a

GAO

United States General Accounting Office

Report to the Honorable Rod Paige

Secretary of Education

April 2003 STUDENT 

FINANCIAL AID

Monitoring Aid 

Greater Than 

Federally Defined 

Need Could Help 

Address Student Loan 

Indebtedness

GAO-03-508
We found that in school year 1999-2000, of the 3.4 million full-time/full-year 

federal aid recipients, 22 percent (732,000) received a total of $2.96 billion in 

financial aid that was greater than their federally defined financial need. Of 

these, 628,000 received an estimated $2.72 billion in such aid by obtaining 

non-need-based loans—which we identify as substitutable loans—that 

families borrow to meet their expected family contribution (i.e., what the 

federal government determines the family can afford to pay for college). 

Title IV allows for students and families to obtain these non-need-based 

loans to meet their expected family contribution. Another 104,000 federal aid 

recipients received an estimated $238 million in such aid as a result of 

receiving a combination of aid from federal and nonfederal sources. 

Proportion of Federal Aid Recipients Receiving Aid Greater Than Federally Defined 

Need in Relation to All Federal Aid Recipients, Full-time/Full-year Undergraduates, 

1999-2000

Changing the HEA to limit the receipt of aid that is greater than students’ 

federally defined financial need is not likely to achieve significant federal 

savings, although, the use of substitutable loans may increase overall student 

indebtedness. In terms of cost implications, limiting those instances where 

federal aid recipients receive substitutable loans—which is the main reason 

why students received aid greater than their federally defined need—will not 

likely result in significant savings. While the government will not have to pay 

default claims or special allowance payments on loans it guarantees, it 

would forego any interest earnings on loans it makes directly. Any savings 

from limiting these loans would be substantially less than the total amount 

of the loans made—the $2.72 billion. However, the widespread use of 

substitutable loans may increase the average debt of borrowers and may 

affect Education’s ability to help students and their families maintain their 

loan debt at manageable levels. 

STUDENT FINANCIAL AID 

Monitoring Aid Greater Than Federally 

Defined Need Could Help Address 

Student Loan Indebtedness 

www.gao.gov/cgi-bin/getrpt?GAO-03-508.

To view the full report, including the scope 

and methodology, click on the link above. 

For more information, contact Cornelia M. 

Ashby at (202) 512-8403 or 

ashbyc@gao.gov. 

Highlights of GAO-03-508, a report to the 

Honorable Rod Paige, Secretary of 

Education 

April 2003 

Over half of the $80.4 billion in 

financial aid provided to college 

students in the 2000-01 school year 

came from the federal government 

in the form of grants and loans 

provided under Title IV of the 

Higher Education Act (HEA). To 

help finance their education, 

students and families may have 

received other funds from states, 

private groups or lenders, and/or 

the schools themselves. 

We initiated this study to, among 

other things, determine how often 

federal financial aid recipients 

received aid that was greater than 

their federally defined need and 

what cost or other implications 

might result from changing HEA to 

limit such aid. 

To ensure that substitutable loans 

will not lead to unmanageable 

student loan indebtedness, we 

recommend that the Secretary of 

Education monitor the impact of 

substitutable loans on student loan 

debt burden and, if debt burden 

associated with substitutable loans 

rises substantially, develop 

alternatives to help students 

manage student loan debt burden. 

In commenting on a draft of this 

report, Education noted that while 

student indebtedness is of concern, 

loans to parents should be 

excluded from our analysis. We 

modified the report to more clearly 

detail when nonstudents were 

responsible for the loans. 
Page i GAO-03-508 Student Financial Aid 

Letter 1

Results in Brief 2

Background 4

An Estimated 22 Percent of Federal Aid Recipients Received Aid 

above Their Federally Defined Need 7

Recipients of Aid Greater Than Their Federally Defined Need Are 

More Likely to Have Higher Family Incomes, Be Dependent, and 

Attend Public Universities 13

Savings from Limiting Aid Greater Than Federally Defined Need 

Would Likely Be Modest, but Substitutable Loans to Students 

Could Affect Their Indebtedness 15

Conclusions 17

Recommendation 17

Agency Comments 17

Appendix I Objectives, Scope, and Methodology 19 

Appendix II Logistic Regressions 21 

Appendix III Comments from the Department of Education 30 

Appendix IV GAO Contact and Staff Acknowledgments 32 

Contact 32

Acknowledgments 32

Tables 

Table 1: Sources of Financial Aid for Students Receiving Aid 

Greater Than Their Federally Defined Need Due to 

Combined federal and Nonfederal Aid, 1999-2000 School 

Year 11

Table 2: Selected Student and School Characteristics Associated 

with Increased Likelihood of Receiving Financial Aid That 

Was Greater Than Federally Defined Need 14

Contents 
Page ii GAO-03-508 Student Financial Aid 

Table 3: Selected Financial Aid Package Characteristics That Were 

Associated with Increased Likelihood of Receiving 

Financial Aid That Was Greater Than Federally Defined 

Need 15

Table 4: Odds Ratios for All Students Receiving Aid Greater Than 

Federally Defined Need 22

Table 5: Odds Ratios for Students Receiving Aid Greater Than 

Federally Defined Need That Cannot Be Entirely 

Attributed to Substitutable Loans 26

Table 6. Means of Variables 29

Figures 

Figure 1: Growth in Student Financial Aid Funding, 1991-92 to 

2001-02 6

Figure 2: Proportion of Federal Aid Recipients Receiving Aid 

Greater Than Federally Defined Need in Relation to All 

Aid Recipients, Including Federal Aid Recipients, Fulltime/Full-year Undergraduates, 1999-2000 8

Figure 3: Proportion of Financial Aid Greater Than Federally 

Defined Need in Relation to Total Financial Aid Awarded 

and Total Financial Aid Awarded to Federal Aid 

Recipients, Full-time/Full-year Undergraduates, 1999-2000 9

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Page 1 GAO-03-508 Student Financial Aid 

April 30, 2003 

The Honorable Rod Paige 

Secretary of Education 

Dear Mr. Secretary: 

In the 2000-01 school year, $80.4 billion in financial aid1

 was provided to 

college students to help them finance their postsecondary education. 

Depending on their financial situation, students and their families had a 

range of options for paying for a college education, including funding from 

the federal government, state governments, private entities such as 

religious organizations, and schools themselves. While students and their 

families had multiple options for paying for college, during the 2000-01 

school year, over half of the financial aid awarded came from the federal 

government, in the form of grants to low-income students and loans to 

students and their families, under Title IV of the Higher Education Act of 

1965.2

Most Title IV aid is based on a student’s federally defined need, which is 

the difference between the student’s cost of attendance and the family’s 

federally determined ability to pay these costs—the latter is known as the 

expected family contribution (EFC). Under Title IV, families are presumed 

to have the resources in the form of savings and income to meet their EFC. 

