No application forms 1. Yet they have been an essential source of funding for many students. Means-tested government grant and loan programs are the second major source of financing for higher education. These subsidies are based on an assessment of a student's and, for a dependent student, his or her parents' income and assets at the time of enrollment. Less than 10 percent of state spending on higher education is provided through means-tested financial aid programs.
Colleges also distribute their own aid to students.
They provide price discounts based on academic and athletic talent and financial need. Author's calculations based on the National Postsecondary Student Aid Study, 1992-93. The Taxpayer Relief Act of 1997 created a number of new federal tax expenditures for higher education. Finally, students and families themselves financed a large portion of the cost of college out of family income and savings. In millions of indi- vidual agreements hashed out over dinner tables around the country, they agreed to pay for much of the direct costs of higher education out of their own pockets.