3a. Student aid is a policy mechanism used by state and federal governments through a traditional (low tuition/low need-based aid) and emergent (high tuition/high need-based aid) model. The low tuition/low need-based aid model is a state financing strategy (not an institutional strategy) that aims to offer low tuition for all students. In this model, funds are distributed to all students through the institution. The high tuition/high need-based aid model is a state financing strategy that provides funding directly to students. In this model, need is awarded directly to the most needy students (Hearn & Longanecker, 1985).
Low tuition/low need-based aid provides equal aid to all, which offers the option for equal access to all. This combines …show more content…
Undermatch occurs when the student’s choice of school is less than their optimal capabilities, impacting social efficiency. Students are placed lower in the hierarchy than their skill level, allowing those less prepared to rise, or to leave proficiency gaps (Belasco & Trivette, 2013). While undermatch is often a concern for institutional price discounting, it can also occur at the state level. An “irrational” student may choose to remain at in-state institution for a lower price. The same student could have attended a more appropriate out-of-state institution offering much more academically for a slightly higher price point (Hearn & Longanecker, 1985; Zhang, Hu, Sun, & Pu, …show more content…
Federal loans address the liquidity problem for those without the cash to pay up front due to low socioeconomic status. It also aids those whose assets that are invested somewhere else, or who would prefer to liquidate those assets for another purpose. Federal loans have become more than half of all student financial aid awarded. In addition to loans, tuition tax credits were devised to address the middle-income pinch still felt after the Higher Education Amendments of 1978. Middle-income voters felt that their need was not addressed. They argued that those with low income qualify for Pell Grants, while those with high income can afford to pay for college (Archibald & Feldman, 2011; Hearn,