Making College Affordable by Improving Aid Policy: Financial Aid Programs to Expand College Access Could Be Improved by Simplifying Processes and Favoring Grants over Loans and Need-Based Rather Than Merit-Based Criteria (Making COLLEGE Affordable) (Report‪)‬

Higher education plays an important role in U.S. society. In addition to providing numerous public benefits, such as an increased tax base and greater civic engagement, it helps individuals attain economic and social success. Experiences and skills acquired from postsecondary education reverberate throughout life in terms of higher earnings, a lower likelihood of unemployment, and better decisions about health. Yet research demonstrates that one of the primary barriers to college enrollment, especially for low-income students, is the financial outlay required to attend. For this reason, the federal and state governments spent more than $2.5 trillion in 2008-09 on student grants, such as Pell Grants, with the hope of encouraging enrollment. Although there is a belief that financial aid could greatly improve educational outcomes, there also are many reasons to question the efficacy of the nation's current system of financial aid. After decades of financial aid policy, there are still significant gaps in college access by income, even after accounting for differences in academic preparation and achievement by income. Low-income high school graduates in the top academic quartile attended college at only the same rate as high-income high school graduates in the bottom quartile of achievement. Such gaps, which are also evident in terms of race and ethnicity, suggest that the aid system has not equalized access to higher education. A 2006 review of the aid system by the federal Commission on the Future of Higher Education concluded what many observers have voiced for years: The financial aid system is not addressing the problems facing students. Although financial aid can dramatically reduce the overall cost of college, many students still have significant unmet need. Moreover, the receipt of financial aid is predicated on navigating a lengthy, complicated process. As noted by the commission, some students "don't enter college because of inadequate information and rising costs, combined with a confusing financial aid system."