Student Aid Alliance

Advocating Increased Federal Funding for
Student Financial Aid

Q & A

Why should the federal government help students go to college?

The opportunity to gain a college education helps advance the American ideals of progress and equality. The precedent for direct aid to students was set by the 1944 G.I. Bill, and expanded in the National Defense Education Act of 1958. The Higher Education Act of 1965, which formed the basis for the current federal student aid system, embodied the principle that all qualified students should be able to attend college, regardless of their financial means. Without financial aid, a majority of students would be unable to go to college.

A college education benefits not only the individual, but society as a whole. A highly educated work force has become an essential component of economic growth and competitiveness--it is estimated that increases in national educational attainment have accounted for almost 30 percent of the growth in national income the 20th century. Because they earn more, save more, and are unemployed less frequently, college graduates make fewer demands on the public purse and pay more taxes. When the federal government helps students attend college, it invests in our nation's future.

How big a role does the federal government play in student aid?

According to the College Board, federal grant, loan, and work-study programs account for two-thirds of all available student aid--$89.7 billion out of a total $134.8 billion in academic year 2005-06. Grants from institutions and private sources account for another 25 percent ($33.7 billion), and state grants provide 5 percent ($7 billion).

Who is eligible for federal student aid?

Eligibility for most federal student aid is based on need. The amount of aid is determined by formulas that factor in family and individual income, and the cost of education.

Pell Grants target the neediest students, while the campus-based programs (Supplemental Educational Opportunity Grants, Federal Work-Study, and Perkins Loans) provide federal funds that allow colleges to design packages of assistance tailored to students' individual needs.
Subsidized student loans give students from low- and middle-income families access to low-cost loan capital.
TRIO programs help low-income students who are the first in their families to attend college. Support services include counseling, tutoring, and mentoring.
Graduate programs create incentives for bright students to enter fields that are critical but not necessarily lucrative.

How many college students receive federal student aid?

In FY 2006, over 10 million students received federal student aid from one or more Department of Education programs with an average award of around $9,600.

Has the balance between loans and other forms of aid changed in recent years?

Investment in grant aid allows qualified students to pursue their higher education goals without excessive debt. Students are increasingly forced to finance their education through loans rather than grants or work-study. Loans accounted for just 20 percent of federal assistance in 1976, but in 2005-06 they made up three-quarters of it. During this same time, funding for federal grant programs has failed to keep pace with inflation.

How much does the federal government spend on student aid?

Student financial aid programs account for about 1 percent of the federal budget. The federal appropriation for Pell and campus-based student aid programs in 2005-06 was $15.8 billion, which helped about 8 million students continue their education. Much of this funding goes to undergraduate students from low-income families.

Don't increases in federal student aid just encourage colleges and universities to raise tuition?

Three studies by the U.S. Department of Education have all reached the same conclusion: No. On the contrary, cuts in student aid lead to tuition increases. At state institutions, tuition has increased rapidly when states cut appropriations for higher education. Colleges and universities have raised their financial aid budgets significantly to make up for the loss in the value of federal grant and work-study programs.