Financial aid professionals know that economic disadvantage doesn’t always fit neatly into the boxes that traditional need-analysis systems use. While income has long been the main determinant of aid eligibility, emerging research shows that wealth—or the lack of it—is equally consequential in determining whether students enroll, persist, and graduate.
A recent study from the Higher Education, Race, and the Economy (HERE) Lab at the University of California, Merced, profiled in The EduLedger, underscores that students who grow up in households that are both low-income and low-wealth face barriers current systems overlook. These “dually disadvantaged” students, the report explains, are less likely to attend or complete college, and when they do enroll, they tend to borrow more heavily and carry their debt for longer periods.
Why This Matters for Financial Aid Practice
The HERE Lab’s findings are not just theoretical—they reveal how more nuanced financial aid design could drive measurable outcomes. Researchers modeled the effect of a $5,000 need-based grant targeted to students in the lowest third of income and with no family wealth in three states: California, Illinois, and New York.
The results showed meaningful increases in degree completion and strong economic returns:
- California could gain over 4,500 new graduates per student cohort, yielding a 4:1 return on investment.
- New York and Illinois would also see hundreds to thousands more graduates, with each dollar spent producing several dollars in long-term state economic benefits.
The takeaway: aligning aid eligibility to account for both income and wealth doesn’t just help students—it strengthens local and state economies by boosting completion rates and expanding the skilled workforce.
Turning Research into Action: What Financial Aid Leaders Can Do
1. Redefine the Understanding of “Need”
Traditional need analysis centers on annual earnings. Yet wealth—savings, home equity, investments—better reflects a family’s long-term financial security and their capacity to absorb shocks. Aid professionals can begin advocating within their institutions to treat low wealth as a distinct risk factor that warrants additional support.
2. Design Aid Programs That Reflect the Whole Financial Picture
Even within existing federal frameworks, colleges can create institutional grants or scholarships that prioritize students with limited family assets. Targeting low-wealth students helps reduce early borrowing and promotes stronger persistence.
3. Build Early Awareness During Recruitment
Financial aid teams can collaborate with admissions to make clear that the institution understands the broader financial realities of prospective students. Messaging that emphasizes flexible aid, emergency assistance, and commitment to retention can help attract applicants who might otherwise view college as financially out of reach.
4. Strengthen Safety Nets for Retention
Students from low-wealth families often lack any buffer for emergencies. Short-term micro-grants, emergency aid funds, and access to work opportunities that fit academic schedules can make the difference between persistence and withdrawal.
5. Integrate Financial Coaching and Renewal Support
Beyond awarding aid, ongoing financial coaching can help students navigate budgeting, scholarship renewals, and debt management. Incorporating renewal reminders and one-on-one support throughout a student’s academic journey reinforces retention efforts.
6. Use Data to Guide Continuous Improvement
Institutions can monitor retention and graduation outcomes using available proxies for wealth (e.g., low FAFSA asset levels, first-generation status, lack of home ownership). This helps identify which interventions are most effective for supporting financial stability and degree completion.
Aligning Equity and Economic Outcomes
The HERE Lab’s research makes clear that considering wealth alongside income can reshape how institutions define financial need and allocate resources. When states or colleges invest in low-income, low-wealth students, they not only expand opportunity but also generate measurable economic returns through higher graduation rates and reduced loan default risk.
For financial aid professionals, this insight presents both a challenge and an opportunity:
- A challenge, because traditional aid frameworks do not easily accommodate wealth metrics.
- An opportunity, because aid leaders are uniquely positioned to pilot new strategies, collect evidence, and model approaches that recognize the realities of student financial vulnerability.
As Dr. Laura Hamilton, co-founder of the HERE Lab, emphasized in the EduLedger article, state and institutional investments in these students represent a “win-win”—advancing both equity and long-term economic prosperity.
Financial aid offices have always stood at the intersection of access and outcomes. The next evolution of that mission may be as simple as redefining how we address and respond to the “need” component. To that end, HEAG partners with institutions to strengthen their capacity to serve students equitably. Whether through compliance reviews, or policy consultations, our team can help you ensure your financial aid office is operating with both efficiency and fairness. We invite colleges and universities to connect with us at info@heag.us to review existing policies and procedures and receive expert recommendations on creating a more equitable framework for supporting all students.
