Unleashing the Power of Financial Aid to Equalize Postsecondary Education

Title: Rising Above the Threshold: How Expansions in Financial Aid Can Increase the Equitable Delivery of Postsecondary Value for Education

Authors: Kim Dancy, Genevieve Garcia-Kendrick, and Diane Cheng

The Institute for Higher Education Policy (IHEP) has released a new report based on data from over 2,400 institutions examining how changes in funding affect institutions where students receive a minimum economic return.

The report builds upon the work of the Postsecondary Value Commission, which aimed to define and measure the value of postsecondary education while prioritizing equity in policymaking. Evidence shows that the current postsecondary education system fails to provide fair access, completion rates, affordability, and workforce outcomes for various groups, including Black, Latinx and/or Hispanic, Indigenous, Asian American, Native Hawaiian, and Pacific Islander students, students from low-income backgrounds, and women, including those with intersecting identities within and across these groups. 

Key findings from the survey include: 

• More than 8 in 10 of institutions (83 percent) provide a minimum economic return, but 507 institutions fail to meet the benchmark.
• Doubling the federal Pell Grant would help 95 institutions meet the minimum economic return threshold, benefiting 610,000 students (about half the population of Hawaii), particularly those from marginalized backgrounds.
• First-dollar free college programs—free college programs that cover the full cost of tuition and fees, allowing students to use other aid for living expenses—would enable 44 additional institutions to meet the benchmark, benefiting 215,746 students in public colleges.
• Last-dollar free college programs (programs that cover remaining tuition costs after other grants, without additional benefits if tuition is already fully covered) have minimal impact on institutions meeting the minimum economic return threshold.
• Affordability plays a significant role in determining the value students receive from postsecondary education.

The report includes the following recommendations to improve equitable delivery:

• Double the Pell Grant to help additional institutions meet the minimum economic return for students and reduce cumulative costs for low-income students.
• Invest in first-dollar free college programs to increase affordability and postsecondary value, especially for students with high financial need.
• Fund non-tuition expenses such as transportation, health care, and childcare to address basic needs and improve college completion rates for low-income students.
• Avoid narrow eligibility restrictions for student aid, making need-based financial aid inclusive and targeted based on those with the greatest financial need.
• Invest in four-year pathways by expanding free college programs to include public four-year colleges, addressing stratification concerns, and ensuring equitable postsecondary value.
• Provide support for completion by funding initiatives that decrease time-to-degree and increase graduation rates.
• Disaggregate earnings data by race/ethnicity to gain insights into institutional disparities in economic returns.
• Improve earnings data for non-completers by publishing outcomes for students who leave college without a degree, alongside outcomes for program completers.

To explore findings and methodological information, click here

—Alexandria M. Falzarano