However, instead of relying on family resources to finance their EFC, Title 

IV allows for students and families to obtain non-need-based loans to meet 

their EFC. In some instances, the federal government makes these nonneed-based loans directly to students and families (direct loans) or 

guarantees the repayment of loans made by private lenders (guaranteed 

loans). Other non-need-based loans are available from state governments 

or borrowed from private lenders without a federal repayment guarantee. 

In this report, we refer to non-need-based loans that are used to replace 

EFC as “substitutable loans.” 

 1

The College Board, Trends in Student Aid 2002, Washington, D.C. 

2

Other federal agencies, such as the Department of Veterans Affairs, provided an estimated 

$2.7 billion in additional non-Title IV student financial aid. 

United States General Accounting Office

Washington, DC 20548 
Page 2 GAO-03-508 Student Financial Aid 

Aside from the federal government, the remaining aid that students 

receive, both need-based and non-need-based, comes from sources, such 

as schools, state government programs, and private entities such as 

religious or fraternal organizations. This aid comes primarily in the form of 

direct grants, including, for example, state or school need-based grants, 

and/or academic or athletic merit scholarships. 

We initiated this review to determine (1) the extent to which students 

received aid that was greater than their federally defined financial need, 

(2) the student, school, and financial aid package characteristics 

associated with receiving such aid, and (3) what cost or other implications 

might result from changing the Higher Education Act to limit the receipt of 

aid that is greater than a student’s federally defined need. 

To do our work, we analyzed data from the 1999-2000 National 

Postsecondary Student Aid Study (NPSAS)3

 for cases pertaining to fulltime/full-year undergraduates and developed a multiple regression model 

to identify which student, school, and financial aid package characteristics 

were associated with receiving aid that was greater than students’ 

federally defined need. We also reviewed federal laws and regulations 

governing the awarding of federal financial aid, and we obtained 

information from 12 schools on their financial aid packaging policies and 

practices. We also interviewed officials at the Department of Education 

(Education) and several academic researchers and financial aid officers. 

We conducted our work between January 2002 and March 2003 in 

accordance with generally accepted government auditing standards. For 

details on our scope and methodology, see appendix I. 

Of the 3.4 million full-time/full-year federal aid recipients for school year 

1999-2000, 22 percent (732,000) received a total of $2.96 billion in financial 

aid that was greater than their federally defined financial need. They 

received this aid either because they borrowed substitutable loans or 

because they received nonfederal financial aid, such as scholarships, in 

addition to federal aid. According to our analysis, of the 3.4 million fulltime/full-year federal aid recipients, 19 percent (628,000) received an 

 3

NPSAS is a comprehensive nationwide survey designed to determine how students and 

families pay for postsecondary education. Within Education, the National Center for 

Education Statistics is responsible for conducting the survey. The most recent survey 

collected data for the 1999-2000 academic year. 

Results in Brief 
Page 3 GAO-03-508 Student Financial Aid 

estimated $2.72 billion in aid greater than their federally defined need 

through substitutable loans and an additional 3 percent of such aid 

recipients (104,000) received an estimated $238 million in aid greater than 

their federally defined need as a result of receiving a combination of 

federal and nonfederal aid. For the latter group, several possible reasons, 

related to how nonfederal aid is treated in determining students’ need for 

Title IV assistance or how need is adjusted, may explain why these 

students received aid greater than their federally defined need. 

Higher grade point averages, higher income, being dependent, as well as 

attending public institutions or institutions located in the Southwest or 

Plains states were characteristics associated with students receiving aid 

greater than their federally defined need, regardless of whether that aid 

was due to substitutable loans or a combination of federal and nonfederal 

financial aid. Compared to those students who did not receive aid greater 

than their need, those who did were more likely to have higher family 

incomes, be dependent, or attend schools in rural areas. Also, students 

whose aid packages were composed mostly of non-need-based federal aid 

or nonfederal aid were more likely to receive aid that was greater than 

their federally defined need. 

Changing the Higher Education Act to limit the receipt of aid that is 

greater than students’ federally defined financial need is not likely to 

achieve significant federal savings. However, the use of substitutable loans 

could increase overall student indebtedness. In terms of cost implications, 

limiting those instances where students receive substitutable loans—

which is the main reason why students received aid greater than their 

federally defined need—will not likely result in significant savings. While 

the government will not have to pay default claims or special allowance 

payments on guaranteed loans, it would forego any interest earnings on 

direct loans. Any savings from limiting these loans would be substantially 

less than the total amount of the loans made—the $2.72 billion. However, 

the widespread use of substitutable loans could increase the average debt 

of borrowers and may affect Education’s ability to help students maintain 

their loan debt at manageable levels. 

In this report, we are recommending that the Secretary of Education, over 

time, monitor the impact of substitutable loans on student loan debt 

burden and, if debt burden associated with substitutable loans rises 

substantially, develop and propose alternatives to help students manage 

student loan debt burden for the administration or Congress to consider. 
Page 4 GAO-03-508 Student Financial Aid 

In responding to a draft of this report, Education agreed that student 

indebtedness is of concern, however, Education disagreed with what we 

included in our analysis. Education stated that by including loans to 

students’ families—usually the parents—we were mischaracterizing 

student debt and that loans to families should be excluded from our 

analysis. We modified the report to more clearly detail when nonstudents 

were responsible for the loans. Education also had technical comments, 

which were incorporated when appropriate.

The following programs are authorized under Title IV of the Higher 

Education Act, as amended: 

• Pell grants—grants to undergraduate students who are enrolled in a 

degree or certificate program and have federally defined financial need. 

• Stafford and PLUS loans—these loans may be made by private lenders 

and guaranteed by the federal government (guaranteed loans) or made 

directly by the federal government through a student’s school (direct 

loans). 

• Subsidized Stafford loans—loans made to students enrolled at least 

half-time in an eligible program of study and have federally defined 

financial need. The federal government pays the interest costs on the 

loan while the student is in school. 

• Unsubsidized Stafford loans—non-need-based loans made to 

students enrolled at least half-time in an eligible program of study. 

Although the terms and conditions of the loan (i.e., interest rates, etc.) 

are the same as those for subsidized loans, students are responsible for 

paying all interest costs on the loan. 

• PLUS loans—non-need-based loans made to credit worthy parents of 

dependent undergraduate students enrolled at least half-time in an 

eligible program of study. Borrowers are responsible for paying all 

interest on the loan. 

Dependent students may borrow combined subsidized and unsubsidized 

Stafford loans up to $2,625 in their first year of college, $3,500 in their 

second year, and $5,500 in their third year and beyond. Independent 

students and dependent students without access to PLUS loans can 

borrow combined subsidized and unsubsidized Stafford loans up to $6,625 

in their first year, $7,500 in their second year, and $10,500 in their third 

year and beyond. There are aggregate limits for an entire undergraduate 

Background 
Page 5 GAO-03-508 Student Financial Aid 

education of $23,000 for dependent students and $46,000 for independent 

students or dependent students without access to PLUS loans. 

• Campus-based aid—participating institutions receive separate 

allocations for three programs from Education. The institutions then 

award the following aid to students: 

• Supplemental Educational Opportunity Grants (SEOG)—grants 

for undergraduate students with federally defined financial need. 

