Home About Services Blog News Resources Contact Financial Aid Profession Financial aid has different meanings for various groups. In the narrowest sense, students often use the term to refer to grant and scholarship assistance or “free money” which does not have to be repaid. Financial aid administrators take a much broader view. We generally define financial aid as any assistance provided for the purpose of helping a student meet their college costs including grants, scholarships, loans, and employment programs. Harvard University which began in 1636 was the first American college1. Harvard also started the American financial aid system. Within seven years, Harvard had received its first scholarship funds from a private donor, Lady Anne Radcliffe Mowlson. Harvard had established a student loan program by 1840 and Harvard had the best-funded scholarship program in the nation by 18782. Until the Servicemen’s Readjustment Act of 1944, better known as the GI Bill, there was no federal program designed to help students pay for college. The passage of the National Defense Act of 1958 (NDEA) and the Higher Education Act of 1965 sealed the federal government’s involvement in financial aid and established the need for people to administer these programs. Perhaps the first group of organized financial aid administrators, consisting of a cluster of 95 private colleges and universities, founded the College Scholarship Service (CSS) in 1954. CSS developed a standard need analysis system to award financial aid based on family income and assets3. In 1966, the National Association of Student Financial Aid Administrators (NASFAA) was founded as an outgrowth of six regional professional associations. NASFAA is currently the largest postsecondary education association in Washington, DC, with more than 10,000 aid administrators at member institutions nationwide. Higher education has seen rapid change in the past 50 years as financial aid has matured into a profession. Increases in enrollment, college costs, and funds administered along with changes in the goals of financial aid, technological advances, and intrusive federal regulation have made it one of the most dynamic higher education professions. In 1971, 34% of 25–29 year old Americans had some college education and by 2001 this percentage increased to over 58%4. College costs increased by almost 1,000% since 19715 and that increased the pressure on aid administrators to find funds to help students enroll. Aid administrators now annually award over $74 billion to enable students to pursue their educational objectives6. At the same time that college enrollments and college costs were exploding, the goals and purposes of financial aid were expanded. The goals were clear in the simple days at Harvard in the early 1640’s, to provide funds to assist financially needy students. The entanglement of the federal government, however, has resulted in multiple objectives. The GI Bill provided funds for students to attend college in part to address concerns about economic reintegration of almost 16 million veterans returning from WWII and the potential for high unemployment if they immediately reentered the workforce. The National Defense Act which created the National Defense Student Loan (now called the Federal Perkins Loan) was created in response to the Soviet Union’s launch of Sputnik and our need to develop scientists who could help us compete with the Russians. Congress continues to use the aid programs to encourage students to enter certain fields such as teaching and law enforcement. Using the Constitution’s spending clause, Congress has used financial aid as a means to regulate a number of college activities and promote public policy concerns such as ensuring the academic integrity of academic programs, registration for selective service, and denying financial aid to students with drug convictions. To meet increased costs, student borrowing increased dramatically and student loan default rates skyrocketed. In the early 1990s, the national student loan default rate soared to a high of 22.4%7. Aid administrators were assigned additional responsibilities by the U.S. Government to prevent defaults. As a result, aid administrators provided more intensive debt management counseling and became more connected to career planning and placement activities. Default rates have now fallen below 6%8. Colleges have also begun using the funds as leverage to encourage enrollments of the best and brightest and special populations such as athletes and underrepresented minority students. In 1988, academic merit was used to award institutional aid at 58% of four-year private colleges and universities and 14% of four-year public institutions. By 1996, merit was used at 73% of four-year private institutions and 28% of four-year public colleges and universities9. A recent study of 2,554 colleges shows the majority of institutional funds at four year public universities are awarded on a non-need basis (merit or other factor)10. Such changes have caused concern both within and outside the profession. The State of Georgia launched the Hope Scholarship Fund which is awarded on the basis of academic performance. The shift in use of aid from needy students to meritous students has raised ethical concerns. In 1999, NASFAA adopted a Statement of Ethical Principles replacing its Statement of Good Practices and in doing so removed the expectation that “the aid administrator should make every effort to redirect [non need-based] funds to assist those students with demonstrated need.” Use of funds to recruit underrepresented minority students has also created concerns. The current U.S. Supreme Court case involving admissions at the University of Michigan is expected to significantly impact financial aid. In the midst of these changes, regulation of the profession has grown significantly. A project by the Office of General Counsel at the Catholic University of America catalogued over 7,000 regulations affecting colleges and universities. Such regulation has driven some institutions out of the financial aid programs (e.g., Grove City College). “To manage the increased workloads, aid administrators have had to become much more process-oriented than they were in 1988. Aid administrators have become much more concerned with following the rules and regulations of aid, rather than with making sure students receive aid packages that meet their needs and safeguard limited funds11.” As such, aid administrators have used technology extensively to automate these processes. Aid administrators have been electronically transmitting enrollment data and financial aid eligibility information since the early 1990’s while Registrar’s continue to seek a national method to exchange student academic transcripts. Improvements in technology enabled the U.S. Department of Education to require schools to submit detailed information on every student receiving financial aid and reduce the timeframe for delivery of funds resulting in improved oversight and cost savings. And concerns over fraud have led to government data matches between Selective Service, Immigration and Naturalization Services (INS), Social Security Administration (SSA), the Internal Revenue Service (IRS), and others. Technology also enabled institutions to engage in distance education activities at an unprecedented level. In 1995, Western Governors University was established to deliver education anywhere anytime. Such programs allow learners to proceed at their own pace causing further complexity in the administration of student aid. Many federal regulations were in direct conflict with the aims and objectives of distance education and lawmakers are poised to consider changes to expand aid for this group of students. As federal regulation and the costs for non-compliance have grown, the importance of the financial aid office within colleges and universities has been recognized. Aid administrators are moving up the organizational ladder and involving higher level campus administrators in policy decisions. The financial aid office is a high financial risk area for the institution and a major factor in its ability to attract and retain qualified students. A well-run financial aid office is essential to the health of an institution. As the profession has grown, its people and history have established ethical principles to guide the future. 1DeGruyter, W. (1997). American Universities and Colleges, 15th Ed. 2Mar, M. Elaine (2001). Paper Daughter: A Memoir, Replica Books. 3The CSS methodology remained the primary need analysis system to distribute federal funds until 1992 when the Higher Education Amendments mandated the sole use of a single, free application for federal funds. An outgrowth, the Profile, is still used by a number of institutions to award their own funds. 4U.S. Department of Education (2003). National Center for Education Statistics, The Condition of Education 2003. Available at http://nces.ed.gov/pubsearch/pubsinfo.asp?pubid=2003067. 5The College Board (2001). Trends in College Pricing. 6The College Board (2001). Trends in Student Aid. 7U.S. Department of Education (2002). Available at http://www.ed.gov/offices/OSFAP/defaultmanagement/defaultrates.html. 8Ibid. 9The College Board and the National Association of Student Financial Aid Administrators (1996). The Financial Aid Profession at Work: The 1996 Survey of Undergraduate Financial Aid Policies, Practices, and Procedures, p. 46. 10The College Board and the National Association of Student Financial Aid Administrators (2002). Financial Aid Professionals at Work in 1999-2000: Results from the 2001 Survey of Undergraduate Financial Aid Policies, Practices, and Procedures. 11College Board and the National Association of Student Financial Aid Administrators (1996), p 74. 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