Financial Aid Policies Fail to Assist Low-Income Students

Policies hinder some students from earning a college degree, a recent Ed Trust report finds.


President Obama's administration has set the goal of seeing 8 million new college graduates by 2020. Ironically, a recent report by the Education Trust finds that many financial aid policies at schools actually hinder increased enrollment. According to the report, despite the availability of federal programs like Income-Based Repayment and Public Service Loan Forgiveness, which make it possible to obtain some relief on federal student loans, low-income students continue to face financially prohibitive barriers to earning a college degree.

In Priced Out: How the Wrong Financial-Aid Polices Hurt Low-Income Students, Ed Trust analyzes recently released net price data—the average price students have to pay after all sources of grant and scholarship aid are exhausted—and evaluates the financial barriers faced by low-income students.

[Read more about looking at net prices instead of college sticker prices.]

Looking at factors indicative of affordability, quality, and accessibility, Ed Trust concludes that the way institutions determine the distribution of their available grant funds in turn impacts the accessibility of higher education to many prospective students, and that these policies significantly limit low-income students' access to quality higher education.

When looking at net cost, a major factor indicating affordability, the report found that the typical low-income student is required to come up with 72 percent of their family's income annually to cover the costs of college after grants and scholarships have been exhausted. Middle-income student must come up with 27 percent of their family's income, while high-income students need only produce 14 percent.

Concluding that requiring students to pay almost two thirds of their family's income is not affordable or reasonable, Ed Trust set the metric for determining "reasonably affordable" schools as those that require low-income students to come up with a percentage of family income equivalent to that required of middle-income students—schools that require low-income students to pay no more than 27 percent of their family's income annually.

The result: only 65 institutions out of 1,186 schools that had comparable data are "reasonably affordable" for low-income students.

The report then determined how many of these 65 affordable institutions offer quality, which is defined by Ed Trust as schools that give all their students at least a 1-in-2 shot at graduating. This reduces the number of affordable, quality institutions to 29.

The final attribute considered was accessibility: How many of these institutions meet or exceed the national average for enrollment of low-income students? That national average is 30 percent. Of the 29 affordable, quality institutions, only five have a student body that is at least 30 percent low income.

There are five quality institutions that are affordable and accessible to low-income students.

The reason: institutions have reduced the amount awarded in need-based grants. That is, institutions provide grant money to high-income or middle-income students who likely will attend college even without this aid instead of distributing this money to students who are not able to afford school otherwise.

[Get tips for how to pay for college.]

Since many high- and middle-income students would attend anyway, such policies essentially shut the door on, or "price out," low-income students without increasing the number of people likely to attend college. In contrast, policies that distribute grants to those most in need would increase enrollment because these low-income students would not be—and are not—able to attend with this aid. The finding is quite significant at a time when the federal Pell Grant remains under the gun.

Ed Trust's bottom line: the administration must figure out how to ensure colleges are not undermining the mission of increasing college enrollment and its democratic principles of making college accessible and affordable for low-income students.

The high cost of education and the burden of educational debt are significant barriers to many who wish to pursue a public service career. Equal Justice Works believes that educational debt should lead to opportunities for happiness and success in choosing to serve the public interest, not stand in the way of this service. We host a wealth of information and offer free, interactive webinars on educational debt relief programs that can help ease the burden on those dedicated to public service.

Are you burdened with educational debt you incurred because the costs were too high for you and your family to cover? Equal Justice Works has partnered with EARN on to provide a public forum for student loan borrowers to join the debate because the national debate on educational debt is missing one of the most important voices of all: student borrowers themselves. Go to and share your experience with educational debt, then help spread the word so our voices are heard.

Radhika Singh Miller is a program manager for Educational Debt Relief and Outreach at Equal Justice Works. In 2008, she served on the Student Loans Team in the Negotiated Rulemaking for the College Cost Reduction and Access Act (CCRAA) and has extensive knowledge of this landmark educational debt relief legislation. Radhika graduated from Loyola Law School Los Angeles and was most recently a staff attorney at the Partnership for Civil Justice, focusing on constitutional and civil rights litigation and advocacy.