Financial Aid Practices That Support Low and Moderate Income Student Access and Success

Financial Aid Practices That Support Low and Moderate Income Student Access and Success
Financial Aid Practices That Support Low and Moderate Income Student Access and Success



This forum, presented in collaboration with the National Center for Postsecondary Research at Teachers College, Columbia University, focused on promising practices that have demonstrated success in increasing access to financial aid, college-going rates, and college persistence for low- and moderate-income families. The forum also highlighted successful informational practices that counter the assumption of many students and families that that they will not be able to afford higher education.

  • Almost half of college-qualified low- and moderate-income high school graduates face financial barriers that prevent them from enrolling in four-year colleges
  • Among academically high scoring low-SES students who do enroll in college, nearly half leave college with no credential at all
  • These barriers to college entrance and completion persist even with the federal investment of $86 billion annually in grants, loans, work aid, and tax benefits available to students


Tom Bailey, Ph.D., Director of the National Center for Postsecondary Research, framed the discussion in the context of our society’s commitment to making college access independent of income and family means. With the investment of billions of dollars into Pell grants, tax credits, loans, and savings plans, the nation has made significant progress in increasing college access over the past ten years, but has not yet succeeded in making college affordable to all. Forty three percent of students in families with incomes under $30,000 go to college. At community colleges, only 40% of all entrants have attained a degree after six years. Bailey cited three reasons for these discouraging numbers: 1) the financial aid system is too complicated; 2) the types of aid available have shifted to those that are not especially accommodating to low-income families, such as tax credits; and 3) at the state level, there has been a shift toward merit-based aid and away from need-based aid.

According to Bailey, we are not meeting our goals of access and success, and we need to be more concerned about what happens once students get in the door. He posed the question of “How can we structure financial aid to encourage retention?”

Lashawn Richburg-Hayes, Ph.D., Senior Associate and Deputy Director of Young Adults and Postsecondary Education Policy, MDRC, presented findings from the Performance-Based Scholarship Program for Low-Income Parents, part of the Opening Doors Demonstration, a national demonstration project designed to address student persistence in postsecondary education. The demonstration project used three broad strategies to achieve increased course completion—integral to higher rates of graduation or transfer, and increased employment and higher wages—which were: reforms in curriculum and instruction; enhanced student services; and increased financial aid. The goal of the performance-based scholarships was to ease the financial burden of college and to incentivize good academic performance. The project was modeled after earlier financial incentive and pay for performance programs focused on using incentives to move welfare recipients into the workforce.

Richburg-Hayes detailed the implementation of the performance-based scholarship program in Louisiana. Low-income parents, mostly African American single mothers with incomes within 200% of the federal poverty level, were targeted for the incentive scholarships. The average participant age was 26 years old. Participants in the demonstration were randomly assigned by lottery to either the Opening Doors Program, or a control group that received regular courses and services at the two community colleges attended by participants. Students in the program received $1000 per semester for two semesters, paid in increments across the term, in addition to Pell grants and other aid. Students were eligible for the incentive scholarships if they remained enrolled at least half-time and maintained a “C” average or better. Scholarship checks went directly to students, and were administered through counselors employed by the Opening Doors Program to monitor and support students. Students were able to use scholarship money for non-tuition expenses, which in many cases included books and childcare.

Key findings from the first two cohorts in the demonstration (recruited in 2004) included large, positive effects on persistence and other academic outcomes. Students who received scholarships were more likely to stay registered in classes after the add/drop deadline and earned more credits across the first two semesters than those in the control group. A student survey revealed additional psychological and social benefits, possibly due to the counseling component of the program. Richburg-Hayes indicated that the study was interrupted by Hurricane Katrina, a category five hurricane that hit the Gulf Coast in August 2005—preventing the analysis of longer term data from later cohorts.

According to Richburg-Hayes, further research is necessary to examine the effectiveness of the program in other states. A replication of the study is now underway with anchor funding from the Bill & Melinda Gates Foundation. The replication will vary several aspects of the program: target group; dollar amount of the scholarship; duration of the scholarship; types of counseling and other services accompanying the scholarships; administrative arrangements for disbursing scholarships; and the schedule for payment of scholarships. Preliminary findings from the replication are expected early in 2010.

