6 ways to transform financial aid processes
Every year, millions of people buy Powerball tickets for a one-in-292.2-million chance of winning big. Meanwhile, four out of five undergraduate students are eligible for some kind of financial aid, and yet more than two billion dollars in student grants go unclaimed each year. Higher education is the real winning ticket, clearing pathways to skill-building, job security, and peace of mind.
Financial friction is the No. 1 barrier to enrolling and graduating from college. By examining financial aid processes, institutions can maximize the use of available funds to keep students on track to achieve their goals.
Higher education enrollment has fallen 5.1% since fall 2020, and the national persistence rate dropped an unprecedented two percentage points in 2021. To combat these trends, institutions are rethinking longstanding approaches to student success. One of the most powerful tools at their disposal is financial aid. While budgets remain tight and resources scarce, transforming financial aid processes allows institutions to leverage aid more efficiently and effectively to meet institutional goals while getting more students through to completion.
Today’s prospects aren’t just deciding which school to attend. They’re deciding whether postsecondary education is worth the cost in the first place, weighing a potential return on investment against affordability. Because of this, financial aid packages make or break enrollment decisions, playing a crucial part in admissions strategies. When financial aid is only thought of as a way to get prospects in the door, institutions miss out on the pivotal role it can play throughout the student lifecycle.
Retention will be a top priority in semesters to come, and affordability is a key driver of alarming stop-out rates. In a study conducted by the University Professional and Continuing Education Association (UPCEA), 42% of surveyed students who had exited higher education cited financial constraints. While the pandemic sprung massive challenges on many students, shifting financial circumstances have always impacted students’ ability and desire to stay in school.
By examining financial aid processes and transforming them with applied technology and innovative strategies, institutions can provide the timely, accurate, and comprehensible support students need to enroll and persist. Here are six ways to transform financial aid processes:
1. Improve perceptions of affordability
In a 2021 survey conducted by researchers at public policy research organization New America, less than half of respondents agreed with the statement, “Americans can get a high-quality education after high school that is also affordable.” Financial aid helps prospects see past the sticker shock of rising tuition prices to imagine higher education as an attainable possibility. Unfortunately, this information comes too late for too many.
Consistent and robust information about funding opportunities can be incorporated into recruitment efforts long before the offers of admissions go out. By breaking down silos of information between admissions and financial aid, messaging about available opportunities can be seamlessly introduced into any recruitment activity, from campus tours to website homepages.
Research shows the importance of early outreach. An investigation from Inside Higher Ed on how the perception of affordability impacts enrollment yields found that high school juniors are 20% less likely to apply for college if they don’t believe they can afford it. Particularly true for low-income and first-generation students, prospects without built-in mentorship guiding them to financial aid resources may never learn that those resources exist in the first place.
Institutions may increase application numbers by informing prospects of aid early or even offering them direct funding opportunities. For instance, merit-based micro-scholarships enable high schoolers to start saving for college or take dual-credit courses right away. By providing resources for prospects to invest in their own education, financial aid helps keep students motivated throughout high school and ready to pursue a degree after graduation.
2. Empower students with self-service
Even well-staffed financial aid offices can’t provide 24/7 support for their students. That’s where self-service comes in. When students can access their account information at any time, from any device, they can better manage their loans, avoid over-borrowing, meet scholarship requirements, and focus on learning.
This isn’t an abdication of responsibility, rather a more efficient distribution of it. Financial aid officers will still guide students through the most complex parts of the financial aid process while staying on top of ever-changing regulatory requirements. But with self-service, aid officers gain new availability to tackle those issues one-on-one, while students can take ownership of their finances in preparation for the future.
3. Ease application pain points
Technology has reimagined how students and their families apply for financial aid, but that doesn’t mean the process is simple. Gathering, organizing, and submitting the necessary information can be a complex challenge for many students, particularly those handling it all on their own. And while the FAFSA Simplification Act will overhaul the federal student aid process, many of the improvements won’t take effect until the 2024–25 award year. In the meantime, individual institutions can evaluate their own methodology to ease application pain points as much as possible.
Including FAFSA resources on admissions sites can get many students through the first hurdles of applying for financial aid with a solid understanding of how to see it through to completion (on time).
Any additional information required by individual institutions should be periodically evaluated and simplified, or even removed, when possible. A streamlined system will benefit students and staff alike, and those internal efficiencies can make a big difference. The earlier applicants can be notified of their aid offers, the more time they’ll have to make informed decisions about enrollment. Delayed offers may result in accepted students not considering an institution at all because they’ve already selected another one. In fact, one CampusLogic survey* showed that 80% of students will consider their second-choice school if their aid isn’t processed within eight weeks.