Priority for this aid is given to Pell grant recipients. 

• Perkins loans—low-interest (5 percent) loans to undergraduate and 

graduate students. Interest does not accrue while the student is 

enrolled at least half-time in an eligible program. Priority is given to 

students who have exceptional federally defined financial need. 

Students can borrow up to $4,000 for any year of undergraduate 

education with an aggregate limit of $20,000. 

• Work-study—on- or off-campus jobs in which students who have 

federally defined need earn at least the current federal minimum wage. 

The institution or off-campus employer pays a portion of their wages. 

The amount of nonfederal financial aid has been increasing faster than the 

amount of federal grants for financial aid while the amount of federal 

loans for financial aid has increased the most. As figure 1 shows, from 

1991-92 to 2001-02, the total financial aid awarded from nonfederal grants 

more than doubled, while the amounts from federal grant programs 

increased much more slightly. During this time, the amount of aid 

borrowed through federal loan programs nearly doubled. Growth in the 

amount borrowed through nonfederal loans from 1995-96 to 2001-02 also 

rose, but it remains the smallest source of the four categories. 
Page 6 GAO-03-508 Student Financial Aid 

Figure 1: Growth in Student Financial Aid Funding, 1991-92 to 2001-02 

Note: Data for nonfederal loans was not collected prior to 1995-96. 

As a result of increasing reliance on loans to pay college costs, there is 

growing concern about the level of loan debt students are accumulating. 

The median cumulative amount borrowed from all loan sources for 

graduating seniors increased (in constant 2001 dollars) from $9,800 in 

1992-93 to $18,000 in 1999-2000.4

 Even though income of graduates may 

have increased over the same period, some analysts have expressed 

concern about the increased reliance on the use of loans in lieu of other 

options for financing a college education, such as resources the student 

and family already have. 

Education is responsible for, among other things, formulating the federal 

postsecondary education policy, overseeing federal investments in support 

 4

National Center for Education Statistics, National Postsecondary Student Aid Studies: 

1992-93 and 1999-2000.

Amount of total aid in constant dollars (in millions)

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

91-92

92-93

93-94

94-95

95-96

96-97

97-98

98-99

99-00

00-01

01-02

School year

Federal loans

Nonfederal grants

Nonfederal loans

Source: The College Board, Trends in Student Aid 2002, Washington, D.C.

Federal grants
Page 7 GAO-03-508 Student Financial Aid 

of students enrolled in postsecondary education, and managing the 

distribution of Title IV funds. Part of its role in fulfilling these 

responsibilities is to ensure that Title IV funds are used effectively. 

Education has established a performance indicator of maintaining 

borrower indebtedness and average borrower payments for federal 

student loans at less than 10 percent of borrower income in the first year 

of repayment. This indicator was established based on the belief that an 

educational debt burden of 10 percent of income or higher will negatively 

affect a borrower’s ability to repay his or her student loans. 

Schools are responsible for determining individual students’ eligibility for 

specific sources of financial aid and compiling these sources to meet each 

student’s need—a process known as packaging. Part of this process 

involves deciding which types or sources of aid should be awarded first—

for example, grants or loans, federal or nonfederal aid, need-based or nonneed-based aid. Another factor to consider in packaging aid is whether to 

reduce aid from any source in a student’s package to offset an aid award 

from another source. Such a reduction might be done, for example, when a 

student who has been awarded a significant amount of need-based aid 

subsequently obtains a substantial non-need-based aid award from a 

source outside of their school’s financial aid office. 

In school year 1999-2000, an estimated 732,000 out of 3.4 million fulltime/full-year federal aid recipients (22 percent) received $2.96 billion in 

financial aid greater than their federally defined financial need, either 

because they or their parents received substitutable loans or because they 

received nonfederal financial aid, such as scholarships, in addition to 

federal aid. Figure 2 shows how the number of aid recipients receiving aid 

greater than their federally defined need compares to the total number of 

financial aid recipients. Figure 3 shows how the amount of aid greater than 

federally defined need compares to total aid received. 

An Estimated 22 

Percent of Federal 

Aid Recipients 

Received Aid above 

Their Federally 

Defined Need 
Page 8 GAO-03-508 Student Financial Aid 

Figure 2: Proportion of Federal Aid Recipients Receiving Aid Greater Than Federally Defined Need in Relation to All Aid 

Recipients, Including Federal Aid Recipients, Full-time/Full-year Undergraduates, 1999-2000 
Page 9 GAO-03-508 Student Financial Aid 

Figure 3: Proportion of Financial Aid Greater Than Federally Defined Need in Relation to Total Financial Aid Awarded and 

Total Financial Aid Awarded to Federal Aid Recipients, Full-time/Full-year Undergraduates, 1999-2000 
Page 10 GAO-03-508 Student Financial Aid 

Of all federal aid recipients, about 19 percent (628,000) received total 

financial aid that was greater than their federally defined need solely as a 

result of receiving substitutable loans. We estimate this to be $2.72 billion 

with an average amount of about $4,300. These students received aid that 

was greater than their federally defined need because, under the Higher 

Education Act, students and their families can borrow substitutable 

loans—unsubsidized Stafford and PLUS loans—to offset the amount of 

their expected family contribution (provided they do not exceed the 

annual and cumulative borrowing limits established for these programs). 

The way that schools package student financial aid could contribute to 

students receiving substitutable loans that increase their aid beyond their 

federally defined need. For example, of the 12 schools that provided 

information on their aid packaging practices, 7 automatically package 

substitutable loans for students that are greater than their federally 

defined need while 5 require that a student or family who wishes to obtain 

such a loan apply for it.5

Another 3 percent of federal aid recipients (104,000) received aid that was 

greater than their federally defined need as a result of receiving nonfederal 

aid in addition to their federal aid. We estimate this to be a total of $238 

million with an average of about $2,300. This group of students continued 

to have aid greater than their federally defined need even after any 

substitutable loans they received were accounted for. Further, there was 

no pattern among these students in terms of the sources from which they 

received their financial aid, except that the majority received unsubsidized 

Stafford loans. (See table 1.) In addition, there was no pattern in terms of 

the types of schools they attended.6

 The lack of any such pattern may be 

due to factors not captured in NPSAS data, such as the sequence in which 

financial aid was packaged. 

 5

One of the 7 schools automatically awards substitutable loans when need falls below a 

$200 threshold. 

6

Other characteristics we examined included whether the institution was rural or urban, its 

regional location, or whether it awarded only undergraduate degrees or masters or doctoral 

degrees as well. 

