Paving the Way: How Financial Aid Awareness Affects College Access and Success

October, 2008

In a time of ever-rising college costs, financial aid is critical to increase college access and success. Federal, state, and institutional aid programs help to ensure that students can afford higher education regardless of economic background. Financial aid is most effective when students and families learn about it early enough to make the right choices and plans about high school coursework, family savings, work and earnings, and college options.

This literature review explores the questions of how and when students and families learn about college costs and financial aid, and how the timing and substance of that information may impact college-going behavior. The research for this review was conducted in 2007 by graduate intern Deland Chan, who wrote it with Deborah Frankle Cochrane. Shannon Gallegos and Edie Irons helped create the finished product.

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What do students and parents know about the cost of college and financial aid?

Many parents and students lack adequate knowledge to accurately estimate college costs.

Low-income and minority parents tend to overestimate the costs of attending college and are more likely to have inaccurate knowledge of actual college costs.

Generally, parents’ ability to estimate college costs accurately is positively correlated with income and negatively correlated with Latino and African-American ethnicities.

High school students also overestimate college costs, and to a greater extent for two-year colleges than four-year colleges. Students typically estimate three times the mean tuition for two-year colleges and twice the tuition for four-year colleges.

Students and parents with more information about college are much more likely to accurately predict college costs. Well-informed 11th graders overestimate actual two-year costs by 5 percent. Parents without basic college knowledge overestimate costs by 228 percent.

Those who are eligible for financial aid are least likely to know about it, although awareness levels are low among students and parents at all income levels.

Many parents have limited knowledge about financial aid. Sixty-two percent of all parents with children who are planning to attend college do not name grants as a source of financial aid, 58 percent do not name scholarships, and 64 percent do not name loans.

Low-income parents are more likely to lack sufficient information about financial aid.

1. Of parents with incomes under $25,000, three out of four can not identify scholarships, grants, or loans as sources of financial aid.

2. Sixty percent of parents with annual incomes under $50,000 say they need more information about how to pay for college, compared to only 37 percent of parents with annual incomes of $75,000 or more.

Many students have limited knowledge of financial aid: 65 percent of students who are planning to attend college do not name grants as a source of financial aid, 72 percent do not name scholarships, and 71 percent do not name loans.

Pell Grant recipients are often first-generation college students, and they lack essential information about financial aid and admissions information.

Students whose parents earned at least a bachelor's degree are more likely to report that the family is aware of and willing to pay college costs.

Knowledge of financial aid varies by race and ethnicity.

1. Regardless of whether their parents attended college, Asians are least likely, and African Americans are most likely, to know about federal student aid programs when they are in high school.

2. Three out of four African-American parents do not identify scholarships as a source of aid, compared to half of White parents. Similarly, 83 percent of Latino parents do not mention grants as a source of aid versus 58 percent of White parents (Sallie Mae Fund and Harris Interactive 2003). Most Latino non-college-going youths can not name one source of financial aid.

3. Two-thirds of African-American parents and 62 percent of Latino parents say they need more information about how to pay for college, compared to only 44 percent of White parents.

Some students have inaccurate perceptions of their eligibility for financial aid.

1. Many current and former community college students, especially those from two-parent households, assume that their household income is too high to make them eligible for federal financial aid.

2. In California, far fewer Latino students than are eligible actually apply for Cal Grants because they erroneously believe that high grades are required.

3. Many low-income students who do not apply for financial aid believe that they do not need financial aid. Twenty-nine percent of low-income dependent students and 39 percent of low-income independent students say they did not file a Free Application for Federal Student Aid (FAFSA) because they believed they could afford to pay.

How do students learn about financial aid?

Counselors are influential in disseminating financial aid information, especially among low-income and minority students, and their personal biases may affect the information given to students.

Counselors are the most frequently cited source for financial aid information for high school juniors and seniors. Almost 85 percent of high school seniors hear about financial aid from teachers, counselors, or coaches.