Bridget Terry Long, Ph.D., Professor of Education and Economics at Harvard University, described an intervention to improve access to college information and financial aid for low- and moderate-income families that is being piloted at H&R Block tax centers. This intervention was designed to address what she identified as the problems with the current aid system: complexity; misinformation; lack of awareness of the Free Application for Federal Student Aid (FAFSA); late information; and missed deadlines. Although the institution of the abbreviated FAFSA-EZ form, which cuts the FAFSA from five to two pages, has simplified the financial aid application process, many families are still unaware of the form or unsure of their eligibility to fill out the EZ form. Long added that the development of the FAFSA “Forecaster” was a good step, but that that tool still requires a great deal of information and continues to pose challenges for lower-income groups due to only being available online.  According to Long, “even with current initiatives, there are major concerns about the financial aid system,” including misinformation among families (i.e. many low-income students greatly overestimate the cost of higher education), lack of knowledge of the FAFSA process, and learning of aid eligibility too late to influence decisions.

The H&R Block experiment provided low-to moderate-income families visiting H&R centers for tax preparation with additional financial aid information, information on local colleges, and assistance filling out the FAFSA with tax information sourced directly from their records. Families with incomes less than $45,000 and with a family member between ages 15 and 30 without a college degree were eligible. Participation in the program was voluntary, and the intervention was assigned randomly. The study participants comprised two groups. Group 1 consisted of high school seniors or graduates, who worked with a tax professional to fill out and submit the FAFSA (with consent). Group 2 consisted of families with high school students (sophomores and juniors) who were given an early estimate of eligibility for financial aid, as well as information about academic requirements for college entrance. The study population included a control group that was not assisted with the FAFSA, but that was provided with basic information on higher education.

The first two implementations of the study were a 2007 pilot program in Cleveland, which involved 3,206 participants, and the 2008 implementation in Ohio and North Carolina, which had 26,013 participants. Long shared some preliminary sample statistics from the 2008 tax season involving this cohort: the average income of participants was $16,295; many  participants were receiving public assistance; approximately 30% of the sample was African-American; and many have a GED rather than a traditional high school diploma. Data from these rounds of implementation were not yet available; however anecdotal feedback indicates increased student interest in learning about college options after receiving aid estimates from H&R Block centers.

According to Long, the research goal of the study going forward is to measure the impact of the simplification of the FAFSA process and the provision of information on outcomes such as college enrollment. Goals for the current program cohort (tax season 2009) are to understand the intervention’s impact on different types of students, and to use technology, such as e-mail and cell phone follow-up to increase awareness about college enrollment and events such as college open houses.

Michael McPherson, Ph.D., President of the Spencer Foundation and co-chair of the Rethinking Student Aid Study Group, organized by the College Board, discussed key recommendations for federal financial aid from the study group’s report. McPherson underscored that this is “a propitious time for a serious rethinking of aid.” Previous discussions about fixing the financial aid system have been focused on “tinkering with the current model,” when what is needed is “a more principled discussion about what we’re trying to accomplish with aid.” The Rethinking Student Aid Study Group, which included individuals from higher education, economics, policy, and politics, has based its recommendations on an underlying set of principles, that aid should be: targeted to those in need; adequately funded; clear, transparent and well-communicated; predictable; student-focused; support both access and success; and use funds efficiently. McPherson stressed that the goal of the report was not to create a blueprint, but to create a “deeper, more meaningful, thoughtful discussion that would underscore what will work.”


Key recommendations shared by McPherson included:

  • Simplify the federal aid system, including both the application process and the programs
  • Improve the federal loan process, targeting subsidies at people who have difficulty paying back loans
  • Develop a federal savings program for low-income families
  • Reward states and institutions that support student success
  • Establish institution-based incentives for accomplishing student progress and completion of degree


Highlights from Question and Answer Session


A Congressional staffer asked the panel to speak about the President’s proposed tax credit in the stimulus package. McPherson responded with the study group’s view that aid should be consolidated and come in the form of credits instead of deductions, and should include non-tuition expenses. He added that “linking tax credits with service is a bad idea” that would be complex to administer and would go against the need for simplification of the system. Long added that when tax credits were originally created, there was a surplus and the government wanted to give back to families. The research, she explained, shows that credits are not great at encouraging college entrance and persistence, largely because low-income families often do not have enough of a tax base to be eligible for credits.

Another participant asked whether the colleges working with the Opening Doors Demonstration adopted the program after the initial implementation period. According to Richburg-Hayes, the idea of performance-based scholarships has caught on. Ohio developed its own performance-based program in 2006 using TANF funds, which is currently being evaluated. A new program in New Mexico, which has expanded eligibility to include part-time students, is also being evaluated. In addition, at least one California college has developed its own performance-based program.

In response to a question about whether the research has looked at the full cost of college and the effects of students’ need to pay off loan costs over the long-term, McPherson said that this topic has been heavily discussed in the economics of education field. He concluded that, yes, it does pay to go to college, but that it has been difficult to get this message across. Many people radically overestimate the cost of college, and McPherson urged better communication to counter this belief.




