Financial aid shifting from lower-income students to higher-income students, analysis finds

A new analysis from The Hechinger Report finds that, over the last decade, the net price—the price after discounts and financial aid—paid by low-income students at nearly 700 colleges and universities has increased more rapidly than the net price paid by their high-income peers. Low-income students still typically pay less overall, but the trend suggests that “in the competition for revenues and students, financial aid is shifting from needy families to wealthier ones.”

The Hechinger Report’s Tuition Tracker uses federal data to compare the sticker price of U.S. colleges and universities with their estimated net price by income. At 80 institutions, net price doubled for their lowest-income students across the past decade, while it tripled at 19 colleges and quadrupled at 10. At 90 colleges and universities, the net price increased for their lowest-income students while it decreased for their highest-income students. The tuition tracker, however, shows that at Georgetown University, which meets U.S. students’ full demonstrated financial need, the net price for students whose household income is less than $30,000 has decreased by 94%, from $10,603 to $596. 

Implications for lower-income students

Facing rising net prices, lower-income students have become more reliant on student loans and federal Pell Grants. However, the latter covered only about 25% of college costs in 2020-21, a 69% decline from how much it covered in 1975-76, according to data from the Pell Institute for the Study of Opportunity in Higher Education and the Alliance for Higher Education and Democracy at the University of Pennsylvania. State financial aid also has failed to keep up with the cost of attendance and in some cases has shifted to disproportionately benefit higher-income students.

Increased reliance on student loans can thwart low-income students’ financial mobility years after graduation. Pell Grant recipients, most of whom typically earn an annual income of $40,000 or less, were over five times more likely to end up in default on their loans within 12 years of entering college than their higher-income peers, according to The Institute for College Access and Success. First-generation college students and Black students were also more likely to default on their student loans.

“Costs keep going up. And when the Pell Grant fails to keep up with inflationary costs, that’s often going to be felt by the neediest students,” Justin Draeger, president of the National Association of Student Financial Aid Administrators, tells The Hechinger Report. “It’s doubly unfortunate because for those students, price sensitivity doesn’t just impact their choice of where they’ll go to college, it impacts whether they’ll go to college.”

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