Most Cases of Aid Greater 

Than Federally Defined 

Need Can be Attributed to 

Substitutable Loans 

Some Cases of Aid Greater 

Than Federally Defined 

Need are Due to 

Combinations of Federal 

and Nonfederal Aid 
Page 11 GAO-03-508 Student Financial Aid 

Table 1: Sources of Financial Aid for Students Receiving Aid Greater Than Their 

Federally Defined Need Due to Combined Federal and Nonfederal Aid, 1999-2000 

School Year 

Aid category Source of financial aid 

Percent of the 104,000 

students who received 

aid from this source

Pell grants 17 %

Supplemental Educational Opportunity 

grants (SEOG) 

6

Other federal grants 6

Perkins loans 8

Subsidized Stafford loans 39

Unsubsidized Stafford loans 66

PLUS loans 12

Other federal loans 5

Federal work study 12

Veterans and Department of Defense (DOD) 

benefits 

4

Vocational Rehabilitation and Job Training 

Partnership Act assistance 

7

Federal aid 

Other federal aid 3

State need-based grants 30

State merit grants or scholarships 8

State loans 3

State nonneed, nonmerit grants a 

Other state aid 1

State aid 

State work study 5

College or university athletic scholarships or 

grants 

5

College or university merit grants or 

scholarships 

38

College or university need-based grants 36

College or university nonneed, non-merit 

grants 

6

College or university loans 10

College or university work study 29

College or 

university aid 

Other college or university aid a 

Private source grants or scholarships 32

Private loans 13

Tuition waivers for students whose parents 

are college or university employees 

4

Private aid 

Employer assistance 3

Source: GAO analysis of 1999-2000 NPSAS data. 

a

Less than 1 percent of students received this form of aid. 
Page 12 GAO-03-508 Student Financial Aid 

While we did not identify any common patterns or characteristics 

associated with students receiving aid greater than their federally defined 

need as a result of combinations of federal and nonfederal aid, there are a 

number of possible reasons why this may occur: 

• In limited circumstances, students who receive Title IV assistance are 

allowed to receive aid that is greater than their federally defined need. In 

the first situation, schools cannot reduce the amount of a Pell grant even if 

it results in a student receiving aid greater than federally defined need. We 

found, however, that only 17 percent of the students in this group received 

Pell grants. Also, if aid greater than federally defined need is $300 or less, 

campus-based assistance does not need to be reduced and subsidized 

Stafford loans do not need to be reduced if the student is also receiving 

federal work study. Finally, after any Stafford loan funds have been 

delivered to the student, the student is allowed to receive aid from a nonTitle IV source, even if that aid results in aid greater than federally defined 

need.7

 This could, for example, explain some of the 39 percent of students 

in this group who received subsidized Stafford loans. 

• In some cases, rules for nonfederal assistance can increase the likelihood 

of students receiving aid greater than their federally defined need from 

sources such as private scholarships. Benefactors of private scholarships 

may sometimes prohibit schools from reducing the amount of the 

scholarship even if a student’s total aid package will be greater than their 

federally defined need. Also, several of the schools that provided 

information to us specifically cited students who receive both Pell grants 

and state, merit, or athletic scholarships that are greater than their 

federally defined need as cases in which they would not reduce total aid in 

order to stay within their federally defined need. We found that, among the 

students whose aid was greater than federal need due to combinations of 

federal and nonfederal aid, less than 5 percent received both Pell grants 

and state or institutional merit scholarships or athletic scholarships. 

• Some schools—primarily private 4-year institutions—use different factors 

than those used by the federal government to determine eligibility for 

institutional need-based aid. These need formulas, known as institutional 

methodologies, may identify a higher level of need for a student than the 

federal government would. However, schools that use institutional 

methodologies must still use the federal definition of need to award 

 7

Schools may still need to adjust packages with both campus-based aid and Stafford loans 

to prevent aid greater than federally defined need. 
Page 13 GAO-03-508 Student Financial Aid 

federal need-based aid. By filling this higher level of need from aid sources 

that are not counted towards federally defined need, the student could 

receive more aid than his/her federally defined need would dictate. NPSAS 

does not capture whether any nonfederal need-based aid was distributed 

using these institutional methodologies. 

• Under Title IV, financial aid officers have discretion to recalculate a 

student’s need if the family’s financial circumstances change dramatically, 

such as a parent’s loss of employment. This discretion, known as 

professional judgment, could result in an increase to a student’s financial 

need. NPSAS does not capture whether a student’s aid package was 

adjusted due to professional judgment. However, the 12 schools that 

provided information to us generally said they changed aid awards as a 

result of professional judgment for 5 percent or fewer of federal aid 

recipients.8

These cases describe situations under which federal aid recipients may 

legitimately receive more financial aid than their federally defined need. 

While each of the situations described provides a plausible explanation of 

how a combination of federal and nonfederal aid can raise overall aid 

above federally defined need, we cannot determine with certainty, without 

looking in detail at each case, why these aid recipients received more aid 

than their federally defined need. 

Compared to those federal aid recipients who did not receive aid greater 

than their federally defined need, the 732,000 who did were more likely to 

have higher family incomes, be dependent, or attend public universities. 

They are also more likely to have higher grade point averages or attend 

schools in the Southwest or Plains states. Among those variables that 

proved statistically significant, table 2 shows selected student and school 

characteristics that were associated with receiving aid greater than 

federally defined need. Appendix II more fully describes all of the 

variables used in our analysis and more completely discusses their levels 

of statistical significance. These patterns generally held regardless of 

whether the aid greater than federally defined need could be attributed to 

substitutable loans or a combination of federal and nonfederal aid. The 

one exception we found was that students who received aid greater than 

 8

Two schools said they did so for 10 percent of federal aid recipients. 

Recipients of Aid 

Greater Than Their 

Federally Defined 

Need Are More Likely 

to Have Higher Family 

Incomes, Be 

Dependent, and 

Attend Public 

Universities 
Page 14 GAO-03-508 Student Financial Aid 

their need as a result of a combination of federal and nonfederal aid were 

more likely to be white. 

Table 2: Selected Student and School Characteristics Associated with Increased 

Likelihood of Receiving Financial Aid That Was Greater Than Federally Defined 

Need 

Characteristics 

Likelihood of receiving aid greater than 

federally defined need 

Students 

Dependent More than twice as likely as independent 

students 

Family income Increased 24 percent for every $5,000 

increase in income 

Grade point average Increased 16 percent for every half-point 

increase in grade point average 

Schools 

Located in Plains or Southwestern 

states 

Almost twice as likely as students attending 

schools in other regions 

Public institution Almost 3 times as likely as students at private 

not-for-profit institutions 

Located in rural area One and a half times as likely as students at 

schools located in urban areas 

Source: GAO analysis of 1999-2000 NPSAS data. 

