Abstract
University hardship funds represent a critical intervention designed to support financially vulnerable students at risk of withdrawing from higher education. This literature synthesis examines the effectiveness of hardship funds in reducing student dropout rates and critically analyses how institutions operationalise the concept of “need” when allocating such support. Drawing upon international evidence from experimental, quasi-experimental, and qualitative studies, this review finds consistent evidence that need-based financial aid and hardship-style grants significantly reduce dropout risk, with particularly pronounced effects among low-income student populations. Italian research indicates approximately one-third of recipients would have withdrawn without grant support, whilst Portuguese evidence suggests scholarships reduce dropout odds by approximately forty percent. However, the operationalisation of “need” varies considerably across institutional and national contexts, ranging from simple income thresholds to sophisticated multidimensional indices incorporating consumption patterns, debt status, and psychosocial factors. This variation has significant implications for equity, as operational definitions determine which students receive support. The findings underscore the importance of both adequate funding provision and thoughtful needs assessment mechanisms in promoting student retention and success.
Introduction
Student dropout from higher education represents one of the most significant challenges facing universities worldwide, with profound implications for individuals, institutions, and society. Students who withdraw before completing their qualifications experience reduced lifetime earnings, diminished career prospects, and often carry accumulated debt without the corresponding credential that might justify that investment (Tinto, 2012). For institutions, high attrition rates threaten financial sustainability, particularly in funding environments increasingly linked to completion metrics. At the societal level, non-completion represents a substantial waste of educational investment and contributes to skills shortages in key economic sectors.
Financial hardship has consistently emerged as a primary driver of student withdrawal decisions. The expansion of higher education participation across developed nations over recent decades has brought increasing numbers of students from low-income backgrounds into universities, many of whom face precarious financial circumstances that threaten their ability to persist (Callender and Jackson, 2005). Rising tuition fees, inadequate maintenance support, and escalating living costs have intensified these pressures, creating conditions where students must choose between continuing their studies and meeting basic material needs including food, housing, and utilities.
In response, universities and governments have developed various forms of emergency and ongoing financial support, commonly termed hardship funds, emergency aid, or discretionary assistance. These mechanisms aim to provide targeted support to students experiencing acute or chronic financial difficulty, with the explicit goal of enabling continuation of studies. However, questions persist regarding both the effectiveness of such interventions and the appropriateness of the criteria used to determine eligibility.
The concept of “need” sits at the heart of hardship fund allocation, yet its operationalisation varies considerably across contexts. Some institutions rely primarily on household income data, whilst others incorporate direct hardship indicators such as arrears, debt, or difficulty meeting essential costs. More sophisticated approaches employ multidimensional indices that capture the complex, intersecting factors that contribute to student financial vulnerability. These operational choices are not merely technical; they fundamentally determine which students receive support and, by extension, which students are enabled to continue their education.
This dissertation addresses two interconnected questions of both academic and practical significance. First, it examines the evidence base regarding the effectiveness of hardship funds in reducing dropout risk. Second, it critically analyses how “need” is operationalised in the allocation of such support, considering the implications of different approaches for equity and effectiveness.
Aim and objectives
The primary aim of this dissertation is to synthesise existing evidence on the effectiveness of university hardship funds in reducing student dropout risk and to critically examine how financial need is operationalised in the allocation of such support.
To achieve this aim, the following specific objectives guide the investigation:
1. To review and synthesise empirical evidence from experimental, quasi-experimental, and observational studies examining the relationship between need-based financial support and student retention outcomes.
2. To identify and categorise the principal approaches used to operationalise “need” in hardship fund allocation across different institutional and national contexts.
3. To critically analyse the implications of different need assessment approaches for identifying and supporting financially vulnerable students.
4. To evaluate the extent to which current evidence supports the continued investment in hardship funds as a dropout prevention strategy.
5. To identify gaps in existing knowledge and propose directions for future research and policy development.
Methodology
This dissertation employs a literature synthesis methodology, systematically reviewing and integrating findings from peer-reviewed research examining the relationship between need-based financial support and student dropout. Literature synthesis represents an appropriate methodological approach when the research objective involves consolidating evidence across multiple studies to address broad questions of effectiveness and practice (Snyder, 2019).
The review incorporated studies identified through systematic searching of academic databases, focusing on research published in peer-reviewed journals that examined either the effectiveness of hardship funds, emergency aid, or need-based grants in reducing dropout, or the methods used to assess and operationalise student financial need. Priority was given to studies employing rigorous methodological designs, including randomised controlled trials, natural experiments, regression discontinuity designs, and other quasi-experimental approaches that permit causal inference.