Many institutions require applicants to fill out the CSS Profile, which has been described as the most onerous form in college admissions, as it vastly exceeds the complexity of the FAFSA. While this gives financial aid offices more information to distribute aid effectively, many have critiqued the disproportionate burden it places on those most in need. College Board has promised a forthcoming, “lighter, shorter” version of the profile, but some institutions have waived the requirement for qualifying students or done away with it entirely. As these changes slowly take shape for federal aid, it’s important for administrators to continue evaluating their own processes to make financial aid as efficient, equitable, and accurate as possible.
*Results from a nationally representative sample of 1,200 current and former college students conducted for CampusLogic by EMI Research Solutions in January 2022
4. Use data to keep students on track throughout the lifecycle
Financial aid offices tend to be high-touch throughout the admissions process. This isn’t the case after enrollment, even among students who could use additional support. Well-timed interventions can make all the difference for students who would have otherwise failed to meet the requirements of the aid applications and scholarships they need to stay enrolled.
By applying technology strategically, institutions can equip staff with the insights they need to keep students on track, as Georgia State University demonstrated with their Packaging Status Promotion (PSP) initiative. Using data from their Student Information System, the PSP can monitor the financial status of over 50,000 students to proactively resolve issues and help at-risk students complete their FAFSA and accompanying documents on time. As a result, the institution saw a 20.6% increase in student financial aid completion.
Data enables institutions to best utilize financial aid, but there are also policy changes that can help students reach graduation and succeed beyond it. Reevaluating punitive measures for unpaid bills—like withholding transcripts for outstanding balances as low as $25—can deter students from continuing their education or may put an alum’s career on hold. Any student-first measures an institution can afford to implement will not only make their recruitment more competitive but will contribute to a more successful and satisfied campus community.
5. Incorporate basic needs into student support strategies
In a 2021 survey of more than 195,000 students across the United States, The Hope Center reported three out of five respondents experienced basic needs insecurity and over half did not apply for support because they did not know how. Reliable food and housing are prerequisites for staying enrolled and achieving student success.
While financial aid primarily makes tuition more affordable, many institutions have expanded the scope of their support to cover basic needs. One approach is to ensure the costs of on-campus housing and dining can be covered by institutional scholarships and grant money. An increasing number of financial aid offices also set aside emergency funding—available by application—to create a safety net for those who need it most. These emergency funds may be built into annual budgets or sourced as needed through family, friends, and alumni networks using intelligent donation technology.
When aid can’t be expanded, a growing number of institutions are partnering with community organizations such as food pantries to fill in the gaps. Whether these resources are officially affiliated with the institution or not, by simply communicating their availability to the student body, financial aid offices may keep precarious education paths from derailing.
6. Commit to transparency
In a study conducted by College Ave Student Loans and reported by University Business, 81% of responding families found the costs of tuition and fees more expensive than they’d expected. If prospective students and their families don’t have clear and accurate information about expenses, they can’t make an accurate financial plan to cover them, particularly amid unpredictable challenges caused by the pandemic.
University Business contributor Chris Burt recommends institutions help by committing to transparent communications: “Ensure that information being presented on campus websites and to prospective students are also being allayed and updated on websites that students and parents are expected to frequent, such as U.S. News and World Report,” he writes. He suggests spelling out the differences between student loans and grants, as well as private scholarships: “No matter what, all prospective students should receive a complete breakdown of costs of their tenure at the institution.”
Transparency can also be actively incorporated into new scholarship strategies. Cornell College, for example, can compete with flagship universities through their newly unveiled “Freeway Scholarship.” Awarding $30,000 annually to prospects from surrounding states, Cornell College avoids tuition discounting while offering a much more competitive price to target students. “The Freeway Scholarship also has the advantage of giving up-front clarity to students and their families about net college costs at the same time it targets its main public university competitors,” writes Forbes contributor Michael Nietzel. “It will be interesting to see if other private colleges emulate the Cornell model.”
Funding the future of higher education
Financial aid has the potential to solve significant barriers in higher education. For students, funding opportunities are deciding factors in both enrollment and persistence. And for institutions, sustainable methods of student support can help demonstrate the value of pursuing a degree while stabilizing enrollment and retention rates.
Higher education has radically transformed over the course of the pandemic, but just as circumstances continue to change, institutions can’t lose momentum in their own evolution. By reimagining the role and processes of financial aid, institutions can bridge economic gaps throughout the lifecycle for a more successful and equitable student body.