Overcoming Financial Obstacles With Help From Higher Education Institutions

September 11, 2023 Watermark Insights

Overcoming Financial Obstacles With Help From Higher Education Institutions

Research has shown a strong correlation between education and income levels. People with two- and four-year degrees have a higher income than those who don't. Similarly, well-educated people are more likely to maintain steady employment. The phenomenon of earning a higher wage due to a higher education degree is called the “college wage premium.” While the wage premium varies from state to state, college graduates across the United States earn more than people without higher education.

Higher education institutions can participate in student retention and success with engagement strategies designed to see their students through to degree completion. The ability to identify students at risk of dropping out and proactively provide them with the resources they need to stay on track is one of several methods your institution can consider. 

The Challenges Facing Low-Income Families

In 2022, 39.6% of adults aged 25 to 29 had achieved a bachelor's degree or higher.

The college wage premium matters. While 61% of high school graduates enrolled in college in 2021, graduation rates have not kept pace. In 2022, 39.6% of adults aged 25 to 29 had achieved a bachelor's degree or higher. While racial gaps in degree completion have narrowed, they have not narrowed enough, with 25% of Hispanic adults, 28.3% of Black adults, 45.5% of White adults, and 71.6% of Asian adults having completed a bachelor's degree. 

Students who come from historically disenfranchised groups — low-income, Black, Latinx, and academically at-risk students — continue to struggle to achieve college success. Financial obstacles only exacerbate this problem by prohibiting academic success.

Overcoming Financial Barriers

Students have assistance at their disposal. Federal financial aid and student loans allow students from economically disadvantaged families to continue their academic journeys beyond high school graduation. However, higher learning institutions face challenges when providing student assistance from enrollment to completion.


The U.S. Department of Education’s Federal Student Aid distributes more than $102.51 billion in federal aid annually. 

Students seeking federal financial aid to help pay for college must first fill out the Free Application for Federal Student Aid (FAFSA) form. The FAFSA is integral to the U.S. Department of Education’s Federal Student Aid decision to distribute more than $102.51 billion in federal aid annually. 

States and universities use the FAFSA to make decisions regarding financial aid awards. Unfortunately, many students find the form too complex and confusing, so they choose not to complete it. This low completion rate has left billions of dollars in federal aid unawarded.

Challenges Facing FAFSA Funding

To ease the complexity of applying for financial aid, Congress passed the Consolidated Appropriations Act in December 2020. The act aimed to streamline the FAFSA process, making it easier for millions of college students to apply for and access federal financial aid. Unfortunately, in June 2021, the Department of Education delayed the revision process until the 2024-2025 school year.

Another complicating factor is that once a student completes the FAFSA, they may still need to provide additional information to process and approve their application. Each year, the U.S. Department of Education flags around 25% of applications for audit through a verification process. The process requires flagged students — many of whom are from underrepresented and minority groups — to prove that the information they provided on the FAFSA application form is accurate. The flagging and verification process is nearly three times higher, 60%, for students who qualify for federal need-based Pell Grants. These numbers are highly concerning, as nearly 25% of students eligible for Pell Grants fail to complete the verification process and lose thousands of dollars in federal aid. 

 25% of students eligible for Pell Grants fail to complete the verification process and lose thousands of dollars in federal aid.

The current process requires students in the most need of financial aid to go to great lengths to prove their eligibility. Community colleges provide the strongest evidence of this additional burden. Community colleges typically serve a disproportionately high number of Pell Grant recipients, where only 30% of Pell-eligible students graduate

Student Loan Debt and No Degree

30% of college students drop out before the beginning of their sophomore year.

When students do not have easy access to financial aid programs, they may feel it necessary to drop out of college before receiving their degree. In America, the overall dropout rate is 40% for undergraduates, and 30% of college students drop out before the beginning of their sophomore year. Not finishing college may leave thousands of students with debt — but without the benefit of a degree to go with it.