African-American, Latino, and low-income students are the most dependent on high school personnel for information about college.

Low-income students are more likely to rely on counselors to discuss financial aid (72 percent) than their higher-income peers (34 percent).

While most high school guidance counselors (89 percent) say that student loans help low-income students attend college, more than one-third of counselors (37 percent) believe that low-income students should avoid student loans because of the risks of default.

There is a positive correlation between student access to guidance counselors and enrollment in college preparatory classes. Forty-three percent of students report that they choose their high school curriculum with the help of teachers or counselors. Additionally, 85 percent of low-income SAT takers see a school counselor at least two or three times during their junior and senior years to discuss future plans.

Most counselors express a “personal bias for education” but cannot articulate a clear reason why they steer students toward college. Many find it difficult to discourage unrealistic college expectations because parents might disapprove of counselors who tell students that college is not for them. Often, counselors and teachers lack training in advising students about postsecondary options other than college.

Counselors favor students who are more aggressive in seeking their assistance or students whom they deem are “college material.”

Counselors may treat low-income and minority students as academically incapable and steer them toward less rigorous academic or vocational programs. Some counselors report having low academic expectations for African-American and Latino students.

Counselors’ personal notions of affordability may steer students toward community college because they believe that is all those students can afford, even though low-income students may receive better aid at private schools.

High school counselors are often only able to answer the most basic questions about financial aid and are frequently overburdened or unavailable.

Parents may directly influence their children’s information and expectations about college costs and financial aid.

The college experiences of parents play a significant role in determining their children’s college preparation. Students often form college aspirations in accordance with their parents’ educational level. Parents who attended college are more involved in their children’s high school curricular decisions and college planning activities.

Parents who are aware of financial aid programs tend to have higher degree aspirations for their children.

Students whose parents received financial aid are more likely to have heard about financial aid themselves.

Low-income students who receive college information from friends and/or parents and who expect to receive financial support from parents are 66 percent more likely than other students to plan on attending a four-year college.

Latino parents have trouble gathering information even if they attend college events due to language barriers, and this difficulty is more pronounced for lower-income parents and recent immigrants.

Peers and classmates are a valuable source of information about college costs and financial aid.

Peers and classmates are a commonly cited source of financial aid information for 11th graders and 12th graders. More 12th graders report that they hear about financial aid from friends or classmates (62 percent) than 11th graders (48 percent).

Peer counseling has the potential to be a rich source of financial aid information and college counseling, particularly in light of overburdened high school counselors.

The internet is an increasingly important source of financial aid and postsecondary information for students.

A significant portion of students and parents obtain college-related information from the internet.

The availability of information online does not necessarily mean that students will be aware of or rely on it. In California, most students visit federal web sites for information about financial aid but do not know that a similar site exists for Cal Grants. Some bypass scholarship web sites altogether because they do not think they have a good chance of getting an award.

Students find college web sites and financial aid calculators highly useful in their search for college and financial aid information.

In general, students are suspicious about offering personal information on scholarship search engines and mistrustful of web sites not linked to a specific institution or governmental service.

Students with limited computer and internet access encounter a variety of problems in completing a FAFSA and applying for college.

1. FAFSA.gov, the official web site for students to apply for federal financial aid, does not function well with slower internet connections and older computers.

2. Most students complete the FAFSA at home for better access to parental information but then face difficulty when no expert is available to offer assistance or explain difficult questions.

3. Some schools offer discounted application fees to students submitting online applications. Students without internet access miss out on these discounts.

Other sources may provide crucial information about college costs and financial aid information.

One in three 11th and 12th grade students rely on media sources such as television, radio, and newspapers to learn about financial aid.

Students do not consider community organizations to be an important source of financial aid information.

For Latino parents, the internet (13 percent) and printed materials (11 percent) are rated most highly for gathering financial aid information. Radio, TV, and newspaper media are not considered helpful. Thirteen percent of Latino parents rate college nights, visits, and outreach most helpful.

When do students learn about financial aid?

