The country faces three problems in higher education:
- Increasing costs
- Increasing student debt
- Low completion rates
Although most students receive financial aid, many are left with unmet financial needs and may take on loans or drop out of college as a result. But promising innovations in financial aid could help students pay for college and accelerate their studies.
The cost of college has been rising for decades. In 2016-2017, the average tuition and fees for American community colleges were about $3,520, a 140 percent increase over the inflation-adjusted price in 1986-1987. Access to college has increased since the Higher Education Act of 1965 extended financial aid to all, but completion rates remain low. Only 59 percent of students entering four-year schools graduate in six years, and 31 percent of students entering two-year schools graduate in four years. Financial aid programs can be designed to address these challenges and improve college completion.
Year-round financial aid can boost enrollment and credit accumulation in the summer and help students accelerate their studies. Congress recently reinstated year-round Pell Grants, which will provide additional aid to students who want to take courses in the summer.
Undergraduates who attend school in the summer have better retention rates thereafter and are significantly more likely to complete degrees.
Performance-based scholarships can improve students’ academic progress. MDRC’s Performance-Based Scholarship Demonstration — which included 12,000 students in six states — evaluated the impact of scholarships that were contingent on students meeting certain academic benchmarks, such as completing a certain number of credits with a “C” or better. Overall, the program resulted in modest but long-lasting improvements in students’ academic progress
Disbursing financial aid refunds (the aid that remains after tuition and fees are paid) in small increments throughout a term may be a better way to support low-income students than the typical delivery of aid refunds — a large lump sum at the beginning of the term. MDRC’s Aid Like A Paycheck evaluation is testing whether providing refunds to students in increments every other week can help students improve their financial and academic outcomes. Early results show that biweekly disbursements reduced students’ use of federal loans and debts to colleges after one semester.
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