The way many states choose to dole out financial aid could have the “unintentional consequence of disproportionately excluding Black and Hispanic students,” new research shows.

Because the demand for aid far outweighs available dollars, states are forced to ration need-based financial aid through different eligibility restrictions. A new Urban Institute report supported by Lumina Foundation examines how these requirements can impact who ultimately receivesand benefits fromthat aid.

States spend nearly $14.8 billion in financial aid annually to help students continue their education beyond high school. College affordability remains a top concern for students, particularly those from families with low incomes.

The Urban Institute report looked at financial aid programs in 11 states: California, Illinois, Kentucky, Massachusetts, Missouri, New Jersey, New York, North Carolina, Ohio, Texas, and Wisconsin, to learn how eligibility requirements for state financial aid can impact students of color.

They found that restricting aid eligibility based on high school academic performance, age, the time since high school graduation, and part-time versus full-time enrollment could exclude more Black and Hispanic and Latino students than other students.

Not only that, but the research shows state financial aid programs leave out students attending for-profit schools and provide minimal funding to those attending public two-year institutions.

This disproportionately affects Hispanic and Latino students (who are more likely to attend two-year community college than their peers) and Black students (who are overrepresented in private, for-profit colleges).

Some state financial aid programs also require full-time enrollment, which leaves out many Black and Hispanic students who are less likely than their peers to enroll full-time. Finally, the aid might only be available to recent high school graduates, disproportionately excluding Black students who tend to be older than their peers.

What’s next?

This research underscores the need to improve financial aid programs to help today’s students who are increasingly racially and ethnically diverse, older, with more responsibilities outside of school, and with more financial need. The report’s authors suggest that states should reconsider how much they invest in financial aid for students attending public two-year colleges and examine the design of their financial aid programs for impact by race and ethnicityan important practice for assessing the effects of state policy and funding decisions.

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