In addition, these 732,000 students were more likely to have financial aid 

packages consisting mostly of non-need-based federal aid or nonfederal 

aid. Among those variables that proved statistically significant, table 3 

shows selected financial aid package characteristics that were associated 

with receiving aid greater than federally defined need. (See app. II for a 

more complete description of variables and their significance levels.) 
Page 15 GAO-03-508 Student Financial Aid 

Table 3: Selected Financial Aid Package Characteristics That Were Associated with 

Increased Likelihood of Receiving Financial Aid That Was Greater Than Federally 

Defined Need 

Characteristic of aid package 

Likelihood of receiving aid greater than 

federally defined need 

Number of different aid sources in 

student’s package 

Increased by about a third for every additional 

source in the student’s aid package 

Majority of aid is from federal non-needbased loans to students Almost 5 times as likely as students receiving 

the majority of their aid from federal grants 

Majority of aid is from federal work 

study and PLUS loans to parents 

Six times as likely as students receiving the 

majority of their aid from federal grants 

Majority of aid is from nonfederal 

grants, scholarships and work study 

(also veterans and DOD benefits and 

vocational rehabilitation assistance) 

Just over 6 times as likely as students 

receiving the majority of their aid from federal 

grants 

Majority of aid from nonfederal loan 

sources 

Nearly 8 times as likely as students receiving 

the majority of their aid from federal grants 

Source: GAO analysis of 1999-2000 NPSAS data. 

Based on NPSAS data alone, we cannot say why the characteristics listed 

in tables 2 and 3 are associated with a greater likelihood of receiving aid 

greater than federally defined need. 

Changing the Higher Education Act to limit the receipt of aid that is 

greater than students’ federally defined financial need is not likely to 

achieve significant federal savings. However, the use of substitutable loans 

could increase overall student indebtedness. Any cost savings from 

changing the Higher Education Act to limit the receipt of aid that is greater 

than students’ federally defined financial need would likely be very 

modest, much less than the dollar amount of such aid—the $2.96 billion. In 

the case of the larger group of students and their families whose aid 

greater than federally defined need is attributable to substitutable loans, 

the actual cost to the government is not the face value of the loans. For 

guaranteed loans, the government incurs costs—primarily insurance 

claims payments to lenders for defaulted loans and special allowance 

payments made to lenders to ensure a guaranteed return on the loans they 

make. For direct loans, interest from loan repayments offsets costs the 

government incurs for defaults and interest payments to the treasury on 

funds Education borrows to make loans. These interest earnings produce 

savings for the government. Determining the net cost of federal 

substitutable loans would require comparing savings generated by direct 

Savings from Limiting 

Aid Greater Than 

Federally Defined 

Need Would Likely Be 

Modest, but 

Substitutable Loans to 

Students Could Affect 

Their Indebtedness 
Page 16 GAO-03-508 Student Financial Aid 

loans with the net costs associated with guaranteed loans. We could not 

estimate these costs given the data available in NPSAS.9

For the smaller group of cases involving combinations of federal and 

nonfederal aid, any savings would depend on how aid is packaged. 

Assuming that most schools package loans and work study last—8 of the 

12 schools that provided us with information said this was the typical 

practice at their institutions—loans and work study would most likely be 

eliminated first to keep aid packages within federally defined need limits. 

Any savings on loans would be derived using the same basic calculation 

we described above for substitutable loans. In addition, the government 

would also save the interest it pays on subsidized loans while students are 

still in school. Thus, these savings would be considerably smaller than the 

face value of the loan. With regard to work study, it is likely that schools 

rather than the federal government would obtain most of the savings. 

According to our analysis of the NPSAS data, this would occur because a 

larger percentage of these students received institution-funded work study 

rather than federally funded work study (29 percent versus 12 percent). 

Although changing the Higher Education Act to limit receiving aid greater 

than federally defined need is not likely to result in any substantial cost 

savings, continuing this practice may affect some students’ loan 

indebtedness. The one fifth of federal aid recipients who received 

substitutable loans may face higher monthly loan repayments that might 

constrain their other financial choices. In addition, as student loan 

indebtedness rises, borrowers could experience difficulty in meeting their 

monthly payments, particularly under weak economic conditions. 

The widespread use of substitutable loans might also affect Education’s 

ability to help students and their families maintain their loan indebtedness 

at manageable levels. Officials at Education told us that the agency is 

committed to tracking overall student debt burden. However, the 19 

percent of students and their families who borrowed substitutable loans 

may have higher monthly repayments and spend a larger share of their 

income on loan repayments than other students. This could increase the 

average debt burden of these students above that of other students. 

 9

NPSAS does not identify whether loans are direct or guaranteed. The final cost of these 

loans will also depend on which of several repayment options the borrowers select after 

graduating and whether or not they consolidate their loans. Neither of these is captured in 

the NPSAS data. 
Page 17 GAO-03-508 Student Financial Aid 

While students and their families have a range of options for paying for 

college, the money students borrow could influence their later debt 

burden. Given Education’s performance indicator of maintaining borrower 

indebtedness at less than 10 percent of income in the first year of 

repayment, this relationship should be of interest to the agency. Education 

may find it more difficult to meet this standard if indebtedness continues 

to grow through the use of substitutable loans. Such information might 

prove useful to help inform federal policymakers on how best to minimize 

student indebtedness. 

To ensure that the use of substitutable loans will not lead to 

unmanageable student loan indebtedness, we recommend that the 

Secretary of Education, over time, monitor the impact of substitutable 

loans on student debt burden and, if debt burden associated with 

substitutable loans rises substantially, develop and propose alternatives 

for the administration or Congress to consider to help students manage 

student loan debt burden. Such alternatives could range from shifting 

students into repayment plans that would lower their debt burden to 

limiting the use or amount of substitutable loans. 

In written comments on a draft of this report, Education agreed that 

student indebtedness is of concern, however, Education disagreed with 

what we included in our analysis. Specifically, we included PLUS loans to 

a student’s family—usually to the parents—as part of our analysis. 

Education stated that by including these loans we were mischaracterizing 

student debt and that loans to families should be excluded from our 

analysis. Education also stated that we should distinguish between 

students and their families as the recipients of federal financial aid. We 

modified the report to more clearly detail when non-students were 

responsible for the loans. However, based on the 1999-2000 NPSAS data, 

1.3 million federal aid recipients received unsubsidized Stafford loans 

while 323,000 federal aid recipients received PLUS loans, indicating to us 

that far more substitutable loans are likely to be made to students. 

Education also had technical comments, which were incorporated when 

appropriate. See appendix III for a printed copy of Education’s comments. 

We are sending copies of this report to the Chairmen and Ranking 

Members of the Senate Committee on Health, Education, Labor and 

Pensions and the House Committee on Education and the Workforce; and 

the Director of the Office of Management and Budget. We will also make 

copies available to others on request. This report is also available at no 

charge on GAO’s Web site at http://www.gao.gov. 

Conclusions 

Recommendation 

Agency Comments 
Page 18 GAO-03-508 Student Financial Aid 

If you or your staff have any questions about this report, please call me at 

(202) 512-8403. Major contributors are listed in appendix IV. 

Sincerely yours, 

Cornelia M. Ashby 

Director, Education, Workforce and 

 Income Security Issues 
Appendix I: Objectives, Scope, and 

Methodology 

Page 19 GAO-03-508 Student Financial Aid 

The objectives of this study were to determine how often students who 

were federal financial aid recipients received aid that was greater than 

their federally defined financial need, identify the student, school, and 

financial aid package characteristics associated with receiving such aid, 

and determine what the implications might be, if any, of changing the 

Higher Education Act to limit the receipt of aid that is greater than a 

student’s federally defined need. When students receive financial aid from 

multiple sources or some aid that is not need-based, the potential exists 

for some students to receive aid that is greater than their federally defined 

need. Most Title IV aid is based on a student’s federally defined financial 

need, which is the difference between the student’s cost of attendance and 

the family’s federally determined ability to pay these costs—known as the 

expected family contribution (EFC). To meet their EFC under Title IV, 

families can obtain non-need-based loans, which we refer to as 

substitutable loans. 

