The Federal Student Aid Program Is Breaking Its Promise to the Poor

Students from households with more than $100,000 in income received more federal aid in recent years than those from households with less than $20,000 in income.


One hundred dollars.

This is all that stood in between my aunt Gwen and the 1960 Olympics and a college degree. Following her senior year of high school in 1956, Ed Temple, the legendary coach of the U.S. Women’s Olympic Track and Field team, invited Gwen to the prestigious summer training camp at Tennessee State University. Her roommate there was Wilma Rudolph, the fastest woman in the world and first African-American woman to win three Olympic gold medals.

Over Christmas dinner last year, Gwen told the family how Coach Temple had offered her a scholarship to cover most of school, but that she’d need to come up with the remaining $100 on her own. That amount may sound small—about $900 in today’s dollars—but it was insurmountable to my grandparents, who were sharecroppers in the Deep South. It wasn’t that they didn’t value an investment in the education of their eldest daughter of eight children; it’s just that they couldn’t afford it.

In 1956, there was no such thing as federal student aid. And in the Jim Crow South, blacks below the poverty line had little to no chance of being approved for a private loan. So instead of standing on the podium collecting Olympic gold with her Tigerbelle teammates from Tennessee State, she spent decades in Newark and Boston working hourly-wage jobs.

It’d be nice to think federal student aid programs were originally created to help indigent students access the opportunities afforded through higher education. But the initial motivation came courtesy of the Soviet Union. Fearing that the American technological advantage had been lost following the Soviet’s successful launch of the Sputnik satellite, President Eisenhower signed into law the National Defense Education Act of 1958. Title II of this statute—the National Defense Student Loan program—was specifically instituted to create more teachers, engineers, linguists, mathematicians, and scientists to keep the nation competitive against the Soviets.

The Civil Rights era highlighted that domestic socioeconomic disparities could present as much of a threat to the stability of the United States as the Soviet Union. So in addition to the progress made in voting rights and desegregation, President Johnson signed into law the Higher Education Act of 1965 that effectively created federal student aid. At the bill’s signing, Johnson remarked that the bill “means that a high school senior anywhere in this great land of ours can apply to any college or any university in any of the 50 states and not be turned away because his family is poor.” He solemnly declared that this was the nation’s promise to them.

Though the federal student aid program was created explicitly to help the poor gain access to college and lift them into the middle class, today it seems to have lost that focus. If my aunt did not happen to be an exceptional athlete, it is possible that even in 2013, she would still be effectively shut out of higher-education opportunities. The federal student aid program is increasingly leaving the poor behind.

Today, the Department of Education annually disburses around $150 billion dollars in student loans and grants. Nearly 60 percent of undergraduates, and more than 14 million students in all, use federal aid to help pay for college. These dollars are supposed to make college affordable for students that do not otherwise have the means.

The primary question centers on what constitutes affordability. For students from impoverished households, federal aid can cover the entire cost for some low-cost, public colleges and universities at their in-state rates. For many of them, this type of aid package is the only thing that makes college affordable. Unfortunately, as state budgets tighten, even these schools have annual costs that exceed the amount of federal aid available to students. Families below the poverty line have little to no resources to make up the gap in coverage, and often do not qualify for, or cannot afford, higher-interest student loans through private lenders.

Data from the National Center for Education Statistics drives this point home. In 2007-2008, the average cost for tuition, fees, and room and board at a 4-year university was $13,748 for public institutions and $30,945 for private institutions. For that same year, the latest available, the average federal aid package of grants and loans was $8,070, leaving a gap for students of more than $5,000 annually at public institutions and over $20,000 at private schools.

Though many schools have aid packages to supplement federal money, they increasingly use this money, not for need-based students, but to attract desirable students—that is, those who can afford to pay a significant amount of the tuition. Though this approach leaves some needy students in the cold, it also makes for a better bottom line.

A recent report called “Undermining Pell” from the New American Foundation provides remarkable evidence that student aid is not finding its way to needy students as it should. It states that colleges’ and universities’ business practices are straying from the nation’s commitment to “remove financial barriers that prevent low-income and working-class students from enrolling in and completing college.” Instead, institutional dollars are used for tuition discounts and merit aid—the “merit” being the ability to pay for a slightly reduced tuition. In fact, NCES data from 2007-2008 shows students from households with more than $100,000 in income received more federal aid than those from households with less than $20,000 in income ($8,470 versus $8,060).

The report cites a university administrator that makes the case this way: it makes better business sense to offer four students $5,000 worth of aid and have them pay the remainder than to offer one needy student $20,000 worth of aid. This is a practical example of the report’s sobering finding that student financial aid has become “affirmative action for the wealthy.”

This conundrum is further exacerbated by changes to student loan interest rates, uncertainty about federal student aid funding due to another round of sequestration cuts, and changes to PLUS loan credit requirements that hit the neediest families hardest. Though the individual changes to each of these programs are relatively small, when coupled together along with university practices, this primarily leads to two things. First, it raises the amount of money students are required to pay after exhausting all financial aid. This has the effect of making college prohibitive, just as it was for my aunt in 1956. And according the New America report, this is a purposeful strategy used by some universities called “admit-deny,” which admits a needy students but keeps costs high as an enrollment deterrent. This practice frees up slots for potentially less academically qualified students who have the means to pay for school.

Second, those poor students who manage to navigate the federal aid program and obtain further help from private lenders with much higher interest rates leave college encumbered with huge debt that suppresses their ability to obtain credit for homes, credit cards, and cars with favorable interest rates. Though a college degree increases their earning potential, the high cost of obtaining the degree can perpetuate the socioeconomic disparities that qualified them for need-based help. For example, they’ll have less money available for housing, which may mean they have to live in an area with inadequate schools, high crime, and a shortage of doctors. This makes it unnecessarily difficult to break the cycle of poverty as federal aid was designed to facilitate.

The federal aid program has helped many students obtain an education they would not have otherwise had. But the funding is no longer maximized or focused on the needy students as it was originally intended. The end results are maintained disparities and the curbing of access to college for the poor, to say nothing of the shattered American dreams left in the wake.

For my aunt, the lack of help forever changed her life, through no fault of her own. And in 2013, despite progress, her experience is still a reality for many students.

Fortunately, four decades after she had to give up her dream, she was able to use federal aid and years of personal savings to obtain her bachelor’s degree. And she did not stop there. When she died of brain cancer this past May, she held a doctorate in theology. The government’s delayed investment in her education reaped rewards for the nation—not in the form of gold medals, but in her community through the many lives she touched and the children she inspired to seek a college education.