Understanding the purpose of federal financial aid

In many cases, the amount of Pell Grant awarded to a student will exceed the basic costs of tuition and does provide an allowance for books and supplies that can be purchased at the college or university’s bookstore.  This residual amount for supplies and books, if not used, will be refunded to the student either with money placed in an EBT account, a check made payable to the student, or some other institutional program that allows the student to access the money.  If dormitories are available, the surplus funds are often used to pay for the cost of meal cards and the dormitory fees until available funds are exhausted.  If the student is eligible, federal student loans can be awarded to the student to cover the dormitory and meal card expenses, still allowing the student to receive a refund of any excess Pell Grant or federal student loan monies awarded during the term.  The end results are the same – many students receive money they perceive as being “free” just for going to college not realizing that their financial aid money is actually an investment into their future by the federal government.

For this cause, each semester I know that for every ten students I have in any given class, two will drop out after the second mandated attendance reporting date.  They know that if they quit coming after this date that they will not be liable to return any “unused” educational money.  Since all the federal government requires is that “satisfactory” academic progress is made each semester in order to receive financial aid, many students will sign up for four classes and choose two that they know they can pass with relative ease.  The other classes, even if they quit attending after the second mandated reporting date and fail the course, they can still keep the monies already awarded and remain eligible for more money for the next term providing they are not on any academic probation by the college.  While some colleges are slowly coming up with ways to reduce this fraud, for the most part, most of the nation’s colleges are slow to respond.

The majority of students that rely on federal financial aid do benefit from the investment made by the government.  They do graduate, they do gain lower middle class to middle class employment, and they do pay increased tax revenues over their lifetime because of their educational attainment.  In these cases, the programs worked as they were designed to do.  However, there needs to be a common sense overhaul of the federal financial aid program to ensure that those students that deserve continued funding receive what they need and that those who are defrauding the system are not wasting resources that could be used by other students.  Some websites estimate that between 20 to 30 percent of college students enrolled in any semester will commit some sort of financial aid fraud during any given semester.  One community college system in California was reported to have lost nearly $80,000 of federal student financial aid in 2011 through the campus bookstore alone.  Federal investigators learned that the campus bookstore allowed students to buy clothing, cell phones, and even gift cards on cash vouchers that were to be used by those receiving Pell Grants to purchase books and other related supplies. According to statistical analysis, the average community college has book vouchers valued at $1,000 and a regular four year college issues book vouchers that average $1,250 per semester with very little oversight by school officials as to what the voucher or EBT card is actually used to purchase. The same community college system lost another $78,563 in Pell Grant funding through excess grant money being reimbursed directly to students that did not complete the term or barely qualified under the current definition of “academic progress.”

As our federal government tries to find ways to balance the national budget, federal financial aid programs will need to be streamlined and made more effective to the extent that lost investment and fraud are reduced from their current level.  When this begins to happen, and it will, there will be outcries across our nation from the colleges and universities, parents, and students as the Department of Education and Congress begins to implement new criteria and rules governing federal financial aid.


Dunn, Phil. 2013. “Many Students Use College Aid for Unnecessary Items,” USA Today Online. Accessed September 6, 2013.  Available at: http://www.usatoday.com/story/news/nation/2013/02/27/college-financial-aid-misuse/1950401/
Lederman, Doug. 2009. “Ferreting Out Financial Aid Fraud.” Inside Higher Education. Accessed September 6th, 2013. Available at: http://www.insidehighered.com/news/2009/10/15/gao
 National Center for Education Statistics, available at: http://ies.ed.gov/



Alan Simmons

Alan Simmons is an adjunct instructor of history at Henderson Community College. He has been teaching at the college/university level since 2004. Within the scope of his degrees, his areas of emphasis are U.S. foreign policy, public policy history, political history, and U.S. history.

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2 responses to “Understanding the purpose of federal financial aid

  1. Unfortunately, it is not just students committing fraud. There are colleges which force faculty to pass students with a C or better, regardless of whether or not the students actually attend and do the work! There needs to be significantly better oversight.

  2. I agree totally; the entire higher education system needs to be overhauled, including the degrees offered. Serious questions must be raised about the available degree programs AND their relevance to the American job market.