The geographical scope of included studies was international, encompassing research from European contexts (particularly Italy, the United Kingdom, and Portugal), the United States, and China. This breadth enables examination of how different policy environments and institutional contexts shape both the provision and evaluation of hardship support.
Studies were analysed thematically, with findings grouped according to their contribution to understanding either effectiveness or operationalisation questions. The synthesis process involved identifying areas of convergence and divergence across studies, critically appraising the strength of evidence, and considering the generalisability of findings across contexts.
A limitation of this approach is its dependence on published research, which may be subject to publication bias favouring positive findings. Additionally, the heterogeneity of interventions studied, ranging from ongoing need-based grants to one-time emergency payments, complicates direct comparison across studies. These limitations are acknowledged in the interpretation of findings.
Literature review
Theoretical foundations of financial support and retention
Understanding the relationship between financial support and student retention requires engagement with established theoretical frameworks of student persistence. Tinto’s (1975, 1993) integration model, whilst developed primarily to explain social and academic dimensions of persistence, acknowledges the role of external commitments and circumstances in shaping dropout decisions. Students facing severe financial pressure may experience reduced capacity for academic and social integration, as the demands of employment or financial anxiety consume time and cognitive resources that might otherwise support educational engagement.
Bean and Metzner (1985) offered a model specifically addressing non-traditional student attrition that placed greater emphasis on environmental variables, including finances. Their framework suggests that for many students, particularly those with characteristics associated with non-traditional status such as part-time enrolment, older age, or lower socioeconomic background, environmental pull factors may outweigh institutional push factors in determining persistence decisions.
More recently, Goldrick-Rab (2016) has articulated a conception of higher education that foregrounds material security as a prerequisite for academic success. Her work documents the extent of food and housing insecurity among contemporary students and argues that institutions have underestimated the basic needs challenges facing their student populations. From this perspective, hardship funds represent not merely a helpful addition to student support services but a fundamental requirement for enabling educational participation among financially vulnerable populations.
Evidence on effectiveness of need-based grants
The empirical literature provides consistent evidence that need-based financial support reduces dropout risk and improves completion rates, particularly for students from low-income backgrounds. This evidence spans multiple national contexts and employs diverse methodological approaches.
Italian research by Modena, Rettore and Tanzi (2020) offers particularly compelling evidence, utilising the quasi-experimental variation created by Italy’s need-based grant system to estimate causal effects. Their analysis found that approximately one-third of grant recipients would have left higher education after their first year without the financial support provided. Non-receipt of grants would have increased first-year dropout rates from seven percent to ten percent, representing a substantial increase in attrition. Across the full period of study, grants increased completion rates by 7.8 percentage points. The strength of this evidence derives from the natural experiment created by income eligibility thresholds, which permits comparison of otherwise similar students who did and did not receive support.
Research from the United Kingdom context by Moores and Burgess (2022) examined a university scholarship scheme, exploiting a natural experiment arising from the scheme’s introduction. Their findings demonstrated that scholarships significantly reduced first-year withdrawal, with the largest effects observed for students from low and middle-income households. Notably, the value of the scholarship, which ranged from five hundred to three thousand pounds, appeared less important than the fact of receiving support. This finding suggests that the psychological reassurance provided by financial support may be as important as its material value, though this interpretation requires further investigation.
Meta-analytic evidence synthesised by Sneyers and De Witte (2018) examined twenty-five experimental and quasi-experimental studies of higher education interventions, including need-based grants. Their analysis estimated that need-based grants improve both retention and graduation, with standardised effect sizes of approximately 0.05 for both outcomes. Whilst these effects may appear modest in absolute terms, they represent meaningful improvements when aggregated across large student populations and considered against the substantial individual and societal costs of non-completion.
Recent research from Portugal by Romero and Liao (2025) employed machine learning and causal inference methods to examine scholarship effects within a single university. Their analysis estimated that scholarships reduce dropout odds by approximately forty percent, equivalent to roughly a twenty-two percentage point reduction in dropout probability when other factors are held constant. The sophisticated analytical approach of this study, combining predictive modelling with causal inference techniques, provides additional confidence in the robustness of the relationship between financial support and retention.
Qualitative perspectives on hardship fund impact
Quantitative evidence on effectiveness is complemented by qualitative research that illuminates the mechanisms through which hardship funds support retention. Donnelly (2021) evaluated hardship funding at Sheffield Hallam University through survey methodology, finding that recipients explicitly stated the support enabled them to continue studying. Recipients reported using funds to meet essential costs including food, rent, and utilities, costs that would otherwise have threatened their ability to remain enrolled. The study documented reduced anxiety among recipients, suggesting that financial support provides psychological as well as material benefits.
