Colleges are offering more grant money than ever before, but a surprising share of those dollars isn't going to the families who need the help most. New research shows that many grants are flowing toward higher-income households, even as low-income students continue to face steep financial barriers.
Grant Aid Has Soared — But Not for Everyone
Over the past decade, colleges have significantly increased the amount of financial aid they hand out. In the 2023–24 school year, institutions provided roughly $83 billion in grants, up from about $50 billion in 2010, Axios reported. In contrast, federal grant aid has declined over the same period.
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This shift reflects a broader movement toward a high-tuition, high-aid model, according to research from the Century Foundation, a progressive policy think tank. Schools raise their sticker prices, then offer grants or discounts that ease the cost — at least for some students. The Century Foundation describes this as an "experiment in psychology," where high prices signal prestige and financial aid creates the feeling of getting a deal.
Wealthier Students See More Grants Above Financial Need
The Century Foundation finds that 56% of students from the highest-income quartile receive grants that exceed their financial need — meaning they get more aid than the federal formula suggests their family requires. These grants come from states, the federal government, and schools themselves.
By comparison, just 0.2% of students from the lowest-income quartile receive more aid than they need. Racial disparities also show up in the data: 19% of white students receive aid in excess of need, compared with 5% of Black and Hispanic students.
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Researchers say merit-based aid is a major driver. Many colleges use these awards to recruit top students or attract applicants who might not qualify for traditional financial aid but still want a price break. Merit aid has steadily grown as a share of state grant programs, according to the Century Foundation, leaving fewer dollars for families facing the steepest financial challenges.
Why Colleges Are Competing for Wealthier Students
Institutions say merit awards help them compete for high-achieving students and support middle-income families who may struggle with rising tuition. The Century Foundation says that this strategy tends to favor affluent applicants — especially those able to pay a larger portion of the bill even after receiving discounts.
The Century Foundation also shares that some state and institutional grants shift resources upward in the system. Students at highly selective public colleges receive more state aid on average, while lower-income students and those at less-resourced schools often receive less support.
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High Prices Still Keep Many Students From Enrolling
Even with grant aid at record highs, many adults continue to find college unaffordable. A recent survey from Gallup and Lumina Foundation shows that financial concerns remain the leading reason adults choose not to enroll in higher education or to halt their schooling. Roughly 32% of students cited cost as their reason for quitting their programs.
High sticker prices alone can deter students from applying — even when generous aid might ultimately lower their costs.
The Bottom Line
While grant money is abundant, it's not always reaching the families who need it most. As colleges continue competing for students and raising prices, affordability challenges persist — particularly for low-income households who are already the most likely to be discouraged from pursuing a degree.
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