Dual Enrollment

Students who are enrolled in two separate educational institutions face even more hurdles in accessing financial aid.

Additionally, students with dual enrollment — those concurrently enrolled in two separate educational institutions — face hurdles in accessing financial aid. Dually enrolled students are typically high school students who are also taking college courses. These students are not eligible for federal financial aid. Plus, college credits earned through dual enrollment can affect how long a student can receive state and federal financial aid, as well as the maximum financial aid packages students can receive from federal student loan programs. Students who take advantage of dual-enrollment programs may miss out on much-needed financial aid to help them finish college.

Because of this, the onus is on higher education institutions to shrink the equity gap in education by removing financial barriers to college success and completion. Simplifying the FAFSA application process, giving dual-enrolled students equal access to financial aid, and reducing the amount of education debt for students who did not complete a college degree are all vital to overcoming academic and financial obstacles.

The Role of Higher Education in Removing Financial Barriers

The Role of Higher Education in Removing Financial Barriers

The first step in helping students navigate financial obstacles is identifying low-income, high-risk students who could benefit from financial aid consulting services. Early warning systems that use predictive analytics allow college administrators and student retention specialists to effectively connect with students, assist them in developing a plan for success, and intervene when necessary and in the most effective ways.

Predictive Analytic Software

Predictive analytic software can anticipate issues before they happen, allowing student success coaches to flag at-risk students and begin activating interventions. Predictive analytics leverages known data about the student to determine which students need assistance and what challenges a student might face on their path to success. 

Predictive analytics use data harvested from campus-wide systems, ranging from basic geography and demographics to more actionable academic ability, performance, and behavioral features, that can indicate when a student might be losing momentum. These systems may also use sensitive “ability to pay” and “financial support” insights gleaned from the FAFSA to help explain why some students may experience financial hurdles as they seek to complete their degree. 

While learning institutions usually use the information gathered from the FAFSA in the early stages of a relationship with a student, such as when preparing financial aid packaging, data extracted from the FAFSA form can also impact an institution’s ability to meet students' needs during later stages of their academic careers.

Student Engagement

Another way learning institutions can help guide students through the financial aid process is through student engagement — actively reminding students of the importance of filling out the FAFSA form. Student reminders are especially crucial in community colleges, where more than two-thirds of first-time students do not complete an associate degree within three years. 

Community colleges increasingly have a nontraditional student population — older students, minorities, and low-income students — who may have financial burdens that prohibit them from degree achievement without support. Engaging with students who need it most can identify issues that prevent academic success. One-on-one consultations allow student-retention specialists to help identify specific workshops and other available resources for accessing and applying for financial aid.

Increased Success Through Engagement

Learning institutions that use early warning systems, predictive analytics, and student engagement programs have achieved increased student retention rates. Since 2017, community colleges that have partnered with Watermark to advance engagement with their students have seen a 12.3% increase in FAFSA completion across all students and, more specifically, an increase of 10% for Hispanic students on campus. 

Returning students who received a FAFSA-related note or alert from the Watermark Student Success & Engagement program increased their FAFSA completion rates by 12.6%. On average, students at Watermark’s partner institutions have submitted their FAFSA application within 161 days of the FAFSA becoming available — a full two months sooner than previously experienced. 

Students also submit their FAFSA an average of 60 days before the fall semester begins, a 58% increase. By partnering with Watermark, higher learning institutions have increased student access to financial aid programs, significantly improving outcomes.

Ensure Student Success With Watermark

Ensure Student Success With Watermark

Higher education institutions can help students from low-income families overcome financial barriers. Student engagement is crucial for overall student achievement, and with data collection, measurement, and analysis software from Watermark, you can identify students who need it most and provide them with the academic and social tools they need for degree completion. 

Watermark Student Success & Engagement provides you with insights to make more progress at your institution. Our artificial intelligence solution can help you keep underserved students engaged, increasing their retention and optimizing their chances of degree completion. Request a demo today.

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