Financial aid has taken center stage in federal policy discussions recently, including President Obama’s plan to provide many students with two years of tuition-free community college and changes to the Byzantine system of higher education tax credits, deductions, and tax-preferred savings plans. (I’ve written about the two topics here and here.) But these discussions hint at a broader question—what should be considered “financial aid?” In some respects, financial aid is a little bit like pornography, as everyone knows it when they see it.
But definitions of “financial aid” vary quite a bit across individuals. This is evidenced by Jordan Weissman of Slate, who tweeted his thoughts on financial aid policy:
His definition includes grants, loans, and tax credits—the broadest possible definition. Libby Nelson at Vox agreed:
But she also noted the difficulty in determining what financial aid is:
I’m a little skeptical about whether tax credits should truly be considered aid, as they come so far after the tuition bill coming due:
Others weighed in, noting that loans often aren’t considered financial aid:
It’s worth noting here that all grants, loans, and work-study are included as financial aid that students can receive up to the total cost of attendance, but only grants are included in the calculation of the net price.
So, wise readers, what would you consider to be financial aid? Take the poll below and feel free to leave additional thoughts in the comments section.
One thought on “What Should Count as “Financial Aid?””
Grants, work study, tax credits, tax deductions, and debt forgiveness are all financial aid – they reduce the cost of attendance. Loans are financial aid to the extent that the interest rate is less than the free market rate, and should only be calculated at that amount. For example, if the attainable fm rate is 12% and you get a federal loan at 6.55%, then the aid should be calculated to be the difference in interest paid between the two loans over the term of the loan, and NOT the total amount loaned. In neither case should the loan amount, or the difference in interest, be considered “financial aid provided by the college.”
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