A flawed formula: Who benefits most from campus-based aid?


The trio of financial support to students known as campus-based aid includes Perkins loans, Supplemental Educational Opportunity Grants (SEOG), and Federal Work-Study (FWS). Unlike more popular federal student aid programs, like Pell grants and the Federal Direct Loans, only students at participating institutions can receive campus-based aid, and funds are limited and typically awarded to students on a first-come-first-serve basis. Where available, each of the programs makes additional funding available to students through their school and gives schools discretion in determining which students receive these financial aid awards. SEOG aims to provide high need students with additional grant aid, while Work-Study allows students to work in subsidized positions both on campus or nearby, Perkins loans (which are no longer available as of the 2017-18 school year) have historically provided additional loan eligibility to financially needy students.

Because a complex and outdated formula determines how much each institution is awarded in campus-based aid, the current allocations are biased in favor of older institutions and institutions with high-costs. The conventional wisdom holds that such a formula favors private institutions in the northeast, at the expense of community colleges and low-cost public four-years nationwide. Using data provided by the U.S. Department of Education on campus-aid recipients and disbursements, paired with 12-month enrollment data for the 2015-16 school year allows us to evaluate how severely this allocation formula is working against particular geographic areas.

Who Benefits Most from Campus Based Aid?

As the chart below shows, FWS is disproportionately awarded to students in Maine and Vermont, while in more populous states like California and Texas, just over one percent of students are receiving Work-Study awards. Across sectors, students at private nonprofit institutions have higher rates of participation in FWS regardless of geographic region, despite serving small shares of students overall. For-profit and public institutions tend to serve smaller portions of students despite the higher levels of need this population serves. (To explore FWS participation across sectors, use the slider below the map).

When exploring the share of students receiving SEOG awards, a similar story unfolds. In states in the northeast, and in particular Maine and Vermont, students are most likely to receive an SEOG award. Students in Midwestern states like North Dakota, Iowa, and Wisconsin also receive SEOG at higher rates than those in other areas, while students in Western, Southeastern, and Southwestern areas receive SEOG at the lowest rates. Across sectors, students at for-profit institutions tend to receive SEOG at the highest rates, which is likely due to the programs explicit focus on students with high need relative to their costs. Students at public institutions typically are less likely to receive SEOG relative to other sectors in the same state. However, across states, participation in SEOG among students at public institutions follows roughly the same pattern as that of students overall, with Maine and North Dakota awarding students SEOG the most frequently.

Perkins loans, which are no longer available to current students as of the most recent school year, have historically followed a similar pattern: Rhode Island, which has the highest rate of Perkins participation, awards the loans to seven percent of students, while Vermont awards the loans to six percent of students and Maine and North Dakota each award Perkins loans to about four percent of their students. Among private institutions, participation is typically higher relative to other sectors in each state, and the geographic spread is less concentrated in particular region. Among for-profit institutions, a handful of states award Perkins loans to about five percent of students, while for the majority of state participation is close to or at zero. For public institutions, geographic patterns mimic those seen when all institutions are included.

Does Campus-Based Aid help students in need?

The share of a state’s students who receive Pell grants–a reasonable approximation of student need–has basically no relationship with the share of students who receive federal Work-Study, SEOG, or Perkins loans. Rhode Island, Vermont, and Maine have the highest rates of participation in each of the campus-based programs, yet differ significantly in their share of Pell-eligible students. In contrast, places like Mississippi, Georgia, and the District of Columbia have some of the highest rates of participation in the Pell program, yet campus-based aid in any form is often not reaching students in these places. Across each sector, the relationship between the share of students receiving Pell and the share receiving any form of campus-based aid remains elusive.

Adjusting the way the campus-based aid formula distributes dollars to students could go a long way in improving access to additional funding for the neediest students. Several proposals are already in the works to fix the campus-based formula. In particular, community colleges and other schools who serve high proportions of low-income students and prioritize affordability should be rewarded by the campus-based aid formula, not penalized by it.