Research Corner: The Evolution of the Process of Allocating Federal Campus-based Student Financial Aid to Postsecondary Education Institutions

A recent article in the New York Times observed that the formula used by the federal government to distribute federal student aid funds favors the colleges and universities with greatest resources over those which are less well off (New York Times, 2003). The story, Richest Colleges Receive Richest Share of Federal Aid by Greg Winter, presented comparisons of the average amount of federal aid received (per student applying for aid) by wealthier institutions and those that were less well financed. The article pointed out that less wealthy institutions generally have greater numbers of economically disadvantaged students. As a result, the current system of allotting campus-based funds often directs smaller amounts of campus- based aid to schools with larger populations of lower-income students. Poorer students therefore have decreased access to some of the most beneficial assistance offered through the federal aid programs. The disparity was certainly not intended by the college financial experts who developed the current allocation system a quarter century ago. A review of how this system has evolved may help in understanding this disparity and how it might be addressed in the reauthorization of the Higher Education Act, which is currently underway