Wagner, Sanchez and Haley (2019) examined student perceptions of hardship funding as a retention tool through qualitative research in the United States. Their findings emphasised that students interpreted receipt of hardship support as evidence of institutional care, suggesting that such funds may strengthen students’ sense of belonging and connection to their institution. This finding resonates with Tinto’s emphasis on integration as a retention factor, suggesting that hardship funds may operate through both direct material and indirect relational pathways.
Emergency aid during crisis periods
The COVID-19 pandemic created unprecedented financial pressure on students worldwide and prompted substantial emergency aid distribution. In the United States, the Higher Education Emergency Relief Fund distributed billions of dollars in emergency assistance to students. Bell, Schwegman and Didomenico (2023) conducted an implementation analysis of this programme, examining how institutions disbursed emergency aid. Their findings revealed considerable variation in distribution approaches, with some institutions using FAFSA data as a proxy for financial need whilst others employed additional criteria. The pandemic period thus serves as a natural laboratory for examining different approaches to emergency support, though the exceptional circumstances limit generalisability to normal operating conditions.
Operationalising need through income and socioeconomic status
The most common approach to operationalising financial need in higher education relies on household income and related socioeconomic indicators. This approach reflects longstanding practice in financial aid systems, which have historically used income as the primary determinant of eligibility and award levels.
The Italian grant system studied by Modena, Rettore and Tanzi (2020) employs explicitly need-based eligibility rules grounded in income thresholds. Students whose household income falls below specified levels qualify for grant support, with the level of support varying according to income band. This approach offers administrative clarity and enables consistent application across large student populations, though it requires accurate income reporting and periodic verification.
United Kingdom universities commonly employ household income bands to target financial support, as illustrated by the scholarship scheme examined by Moores and Burgess (2022). Their study categorised students into income bands including below eighteen thousand pounds, between eighteen and twenty-five thousand pounds, and higher income groups, with scholarship eligibility and effects varying across these categories. Such banding approaches balance administrative feasibility against the recognition that financial need exists along a continuum rather than as a binary state.
Beyond income, some approaches incorporate additional socioeconomic indicators including first-generation student status and residence in low participation neighbourhoods. These indicators serve as proxies for financial and educational disadvantage, recognising that household income alone may not fully capture the resources available to students or the financial pressures they face.
Administrative proxies and existing aid data
Many institutions operationalise need through reference to existing financial aid systems rather than conducting independent assessment. In the United States context, the Free Application for Federal Student Aid provides Expected Family Contribution data that institutions commonly use as a measure of financial need. Bell, Schwegman and Didomenico (2023) found that FAFSA data served as a proxy for financial need in the distribution of COVID-era emergency aid, enabling rapid identification of potentially eligible students without additional application burden.
Some institutions have developed algorithmic approaches that rank emergency aid applications by need, drawing on multiple administrative data sources to create composite need scores. This approach offers the advantage of consistency and scalability but raises questions about transparency and the validity of algorithmically derived need assessments.
Direct hardship indicators
Alternative approaches operationalise need through direct assessment of hardship circumstances rather than relying on income or administrative proxies. This may involve students self-reporting difficulty paying for essential goods and services, documenting arrears or debt, or demonstrating unpaid tuition balances.
Donnelly (2021) found that Sheffield Hallam hardship fund recipients reported using support for food, rent, and utilities, suggesting that assessment processes had successfully identified students facing genuine material hardship. The Portuguese research by Romero and Liao (2025) employed unpaid tuition, being in debt, and lack of scholarship as markers of hardship within their predictive modelling, treating these as indicators of current financial difficulty rather than socioeconomic background.
Direct hardship indicators offer the advantage of capturing present circumstances rather than relying on income data that may be outdated or fail to reflect current pressures. However, they typically require self-disclosure, which may be affected by stigma, awareness of available support, and willingness to seek help.
Multidimensional indices of financial need
The most sophisticated approaches to operationalising need employ multidimensional indices that integrate multiple indicators into composite measures. This approach recognises that financial hardship is a complex phenomenon that cannot be adequately captured by any single indicator.
Chinese research has developed classification systems for identifying students in financial hardship that incorporate growth background, consumption patterns, and dormitory behaviour alongside traditional income indicators. An and Jiao (2022) and Shuting, Yuxin and Wanping (2017) describe approaches using logistic regression, Analytic Hierarchy Process, and Technique for Order of Preference by Similarity to Ideal Solution methods to combine multiple indicators into need classifications. These methodologically sophisticated approaches aim to identify hardship through observable correlates rather than relying solely on self-report or administrative data.