Students and families tend to learn about college tuition and financial aid toward the end of high school.

Most students learn about financial aid in the final years of high school, after already making decisions about whether or not to attend college.

Some students do not learn the details about specific types of financial aid until the 11th or 12th grade, or until they have received their financial aid award letter.

One in three 6th through 8th graders speak with parents, teachers, or counselors about college tuition and fees, compared to three in four 11th and 12th graders. Fewer talk with parents, teachers, or counselors about financial aid: just 27 percent of 6th through 8th graders, and 71 percent of 11th and 12th graders.

Students and families most in need of financial aid information tend to receive it later than others.

The lowest-income and Latino families get financial aid information later than higher income and other families.

The average age at which a student first receives financial aid information is 14 years for families with household incomes over $75,000, 16 years for families with household incomes under $25,000, and 17 years for Latino families.

Many students develop college aspirations before attending high school, which may affect their decision to seek information about financial aid.

Students typically decide whether they will attend college between 8th and 10th grades. Among 8th graders, 55 percent of those whose parents did not attend college expect to get a bachelor’s degree, compared to 91 percent of students whose parents had a bachelor’s degree or higher. Among 12th graders, these figures remain virtually unchanged at 53 percent and 90 percent respectively.

How do students’ awareness and expectations about college affordability and financial aid affect college-going behavior?

Awareness of financial aid does not necessarily cause students to apply for aid.

In a survey of adults in Texas, 43 percent of first-generation college-going African-American adults knew about federal aid when they were in high school, but only 24 percent of them filled out the FAFSA at that time. White and Latino adults recalled having a similar level of financial aid knowledge (43 and 40 percent, respectively), but were much less likely to have applied for aid (12 and 16 percent).

Financial aid influences students’ college-going decisions.

Students with more information about financial aid programs consider financial aid a less important factor in deciding where to go to college.

African-American, Latino, and low- and middle-income students who read information about financial aid are more likely to take steps toward attending four-year institutions than those who do not read any information.

Female students, those with greater paternal educational attainment, and those with higher family incomes are less likely to report that financial aid is important in their college choice.

Students who expect a larger parental contribution to educational expenses, as well as those who are confident about their family’s ability to pay, are less likely to regard financial aid as important in their college choice.

Students of color are more likely to modify their final choice of college based on financial aid offers.

A lack of timely financial aid knowledge affects a student’s likelihood of going to college.

One in four young adults who consider but do not attend college would be more likely to enroll if they had better information about how to pay for college when making educational decisions.

Three-fourths of young Latino adults in California who do not attend college would have been more likely to enroll if they had known more about financial aid when making college-going decisions.

A student’s expectations concerning financial aid eligibility influence whether they will apply to and attend college.

Low-income students who expect to receive aid are more likely to aspire to college than those with low incomes who do not expect aid.

Low-income students say that they are more likely to apply to college if they anticipate financial assistance.

Student perceptions about ability to pay affects college selection, and availability of financial aid can predispose students to select a particular institution.

Students who are knowledgeable about financial aid are more likely to go to college, enroll in a four-year rather than a two-year-college, and attend full-time rather than part-time.

African-American students’ perceived inability to pay for college restricts their college enrollment.

Parents’ understanding of college costs and financial aid eligibility affects students’ decisions to apply to and attend college.

Parents who think they cannot afford to pay for college may discourage children from applying.

Parental reluctance to share financial information needed to apply for financial aid can serve as a barrier to student enrollment in college.

Aversion to student loan debt can be a barrier to college enrollment, especially for low-income, minority, and first-generation college-going students.

Low-income and minority students are less comfortable borrowing to finance their educations.

1. Latinos, low-income individuals, and those with less education are less inclined to borrow to finance their educations.

2. Mexican-American students at UC Berkeley borrow less than $13,000 on average, while other Latinos and African-American students average more than $17,000 in loans after four years.

Latino students are more likely to enroll in a community college than a four-year institution to avoid borrowing.