To carry out our objectives, we used the National Postsecondary Student 

Aid Study (NPSAS) data collected by the Department of Education’s 

National Center for Education Statistics. We also contacted 19 college and 

university financial aid officers to obtain information on their schools’ 

financial aid packaging policies and practices. We received responses from 

12 of these officials. 

To determine the extent to which students received financial aid greater 

than their federally defined need, we analyzed the NPSAS data to identify 

the amount and source of financial aid received by full-time, full-year 

undergraduates who received aid from any federal source whether or not 

it was a Title IV program. We identified two distinct groups of students 

who received aid greater than their federally defined need. We first 

identified all students who received aid greater than the federally defined 

need, regardless of the source of that aid (see block A in fig. 2). The first 

group of students were those whose aid greater than federally defined 

need was accounted for by the substitutable loans they received (see 

block A-1 in fig. 2). The second group of students were those whose aid 

still remained greater than their federally defined need, after accounting 

for any substitutable loans in their aid packages (see block A-2 in fig. 2). 

To determine what student and school characteristics were associated 

with receiving aid greater than federally defined need, we again used 

NPSAS data for our analysis. For all of the students receiving aid greater 

than federally defined need and the second group of these students, we 

employed logistic regression models to estimate the association between 

student and school characteristics and the likelihood of receiving aid 

Appendix I: Objectives, Scope, and 

Methodology 
Appendix I: Objectives, Scope, and 

Methodology 

Page 20 GAO-03-508 Student Financial Aid 

greater than federally defined need. We chose logistic models due to the 

dichotomous nature of the phenomenon of interest—whether or not 

students received aid greater than their federally defined need. We did not 

perform a similar analysis on the first group because, since it was such a 

large portion of the students receiving aid greater than their federally 

defined need and since the aid that was greater than need could be 

attributed entirely to receiving substitutable loans, it was not likely the 

results would show this group to be different in any other ways. 

The variables that we used are listed and defined in appendix II. In 

general, we included student characteristics such as race, marital status, 

and dependency status. We included such school characteristics as 

graduation rate, geographical location, and whether or not a school was 

public. We also included some characteristics of the aid packages the 

students received. To report the results of the regressions, we use odds 

ratio tables. (See app. II.) Some variables proved not to have a statistically 

significant association with receiving aid greater than federally defined 

need. For all of the students receiving aid greater than their federally 

defined need, these included whether the student was white, the 

graduation rate of the school, and if the majority of a student’s aid package 

was composed from federal need-based loans. For the second group, 

whether the student was a veteran, was a U.S. citizen, and whether the 

majority of aid was received from federal need-based loans or nonfederal 

loans were statistically insignificant. 

In analyzing the results for the second group of students, we sought to 

determine if a large proportion of these students had characteristics in 

common, such as receiving aid from specific programs or attending 

schools with a certain common characteristic (e.g., public versus private, 

regional location). We did not undertake any further analysis to identify 

how these students received aid that was greater than their federally 

defined need. This would have entailed individually analyzing each of the 

over 400 cases and obtaining additional information directly from the 

school. This analysis would have been beyond the scope of our review. 
Appendix II: Logistic Regressions 

Page 21 GAO-03-508 Student Financial Aid 

To analyze the student and school characteristics that are associated with 

receiving aid greater than federally defined need, we ran logistic 

regressions from variables in the 1999-2000 NPSAS. We sought to 

determine which student, school, and aid package characteristics were 

significantly associated with the receipt of aid greater than the federally 

defined need. We included variables representing dependency status, 

grade point average (GPA), region of the country, race, veteran status, 

income, a private college indicator, the source of the majority of the 

student’s aid, and the number of different aid source in the aid package. 

The results for the models we used are odds ratios that estimate the 

relative likelihood of receiving aid greater than federally defined need for 

each factor. Table 4 shows these odds ratios for all students receiving aid 

greater than their federally defined need (see blocks A-1 and A-2 in fig. 2). 

Table 5 shows the results for the students whose aid greater than their 

need could not be attributed entirely to receiving substitutable loans (see 

block A-2 in fig. 2). If there were no significant differences between those 

who received aid greater than federal need and those who did not with 

regard to a particular characteristic then the odds ratio would be 1.00. The 

more the odds ratio differs from 1.00 in either direction, the larger the 

effect. 

The odds ratios were generally computed in relation to a reference group; 

for example, if the odds ratio refers to being a dependent student, then the 

reference group would be independent students. Some variables, such as 

GPA and income, are continuous in nature. In these cases, the odds ratio 

can be interpreted as representing the increase in the likelihood of 

receiving aid greater than federally defined need given a 1 unit increase in 

the continuous variable. 

An odds ratio greater than 1.00 indicates an increase in the likelihood of 

receiving aid greater than the federally defined need relative to the 

reference group, whereas an odds ratio less than 1.00 indicates a decrease 

in the likelihood of receiving aid greater than the federally defined need 

relative to the reference group. Both tables also include the 95 percent 

confidence intervals around the odds ratios. If these intervals contain 1.00, 

then the difference is not statistically significant. 

Table 6 shows the means for all the variables considered. 

Appendix II: Logistic Regressions 
Appendix II: Logistic Regressions 

Page 22 GAO-03-508 Student Financial Aid 

Table 4: Odds Ratios for All Students Receiving Aid Greater Than Federally Defined 

Need 

Independent variables and effects Odds ratio

95% lower 

limit

95% upper 

limit 

 Dependent 2.62 1.89 3.64 

 GPA (0-40) 1.03 1.01 1.04 

 Currently married 1.63 1.17 2.27 

 Household size 0.72 0.67 0.78 

 Institution in Plains or Southwest 1.70 1.33 2.17 

 White 1.08 0.87 1.35 

 Veteran 1.83 1.09 3.06 

 Income/$5,000 1.24 1.20 1.28 

 Substitutable loan (y/n) 69.21 47.59 100.64 

 Private university 0.35 0.28 0.43 

 4-year university 1.54 1.14 2.07 

 Urban institution 0.68 0.54 0.35 

 Graduation rate of institution 1.00 0.99 1.00 

 # Aid Components 1.33 1.24 1.43 

Aid package variablesa

For the remaining variables, the reference 

group is “Majority from Federal Grants.”b

Federal need-based loans to 

students 

1.72 .73 4.07 

Federal non-need-based loans to 

students 

4.77 1.97 11.54 

Federal work study and PLUS loans 

to parents 

6.02 2.41 15.03 

Nonfederal grants, scholarships, 

and work study (includes 

Veterans/DOD benefits and 

Vocational Rehabilitation 

assistance) 

6.12 2.57 14.53 

 Nonfederal loans 7.8 2.89 21.08 

 No majority 2.33 1.0 5.43 

Source: GAO analysis of 1999-2000 NPSAS data. 

a

The classifications used are consistent with the categories of aid package variables used in the 

NPSAS data. However, we did separate need-based and non-need-based loans. 

b

The variables indicate whether or not the majority of a student’s aid came from the particular source 

described by the variable. The omitted reference group is those students who had the majority of their 

aid coming from federal grants. 

