritize spending on items that directly increase student access, improve student outcomes, and support student health and wellbeing (Poutré et al. 2017; Rubley, 2017).
  • Colleges with wealth should keep prices low for low- and moderate-income students and expend a healthy percentage of returns on their endowments for need-based access and retention.
  • Colleges should give students the information they need for making affordable choices—provide greater transparency. Colleges have an ethical obligation regarding education and transparency about costs and return of investment (ROI) (Webber, 2016).

Individually, these interventions will not create a sustainable framework for access and affordability. Rather, it is their combination: increased student aid from federal sources (e.g., Pell Grant), increased state support through need-based grants or lower tuition, institutional assistance to low-income students, and other efforts that allow institutions to decrease costs for students that will help remedy the current higher education trajectory (Huelsman, 2016; Poutré et al. 2017).

Meeting full-need is complex. It is not simply about providing financial support for typical college expenses: tuition, fees, books, and supplies. It is also about providing an equitable overall experience—an experience in which students with fewer financial resources can share in similar institutional experiences as those with greater financial resources: study abroad, service learning trips, and other comparable experiences. Institutions need to commit to assistance from the time of acceptance through graduation and not “dangle more aid in front of prospective students who are still deciding where to go,” only to reduce it later (Pratt, 2015).

While a college degree still provides a positive return on investment (ROI), especially versus no college degree (Avery and Turner, 2012; Webber, 2016), greater student loan debt is not the answer. And many low- and moderate-income students contribute to the ongoing costs associated with their education by working in excess of 15 hours per week, compromising retention and degree attainment. So working more while attending college is not the answer either. The solution to the higher education affordability problem lies in both cooperation and coordination of actions taken by both government policymakers (federal and state) and institutional leaders: increase student federal, state, and institutional aid and decrease cost (Poutré et al. 2017).


Avery, Christopher, and Sarah Turner. “Student loans: Do college students borrow too much—or not enough?.” The Journal of Economic Perspectives 26, no. 1 (2012): 165-192.

Bettinger, Eric. “How financial aid affects persistence.” In College choices: The economics of where to go, when to go, and how to pay for it, pp. 207-238. University of Chicago Press, 2004. Available at

Burd, Stephen. “Undermining Pell: Volume III.” The news keeps getting worse for low-income students (Education Policy Program Report) New America, Washington, DC (2016).

Cahalan, Margaret, Laura Perna, and M. Yamashita. “Indicators of higher education equity in the United States: 2016 historical trend report.” (2016). Available at

Greenstone, Michael, Adam Looney, Jeremy Patashnik, and Muxin Yu. “Thirteen economic facts about social mobility and the role of education.” The Hamilton Project, Brookings Institution, Washington DC. (2013). Available at

Hiltonsmith, Robert, and Tamara Draut. “The great cost shift continues: State higher education funding after the recession.” Dēmos, 2014. Available at

Huelsman, Mark (2016). “Out of reach? How a shared definition of college affordability exposes a crisis for low-income students.” Demos. Retrieved from

Pratt, Timothy. “College ‘bait and switch.’ The Hechinger Report. (2015). Available at

Poutré, Alain, Jamey Rorison and Mamie Voight. “Limited means, limited options: College remains unaffordable for many Americans”. Institute of Higher Education Policy. (2017).

Richard Scott, W., and Manuelito Biag. “The changing ecology of US higher education: An organization field perspective.” In The University under pressure, pp. 25-51. Emerald Group Publishing Limited, 2016.

Webber, Douglas A. “Are college costs worth it? How ability, major, and debt affect the returns to schooling.” Economics of Education Review 53 (2016): 296-310.