Students whose parents did not go to college tend to consider loans only after exhausting other financing options, including full-time employment.

Other factors may also affect debt tolerance:

1. Students with higher educational expectations are more accepting of borrowing. Those expecting to earn a first professional degree are seven times more likely to be debt tolerant.

2. Students who believe in good luck and chance are three times more likely to be debt tolerant.

Racial and ethnic groups prioritize long-term economic benefits and short-term costs of attending college differently.

Nearly all California Latino youth think a college education is important, but 38 percent do not think that the benefits outweigh the costs.

Latina students’ desire to attend college is diminished by concerns about student debt, bills and expenses, uncertainty of the receipt of financial aid, and long work hours.

What are barriers to accessing financial aid?

Parents and students often have limited knowledge about college costs and financial aid when planning and applying for college.

Students and families typically learn specifics about financial aid amounts and types after they receive financial aid offers very late in the college process.

Many community college students have no idea that certain financial aid programs exist or that they might be eligible for them. Most of these students have to track down information themselves or learn about financial aid through word of mouth from other students.

Inaccurate cost estimates discourage students from attending college.

One in four low-income students who meet eligibility criteria for a Pell grant does not apply for federal aid.

The complexity of the financial aid application discourages students from applying for aid.

Students report that it takes too long to determine financial aid eligibility, and that it is burdensome to research available financial aid and scholarship programs.

Deadlines for financial aid programs are barriers for those unfamiliar with the process or who learn about available aid programs too late. One in four low-income dependent students says they didn’t apply because they missed the deadline. Of undergraduates who do apply, 55 percent do so in March or later, missing deadlines for many state aid programs.

The most underserved and needy students are those most likely to be deterred by the aid application process.

Financially needy students face a variety of barriers that limit their access financial aid.

Many nontraditional students need child care on campus and are particularly concerned about supervision of their children while they attend evening or weekend classes.

Visiting the financial aid office can conflict with the logistics of applying for work-based safety net services, such as food stamps, Medicaid, the Earned Income Tax Credit, or Section 8 housing vouchers, as students may need to apply for these services during the same hours that financial aid offices are open.

Major barriers to financial aid assistance include exceeding income qualifications for financial aid despite relatively low earnings, attending school less than half-time, defaulting on past student loans and grants, and being on academic probation.

First-generation immigrant students face additional problems accessing financial aid.

1. Students residing unlawfully in the U.S. and who have applied to legalize their immigration status are ineligible for federal aid and most forms of state financial aid.

2. Institutions within states often have different policies regarding whether undocumented immigrants are eligible to pay in-state tuition, which can be confusing for students.

Colleges themselves sometimes create additional obstacles to financial aid.

1. As an enrollment management strategy, some colleges use institutional merit grant aid to attract high-achieving students, which reduces the overall amount of aid available to help low-income students.

2. Some community colleges restrict access to information about student loans to students who actively request such information and provide more in-depth counseling only to students who have already decided to borrow.

3. Many community colleges do not participate in the federal student loan programs at all. Nationally, one in ten community college students lacks access to loans, and the rate is twice that for African-American and Native American community college students.

Changing demographics of undergraduate student populations increasingly render outdated the traditional concept of how students manage college costs.

The availability of financial aid, or lack thereof, can affect college enrollment and completion.

States’ college completion rates are positively associated with the amount of money that they spend on grant aid, measured as a proportion of states’ total higher education spending.

Financial barriers – including insufficient available aid – keep half of all college-ready low-income students from attending a four-year college.

Financial aid offers encourage college enrollment, and just being offered an award is more influential than the amount of aid.

Students with no calculated financial need who received aid and students with need that was fully met persist at higher rates than other students.

Students with large loans and little grant aid persist at lower rates than those with smaller loan burdens, no need, or unmet need.

Community college students who borrow may be less likely to persist in their education than nonborrowers.

Paving the Way: How Financial Aid Awareness Affects College Access and Success

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