Financial Aid

Report: We Don't Need More Financial Aid; We Need Better Processes

Some three million students drop out of college citing financial reasons. Yes, much of that is because they don't have enough money to pay for their education; but clunky technology and processes also turn out to be a big part of the problem. A new report from Tyton Partners examines how students "get lost" in the financial aid process and how institutions can become more "student-centered" for better outcomes without "adding a single dollar" to the amount of financial aid they make available.

Tyton is an investment banking and strategic consulting firm covering several segments, including education. Beginning last year and armed with a grant from the Bill & Melinda Gates Foundation, the company worked with three professional associations for college administrators — the American Association of Collegiate Registrars and Admissions Officers, the National Association for College Admission Counseling and the National Association of Student Financial Aid Administrators — to understand what's impairing the United States higher education financial aid system and to develop some possible solutions.

A report, "Finding a Fit: The Evolution of Student-Centered Financial Aid," analyzes perspectives from a survey of 2,700 postsecondary faculty and administrators in admissions, financial aid and registrar's roles. Overall, the biggest impediments for students regarding financial aid at their institutions were:

  1. Insufficient availability of aid;
  2. Lack of student engagement; and
  3. Lack of awareness.

In addition, the report asserted, these obstacles "reinforce each other." If students think a school has insufficient aid, they may be "less motivated to pursue all the necessary steps to get aid." Likewise, if students don't know that aid that is available or what the process is for obtaining it, that may come across to administrators as "low student engagement." And when aid "is in fact limited, it can lower the number of people receiving aid and the amount of aid each person receives," which will result in "lower awareness within the student body."

The systems used by schools to process financial aid exacerbate these problems, the report stated. Poor student communication, in particular, is a difficulty — however one that could potentially "be changed and adjusted without necessarily expanding budgets." Most respondents (88 percent) said they use e-mail to update students on the status of their financial aid application. Yet, only 56 percent reported that they considered that the "most effective method" for communicating. Nearly two-thirds (62 percent) said their student information system is the standard means for communication, but less than half (30 percent) considered it optimal. And while only 9 percent use texting, nearly five times as many survey participants (44 percent) said it was the most effective way to interact with students.

As one respondent told the researchers, "[Students] would say that the way we communicate with them is the biggest problem. They do not read or respond to e-mails, letters or phone calls."

These results were in response to the question, "How do you connect with students to update them on the status of their financial aid application?" Source: Tyton Partners, "Finding a Fit: The Evolution of Student-centered Financial Aid."

In a scenario that opened the report, texting and smartphone apps are at the heart of solution proposed by Tyton as a replacement for current practices. In the example, a student uses her phone to fill out a one-page form that's sent off to every school that has accepted her. In response, she receives a series of personalized text messages asking her to update personal information or submit additional data or documentation. As she awaits the outcome from each school, she's notified about possible scholarships she's eligible for based on her profile, which she can apply for with a screen swipe. Eventually, she receives an alert from each institution laying out how much aid she would receive and how much she would need to pay out of pocket. Acceptance happens with a click. In subsequent years of her college career, the process becomes even simpler. She simply needs to update certain details.

That's far from the way the financial aid process works currently, the report pointed out. "Instead, the process is fraught with confusion, misinformation, and technical challenges. It starts at the very beginning, as thousands of students fail to fill out the FAFSA (Free Application for Federal Student Aid), which is the gateway to federal financial aid and the first step in the financial aid process. The other steps in the process are also problematic: verification of the student’s and parents’ financial records is challenging, schools have difficulty reaching students and getting them to respond, award letters are often hard to understand, and scholarships remain unused and undiscovered, even though there are thousands of students who are in desperate need of more money to help pay for college."

According to the report, shifting from status to what's possible will require schools to:

  • Improve their communications with students by bringing texting into the mix;
  • Set up and deliver financial aid education and training programs for incoming and existing students;
  • Revise how financial aid awards are relayed (and make those communications easier to understand);
  • Coordinate changes and improvements to the financial aid system among different departments for greater cohesion; and
  • Place financial aid services in locations on campus where students hang out and are more likely to reach out for help.

The report is available with registration on the Tyton Partners site.

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