The Free Application for Federal Student Aid (FAFSA) is an important tool in helping to secure federal financial aid for low-income students. The application, which is available through the federal government's website at www.fafsa.ed.gov, is the main determinant of a student's eligibility for federal financial aid. The FAFSA application process was simplified in 2007 when a study determined that many low-income students who would have been eligible for aid did not complete the FAFSA; still, in a 2009 analysis, the publisher of FinAid.org found that two-fifths of undergraduate students do not fill out their FAFSAs each year, and of these, about a quarter would probably qualify for the Pell Grant given to low-income students.
Students' eligibility for federal loans and grants is determined by their FAFSA application. If a student's Expected Family Contribution (EFC) is low enough, he might be awarded a federal Pell Grant and/or a number of other supplemental grants available to low-income students. Students deemed eligible for Pell Grants may be awarded up to $5,500 per year, according to the federal government's financial aid website. If a student is eligible for a Pell Grant, he is also eligible for an Academic Competitive Grant, Federal Supplemental Educational Opportunity Grant, and, depending on his major, a Teacher Education Assistance for College and Higher Education (TEACH) Grant (for elementary or secondary education majors) or National Science and Mathematics Access to Retain Talent Grant (for physical, life, or computer sciences, engineering, technology, mathematics or critical-need foreign language majors). These grants typically have other conditions that must be met by the student.
Depending on the student's household income as reported on the FAFSA, a student may be awarded a combination of grants and loans to meet her college's cost of attendance. Three types of federal loans are available to undergraduates: subsidized Stafford loans, unsubsidized Stafford loans and Perkins loans. Low-income students would most probably qualify for Perkins loans, which have the most favorable interest rate and are awarded to the students with demonstrated financial need. As of 2010, students may be awarded up to $5,500 per year and the interest rate is 5 percent, according to the government's website about Perkins loans.
Low-income students matriculate to college at a much lower rate than their high-income peers. A 1988 longitudinal study tracked children from eighth grade until 12 years later; this study found that only 29 percent of students from lower socio-economic backgrounds who scored in the top quartile on tests in school went on to earn a bachelor's degree, while 74 percent of high-income students who scored in the top quartile did so. College matriculation among low-income students has been enhanced, however, by colleges that offer "no-loan" policies and pledge to meet incoming students' need through grants and scholarships; at Princeton, the amount of low-income students enrolling doubled in the seven years after the college instituted this policy, according to FinAid.org.
After low-income students matriculate, they are still less likely to complete their bachelor's degrees than high-income students. A 2009 report found that about 45 percent of low-income and minority students entering four-year colleges as freshmen in 1999 received bachelor's degrees six years later, compared with 57 percent of other students, according to The Washington Post. The completion percentage was even lower for community colleges. However, the report showed that students who received Pell Grants were just as likely as their high-income peers to complete college.