We found statistically significant differences between those students who 

received aid greater than their federally defined need and those who did 

not for the following characteristics: 
Appendix II: Logistic Regressions 

Page 23 GAO-03-508 Student Financial Aid 

Dependent. All else equal, dependents are more than twice (2.62) as 

likely to receive aid greater than federally defined need. 

Currently Married. All else equal, being currently married (as opposed 

to single or separated, divorced or widowed) increased the likelihood of 

receiving aid greater than federally defined need by a factor of 1.63. 

Veteran. Veterans were almost twice as likely (1.83) than nonveterans to 

receive aid greater than the federally defined need. 

Household Size. As the size of a household increases, the likelihood of 

receiving aid greater than the federally defined need decreases. For 

example, a student from a two-member household is 1.4 times more likely 

to receive aid greater than federally defined need than a person from a 

three-member household. 

GPA. GPA is usually calculated on a 4-point scale. In the NPSAS data set, 

GPA is multiplied by 100 or reported on a 400-point scale. In our analysis, 

we have GPA ranging from 0 to 40, such that a unit increase in our GPA 

variable (say from 37 to 38) represents a 0.1 change in grade point average 

as it is usually calculated (3.7 to 3.8). An odds ratio of 1.03 should thus be 

interpreted as follows: On a 4-point GPA scale, increasing GPA by onetenth of one point (2.53 to 2.63) increases the likelihood of receiving aid 

greater than federally defined need by 3 percent. Thus, a change of one 

grade point (2.5 to 3.5) increases the likelihood of receiving aid greater 

than federally defined need by 35 percent (1.0310 = 1.35). 

Income. For every $5,000 change in income, the probability of receiving 

aid greater than federally defined need increases by 24 percent. A person 

earning $50,000 more than another, all else equal, is 8.6 (1.2410 = 8.59) 

times more likely to receive aid greater than federally defined need. 

Private Not-for-profit University. Attending a private university 

decreases the likelihood of receiving aid greater than federally defined 

need. Someone who attends a public university increases his/her chances 

of receiving aid greater than federally defined need by a factor of 2.86 

(1/0.35). 

Four-year School. All else equal, attending a 4-year institution increases 

the likelihood of receiving aid greater than federally defined need by a 

factor of 1.5. 

Student Characteristics 

School Characteristics 
Appendix II: Logistic Regressions 

Page 24 GAO-03-508 Student Financial Aid 

Urban. All else equal, attending a rural (rather than urban) institution 

increases the likelihood of receiving aid greater than federally defined 

need by a factor of 1.5 (1/0.68). 

Plains-Southwest. A student attending school in the Plains states or the 

Southwest is 1.7 times more likely to receive aid greater than federally 

defined need than a similar student attending school in other regions of 

the country. 

The aid package variables represent the source of the “majority” of the 

student’s aid, if there was a majority source. The omitted reference group 

is the category of people whose majority of aid comes from federal grants 

such as Pell and Supplemental Educational Opportunity Grants (SEOG). 

About 17 percent of the sample falls into the reference group. In general, 

the people who had a majority of their aid coming from federal grants 

were less likely to receive aid greater than the federally defined need than 

any other group (as defined by majority of aid source). 

Majority from Non-Need-Based Federal Loans. Holding all else equal, 

a student who receives a majority of aid from federal, non-need-based 

loans was almost 5 times more likely to receive aid greater than federally 

defined need than a student who receives the majority of aid from federal 

grants.

Majority from Federal Work Study and PLUS Loans to Parents.

Holding all else equal, a student who receives a majority of aid from 

federal work study and PLUS loans is about 6 (6.02) times more likely to 

receive aid greater than federally defined need than a student who 

receives the majority of aid from federal grants. 

Majority from Nonfederal Grants, Scholarships and Work Study.

Holding all else equal, a student who has a majority of aid coming from 

nonfederal grants or scholarships, work study, Veterans/Department of 

Defense benefits, Vocational Rehabilitation assistance or other non-loan 

sources is about 6.12 times more likely to receive aid greater than federally 

defined need than a student who receives the majority of aid from federal 

grants. 

Majority from Nonfederal Loans. Holding all else equal, a student who 

receives a majority of aid from nonfederal loan sources is about 7.8 times 

more likely to receive aid greater than federally defined need than a 

student who receives the majority of aid from federal grants. 

Aid Packages 
Appendix II: Logistic Regressions 

Page 25 GAO-03-508 Student Financial Aid 

No Majority. A student who has no distinct majority source of aid is 2.33 

times more likely to receive aid greater than federally defined need than a 

student who the majority of aid from federal grants. 

Number of Aid Components in Aid Packages. Having more aid sources 

in a student’s aid package results in a higher probability of receiving aid 

greater than the federally defined need. Having an additional aid 

component increases the likelihood of receiving aid greater than federally 

defined need by a factor of 1.33. This means that having five sources of 

aid, rather than one source of aid, can cause a three-fold increase in the 

likelihood of receiving aid greater than federally defined need (2.994 = 

1.314). 

Substitutable Loans. Receiving loans that can be substituted for EFC is 

associated with a great increase in the likelihood of receiving aid greater 

than federally defined need. This can be attributed to the fact that aid 

greater than federally defined need can be accounted for by substitutable 

loans for over 85 percent of the students who received such aid (628,000 

out of 732,000). 
Appendix II: Logistic Regressions 

Page 26 GAO-03-508 Student Financial Aid 

Table 5: Odds Ratios for Students Receiving Aid Greater Than Federally Defined 

Need That Cannot Be Entirely Attributed to Substitutable Loans 

Independent variables and effects Odds ratio 

Lower 95% 

limit

Upper 95% 

limit

 Dependent 3.00 1.53 5.89

 Citizen 3.23 0.76 13.63

 GPA (0-40) 1.05 1.02 1.08

 Institution in Plains or Southwest 1.77 1.24 2.51

 White 1.75 1.15 2.68

 Veteran status 2.26 0.60 8.51

 Income/$5,000 1.06 1.04 1.08

 Private institution 0.74 0.52 1.04

 Number of aid 

components 

1.21 1.09 1.34

Aid package variablesa

The variables below indicate whether or not 

the majority of a student’s aid came from the 

particular source described by the variable. 

The reference group is “Majority from 

Federal Grants.” 

