Student Financial Aid: Monitoring Aid Greater Than Federally Defined Need Could Help Address Student Loan Indebtedness
Published: 2003-04-30T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: 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.
section_title: What GAO Found
paragraphs: 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. 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. 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.

section_title: Letter
paragraphs: In the 2000-01 school year, $80.4 billion in financial aid 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.
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 non- need-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.”
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) for cases pertaining to full- time/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.
subsections: section_title: Background
paragraphs: 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  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.
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. 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  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 non- need-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.
section_title: An Estimated 22 Percent of Federal Aid Recipients Received Aid above Their Federally Defined Need
paragraphs: In school year 1999-2000, an estimated 732,000 out of 3.4 million full- time/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.
subsections: section_title: Most Cases of Aid Greater Than Federally Defined Need Can be Attributed to Substitutable Loans
paragraphs: 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.
section_title: Some Cases of Aid Greater Than Federally Defined Need are Due to Combinations of Federal and Nonfederal Aid
paragraphs: 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. 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.
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 non- Title IV source, even if that aid results in aid greater than federally defined  need. 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  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.
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.
section_title: Recipients of Aid Greater Than Their Federally Defined Need Are More Likely to Have Higher Family Incomes, Be Dependent, and Attend Public Universities
paragraphs: 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  their need as a result of a combination of federal and nonfederal aid were  more likely to be white.
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.)
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.
section_title: Savings from Limiting Aid Greater Than Federally Defined Need Would Likely Be Modest, but Substitutable Loans to Students Could Affect Their Indebtedness
paragraphs: 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  loans with the net costs associated with guaranteed loans. We could not  estimate these costs given the data available in NPSAS.
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.
section_title: Conclusions
paragraphs: 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.
section_title: Recommendation
paragraphs: 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.
section_title: Agency Comments
paragraphs: 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.
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.
section_title: Appendix I: Objectives, Scope, and Methodology
paragraphs: 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  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.
section_title: Appendix II: Logistic Regressions
paragraphs: 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.
subsections: section_title: Student Characteristics
paragraphs: 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 one- tenth 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.
section_title: School Characteristics
paragraphs: 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.
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.
section_title: Aid Packages
paragraphs: 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.
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).
section_title: Student Characteristics
paragraphs: 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).
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 one- tenth 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.
section_title: School Characteristics
paragraphs: 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).
section_title: Aid Packages
paragraphs: 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.
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).
section_title: Appendix III: Comments from the Department of Education
section_title: Appendix IV: GAO Contact and Staff Acknowledgments
subsections: section_title: Contact
section_title: Acknowledgments
paragraphs: 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.