Thomas Bailey, Director, National Center on Postsecondary Research (moderator): is the George and Abby O’Neill Professor of Economics and Education at Teachers College, Columbia University. He is the founder and director of the Community College Research Center and the National Center for Postsecondary Research. His research focuses on community colleges and ways to promote equity in education for low-income and minority students through programs such as dual enrollment, remediation and developmental education. He frequently speaks in the U.S. and abroad on education, workforce, and community college issues.




Dr. Bridget Terry Long, is Associate Professor of Education and Economics at Harvard University.  An economist specializing in education, Dr. Long studies the transition from high school to higher education and beyond.  Her work focuses on college access and choice, factors that influence student outcomes, and the behavior of postsecondary institutions. Dr. Long received her Ph.D. and M.A. from the Harvard University Department of Economics and her A.B. from Princeton University.

She is a Faculty Research Associate of the National Bureau of Economic Research (NBER), a Research Affiliate of the National Center for Postsecondary Research (NCPR), and served as a Visiting Scholar at the New England Public Policy Center of the Boston Federal Reserve Bank.

She received the National Academy of Education/Spencer Postdoctoral Fellowship and has been awarded numerous research grants from organizations including the Bill and Melinda Gates Foundation, National Science Foundation, Lumina Foundation for Education, and the Ford Foundation.  In July 2005, the Chronicle Of Higher Education featured her as one of the “New Voices” in higher education, and in 2008, National Association of Student Financial Aid Administrators (NASFAA) awarded her the Robert P. Huff Golden Quill Award for excellence in research and published works on student financial assistance.


Michael S. McPherson, is the fifth President of the Spencer Foundation.  Prior to joining the Foundation in 2003 he served as President of Macalester College in St. Paul, Minnesota for seven years.  A nationally known economist whose expertise focuses on the interplay between education and economics, McPherson spent the 22 years prior to his Macalester presidency as professor of economics, chairman of the Economics Department, and dean of faculty at Williams College in Williamstown, Massachusetts.  He holds a B.A. in Mathematics, an M.A. in Economics, and a Ph.D. in Economics, all from the University of Chicago.

McPherson, who is co-author and editor of several books, including College Access: Opportunity or Privilege?, Keeping College Affordable and Economic Analysis and Moral Philosophy, was founding co-editor of the journal Economics and Philosophy.  He has served as a trustee of the College Board, the American Council on Education, and the Minneapolis Institute of Arts.  McPherson has been a Fellow of the Institute for Advanced Study and a Senior Fellow at the Brookings Institution.  The Spencer Foundation was established in 1972 through the gift of Lyle Spencer and supports research about education.  The Foundation currently funds individual investigators to pursue important research projects regarding educational issues.  Traditionally the majority of grantees have been affiliated with academic departments in colleges and universities, the remainder being principally employed in schools of education.


Dr. Lashawn Richburg-Hayes, research focuses on measuring various effects of new forms of financial id, enhanced student services, and curricular and instructional innovations on community college retention and credit accumulation.  Dr. Richburg-Hayes is the principal researcher and project director of a national demonstration that will test the effectiveness of performance-based scholarship programs to increase retention and persistence in higher education.

She is also a lead investigator of MDRC’s Opening Doors Project, a demonstration that is designed to help nontraditional students—at-risk youth, low-wage working parents, and unemployed individuals—earn college credentials as the pathway to better jobs with higher pay and of Achieving the Dream, a comprehensive initiative being led by the Lumina Foundation that targets students of color and low-income students, aiming to boost academic achievement and “close the gap” between these and other community college enrollees. Dr. Richburg-Hayes received her Ph.D. in economics in 2000 from Princeton University.






Thomas Bailey, (moderator)
National Center on Postsecondary Research
Box 174, 525 West 120th
New York, NY 10027
(212) 678-3091
Fax: (212) 678-3699

Bridget Terry Long
Associate Professor
Education and Economics
Harvard University Graduate School of Education
Appian Way
Cambridge, MA 02138
(617) 496-4355
Fax: (617) 496-3095

Michael McPherson
Spencer Foundation
625 North Michigan Avenue
Suite 1600
Chicago, IL 60611
(312) 337-7000
Fax: (312)-337-0282

Lashawn Richburg-Hayes
Senior Associate
Young Adults and Postsecondary Education Policy, MDRC
16 East 34 Street,
19th Floor
New York, NY 10016
(212) 532-3200
Fax: (212) 684-0832

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