Federal need-based loans to 

students 

1.79 0.78 4.10

Federal non-need-based loans to 

students 

6.61 3.00 14.6

Federal work study and PLUS loans 

to parents 

3.00 1.16 7.79

Nonfederal grants, scholarships and 

work study (includes Veterans/DOD 

benefits and Vocational 

Rehabilitation assistance) 

19.92 10.14 39.15

 Nonfederal loans 3.14 0.57 17.40

 No majority 6.96 3.48 13.92

Source: GAO analysis of 1999-2000 NPSAS data. 

a

See table 4 for a detailed explanation of the aid package variables. 

We found statistically significant differences between those students who 

received aid greater than their federally defined need and those who did 

not for the following characteristics: 

Dependent. All else equal, being a dependent increases the probability of 

receiving aid greater than federally defined need three–fold. 

White. Being white as opposed to nonwhite almost doubles the chances of 

getting aid greater than federally defined need (1.75). 

Student Characteristics 
Appendix II: Logistic Regressions 

Page 27 GAO-03-508 Student Financial Aid 

GPA. GPA is usually calculated on a 4-point scale. In the NPSAS data set, 

GPA is multiplied by 100 or reported on a 400-point scale. In our analysis, 

we have GPA ranging from 0 to 40, such that a unit increase in our GPA 

variable (say from 37 to 38) represents a 0.1 change in grade point average 

as it is usually calculated (3.7 to 3.8). An odds ratio of 1.05 should thus be 

interpreted as follows: On a 4-point GPA scale, increasing GPA by onetenth of one point (2.53 to 2.63) increases the likelihood of receiving aid 

greater than federally defined need by 5 percent. Thus, a change of one 

grade point (2.5 to 3.5) increases the likelihood of receiving aid greater 

than federally defined need by 63 percent (1.0510). 

Income. For every $5,000 change in income, the probability of receiving 

aid greater than federally defined need increases by 6 percent. Thus, a 

$50,000 increase in income (say between someone earning $25,000 and 

someone earning $75,000) results in a 79 percent (1.0610 = 1.79) increase 

in the likelihood of receiving aid greater than federally defined need. 

Plains-Southwest. A student attending school in the Plains states or the 

Southwest is 1.77 times more likely to receive aid greater than federally 

defined need than a similar student attending school in other regions of 

the country. 

Private University. Attending a private university decreases the 

likelihood of receiving aid greater than federally defined need. Someone 

who attends a public university increases his or her chances of receiving 

aid greater than the federally defined need by a factor of 1.35 (1/0.74). 

The aid package variables represent the source of the “majority” of the 

student’s aid, if there was a majority source. The omitted reference group 

is the category of people whose majority of aid comes from federal grants 

such as Pell and SEOG. About 17 percent of the sample falls into the 

reference group. In general, the students who had a majority of their aid 

coming from federal grants were less likely to receive aid greater than 

federally defined need than any other group (as defined by majority of aid 

source). 

Majority from Non-Need-Based Federal Loans. A student who 

receives a majority of aid from federal non-need-based loans is 6.6 times 

more likely to receive aid greater than federally defined need than a 

student who receives the majority of aid from federal grants. 

School Characteristics 

Aid Packages 
Appendix II: Logistic Regressions 

Page 28 GAO-03-508 Student Financial Aid 

Majority from Federal Work Study and PLUS Loans to Parents. A 

student who receives a majority of aid from federal work study and PLUS 

loans is 3 times more likely to receive aid greater than federally defined 

need than a student who receices the majority of his aid in the form of 

federal grants. 

Majority from Nonfederal Grants, Scholarships and Work Study.

Holding all else equal, a student who receives a majority of aid from 

nonfederal grants or scholarships, work study, Veterans/Department of 

Defense benefits, Vocational Rehabilitation assistance or other nonloan 

sources is about 20 times more likely to receive aid greater than federally 

defined need than a student who receives the majority of aid from federal 

grants. 

No Majority. A student who has no distinct majority source of aid is 

about 7 times more likely to receive aid greater than federally defined 

need than a student who receives the majority of aid from federal grants. 

Number of Aid Components in Aid Packages. Having more aid sources 

in a student’s aid package results in a higher probability of receiving aid 

greater than federally defined need. Having an additional aid component 

increases the likelihood of receiving aid greater than federally defined 

need by a factor of 1.2. This means that having seven sources of aid rather 

than one source of aid can double the likelihood of receiving aid greater 

than federally defined need (2.14 = 1.214). 
Appendix II: Logistic Regressions 

Page 29 GAO-03-508 Student Financial Aid 

Table 6. Means of Variables 

Independent variables 

Means for all federal student 

aid recipients 

Means for those who receive 

aid greater than federally 

defined need 

Means for those who receive 

aid greater than federally 

defined need after accounting 

for substitutable loans 

Citizen 0.940 0.978 0.989 

Dependent 0.687 0.794 0.915 

GPA 28.858 29.651 31.667 

Currently married 0.098 0.095 0.066 

Separated, divorced, or 

widowed 

0.036 0.016 

Missing marriage 0.279 0.249 0.209 

Household size 3.650 3.776 4.08 

Plains State and Southwest 0.185 0.216 0.249 

White 0.641 0.772 0.853 

Substitutable loans 0.490 0.961 0.725 

Veteran status 0.023 0.029 0.017 

Missing vet 0.009 0.008 0.004 

Income/$5,000 8.171(*$5,000 = 40,855) 11.380(*$5,000 = $56,900) 13.213(*$5,000 = $66,065) 

Private not-for-profit university 0.362 0.425 0.524 

Level of university 0.777 0.894 0.876 

Urban 0.756 0.752 0.702 

Graduation rate 47.122 52.395 53.251 

Majority of aid from federal 

grants 

0.170 0.0005 0.002 

Majority of aid from federal 

need-based loans to students 

0.182 0.110 0.038 

Majority of aid from federal nonneed-based loans to students 0.123 0.168 0.122 

 Majority of aid from federal 

work study and PLUS loans to 

parents 

0.055 0.129 0.028 

Majority of aid from nonfederal 

grants, scholarships, and work 

study (includes Veterans/DOD 

benefits and Vocational 

Rehabilitation assistance) 

0.188 0.200 0.565 

Majority of aid from nonfederal 

loans 

0.019 0.059 0.022 

Number of Aid components 3.225 3.841 4.082 

Source: GAO analysis of 1999-2000 NPSAS Data. 
Appendix III: Comments from the Department of Education 

Page 30 GAO-03-508 Student Financial Aid 

Appendix III: Comments from the 

Department of Education 
Appendix III: Comments from the Department of Education 

Page 31 GAO-03-508 Student Financial Aid 
Appendix IV: GAO Contact and Staff 

Acknowledgments 

Page 32 GAO-03-508 Student Financial Aid 

Kelsey Bright, Assistant Director (202) 512-9037 

In addition to the name above, Mary Crenshaw, Patrick diBattista, Nagla’a 

El-Hodiri, Kathy Hurley, Joel Marus, John Mingus, Doug Sloane, and 

Wendy Turenne made important contributions to this report. 

Appendix IV: GAO Contact and Staff 

Acknowledgments 

Contact 

Acknowledgments 

(130107) 
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