Despite Aid, Poorest Families Hardest Hit by Higher Education Costs

Share Article

Eduventures study shows lines blurring between need- and merit-based financial aid.

Need-Based and Non-Need-Based Undergraduate Financial Aid: Factors Impacting Aid Awards

In an environment of intense competition for students, some higher education institutions have begun to rely more intensively on non-need-based financial aid to recruit and enroll students. At the same time, a number of elite American colleges and universities have developed innovative need-based aid programs in an effort to improve access for students from low socioeconomic backgrounds. Although all of this may sound like good news for students, the news is not as positive for students coming from the lowest income quartile.

Key findings in "Need-Based and Non-Need-Based Undergraduate Financial Aid: Factors Impacting Aid Awards," a recently published report from Eduventures, the leading research and consulting firm for the education industry, include:

  • Families from the lowest income quartile spend 58% of their income on tuition as compared with only 12% for families in the top income quartile.
  • Students from the top family income quartile receive roughly three times the non-need-based award as students from the bottom family income quartile.
  • A positive correlation between SAT composite scores and need-based aid suggests a “blurring” of need and merit aid in the data. In some cases, need-based aid is used as a recruiting tactic to attract higher profile academic students.
  • Non-need-based aid (often thought of as merit awards) are given at relatively low levels of SAT performance, with a composite SAT score of 620 marking the cutoff for non-need-based aid.

“The family income data suggest the overwhelming challenge many students from low socioeconomic backgrounds face in attending college, and help explain why many leading colleges and universities are taking steps to make college more affordable through the development of new aid packages,” said Jim Quinn, senior analyst for Eduventures’ Learning Collaborative for Enrollment Management.

With the growth of merit aid in the 1990s, postsecondary institutions have begun to allot a greater percentage of merit-based aid to their students. In the institutions tested as part of Eduventures’ research, students were awarded roughly one-third merit-based aid and two-thirds need-based aid. Nationally, spending on need-based grants at the federal, state, and institutional levels ($39 billion) greatly exceed that of merit aid ($7 billion). Nonetheless, the share of merit aid has increased from 6% to 16% from 1994 to 2004. This is, perhaps, a reflection of institutions looking to find ways to use both need- and merit-based awards to recruit talented students, with some signs of a “blurring” of the aid types.

“In an environment of intense competition for students, many institutions are looking to find ways to use need- and merit-based awards to recruit talented students, sometimes blurring aid types in the recruitment process,” continued Quinn.

Eduventures’ report, "Need-Based and Non-Need-Based Undergraduate Financial Aid: Factors Impacting Aid Awards," was undertaken to identify recent trends in the allocation of need- and non-need-based aid, on behalf of the members of Eduventures’ Learning Collaborative for Enrollment Management program. Key data points collected through the survey included: residency, cost of attendance, family income, SAT composite, need-based financial aid awards, and non-need-based financial aid awards. All data were reported using Common Data Set methodology. For more information on this report or Eduventures’ Learning Collaborative programs, contact Tony Bernez at 617.532.6084.

About Eduventures

For more than a decade, Eduventures has been the most trusted name in the education market for research, consulting services, and peer networking. Its clients include senior administrators and executives from leading educational institutions and companies serving the K-12, higher education, and corporate learning markets, as well as decision-makers in government agencies and the investment community. For more information, visit


Steven Shapiro


# # #

Share article on social media or email:

View article via:

Pdf Print

Contact Author

Steven Shapiro
Visit website