What We're Getting Wrong in Financial Aid Optimization—How It’s Holding Students Back and Costing Enrollment
For decades, financial aid offices have relied on sophisticated models to maximize enrollment and net tuition revenue. But what if one of the most common approaches to optimizing aid is fundamentally flawed? At SightLine, we’ve seen firsthand how traditional aid structures, particularly the way need-based aid is packaged, are misaligned with both institutional goals and student outcomes.
The Core Problem
Many institutions still allocate need-based aid using matrices—grids that assign a target percentage of aid met based on a student’s position in a crosswalk of academic merit and calculated financial need. On paper, this seems fair and efficient. In practice, it’s working against both the enrollment strategy and the students who need support the most.
The Myth of the Aid Matrix
Let’s say a student falls into the “high merit, high need” cell of the aid matrix. The matrix might prescribe that this student receives overall target aid of 75%. Typically, the institution applies the published merit award first, then uses need-based aid to “top off” to the matrix target.
This means that the student is awarded the merit award they qualify for, and is often published online, and then the package is topped off to meet the difference between the merit award and the target percentage indicated in the matrix.
Need-based aid becomes conditional on academic achievement. Instead of serving as a true measure of financial support, it’s effectively reduced when a student qualifies for high merit—making need-based aid contingent on performance rather than need.
Merit Undone by Need
Many strategies attempt to balance equity with institutional goals by stacking need-based aid on top of merit awards. But the design of traditional models often neutralizes merit’s intended impact.
If a merit award simply offsets need-based aid in the formula, the student sees no net increase in their package. From their perspective, the merit award wasn’t really an incentive, it just reduced the other form of aid. The result: one type of support cancels out the other, the motivational signal of merit aid is lost, and the institution’s investment in incentives goes to waste.
Not only does this process make financial aid optimization less effective, but it also creates awarding policies that are difficult to explain to families.
The SightLine Approach: Precision Over Prescription
At SightLine, we believe it’s time to move beyond rigid aid matrices. Today’s students—and institutions—need a more precise, mission-driven model. Our predictive framework rethinks aid in three key ways:
Independent optimization of need- and merit-based aid. We separate the logic for each award type. Need-based aid is directed toward students with the greatest financial barriers, while merit aid is optimized to shape the class and reward academic achievement.
Mission-aligned personalization. We incorporate each institution’s brand, mission, and enrollment goals to design supplemental awards that resonate with the right students.
Counterfactual simulation. Our models test how different aid structures would impact enrollment and revenue outcomes across student segments—so leaders can see trade-offs and make budget decisions with confidence.
Why This Matters Now
With FAFSA delays, demographic shifts, and growing skepticism about college affordability, institutions can’t afford to rely on outdated formulas. The students most affected by aid decisions are also the ones most likely to walk away if they feel unseen or unsupported.
The takeaway is simple: Need-based aid should reflect real need. Merit aid should truly feel like merit. Institutions can’t accomplish either if both are intermingled in a formula-first framework.
It’s time to rethink the way we optimize aid—not just to make the numbers work, but to make college attainable for the students we aim to serve.
Want to explore how SightLine partners with institutions to build smarter, student-centered aid strategies that drive sustainable enrollment growth? Let’s talk.