Research from healthcare contexts provides additional models for multidimensional hardship assessment that may inform higher education practice. You and colleagues (2023) developed a multidimensional assessment of financial hardship among cancer patients that integrated material, psychological, and coping dimensions. Whilst developed for a different population, this framework illustrates the potential for more holistic conceptualisations of hardship that extend beyond simple income measurement.
Implications of operational choices
The variation in how need is operationalised has significant implications for which students receive support and, consequently, for the effectiveness and equity of hardship fund provision. Income-based approaches may fail to identify students from middle-income households who nonetheless face severe hardship, perhaps due to family breakdown, loss of parental support, or exceptional costs. Conversely, administrative proxies may identify students whose formal eligibility does not reflect their actual circumstances.
Direct hardship indicators depend on student help-seeking behaviour, potentially missing students who are reluctant to disclose difficulty or unaware of available support. Multidimensional approaches offer greater sophistication but require more complex data collection and analysis infrastructure, potentially limiting their feasibility in resource-constrained environments.
Discussion
The evidence reviewed in this dissertation provides consistent support for the effectiveness of hardship funds and need-based grants in reducing student dropout risk. Across multiple national contexts and employing diverse methodological approaches, studies find that financial support enables vulnerable students to persist in their studies who would otherwise have withdrawn. The Italian evidence that one-third of grant recipients would have left without support, the Portuguese finding of forty percent reduction in dropout odds, and the UK demonstration of significant withdrawal reduction collectively establish a robust evidence base for the protective effect of financial support.
Several features of this evidence merit particular attention. First, the effects appear strongest for students from low-income backgrounds, suggesting that hardship funds are appropriately targeted at those most likely to benefit. Moores and Burgess (2022) explicitly demonstrate differential effects by income group, with students from lower-income households showing the largest reduction in withdrawal risk. This pattern supports the theoretical expectation that financial constraints operate as binding constraints on persistence primarily for students lacking alternative resources.
Second, the finding that scholarship value may matter less than the fact of receiving support has important implications for policy design. If the psychological reassurance of knowing that support is available contributes to retention independently of the material value of that support, then institutional communication about hardship fund availability may itself function as a retention intervention. This interpretation aligns with Wagner, Sanchez and Haley’s (2019) finding that students interpret hardship support as evidence of institutional care.
Third, the qualitative evidence that hardship funds enable students to meet basic needs including food, rent, and utilities underscores the material reality of student financial precarity. These are not discretionary expenditures but essential costs of living, and students unable to meet them cannot reasonably be expected to maintain the focus and stability required for academic success.
The analysis of how need is operationalised reveals substantial variation across institutional and national contexts. This variation is problematic to the extent that it results in inconsistent identification of students who would benefit from support. An optimal needs assessment approach would identify all students at genuine risk of withdrawal due to financial hardship whilst avoiding provision to students for whom support would not affect persistence decisions. Achieving this optimum is inherently challenging, as it requires prediction of counterfactual behaviour.
Income-based approaches offer administrative convenience and consistency but may fail to capture the complexity of student financial circumstances. Students from middle-income households may face severe hardship that income thresholds do not recognise, particularly where household resources are not available to the student or where income data is outdated. The increasing instability of employment and household circumstances suggests that point-in-time income assessment may inadequately capture ongoing financial vulnerability.
Direct hardship indicators offer advantages in capturing current circumstances but depend on student disclosure. Evidence on help-seeking behaviour suggests that students most in need may be least likely to seek support, due to stigma, lack of awareness, or pessimism about the likelihood of receiving assistance (Goldrick-Rab, 2016). Proactive identification approaches that do not depend on student application may reach students who would otherwise be missed.
Multidimensional approaches represent the most sophisticated response to the complexity of financial hardship but require substantial analytical capacity to implement. The Chinese research employing machine learning classification methods illustrates the potential of such approaches but also highlights resource requirements that may exceed the capacity of many institutions.
A critical consideration emerging from this analysis concerns the relationship between needs assessment and available resources. Even the most sophisticated needs assessment system cannot assist students if insufficient funds are available. The evidence that support reduces dropout creates an ethical imperative for adequate funding, yet many institutional hardship funds operate with limited budgets that cannot meet all identified need. This creates difficult allocation decisions that no assessment system can resolve.
The evidence reviewed addresses primarily ongoing need-based grants rather than one-time emergency payments, and the distinction between these forms of support warrants attention. Emergency funds address acute crises, whilst ongoing grants provide sustained support throughout the academic year or programme. The mechanisms through which these different forms of support affect retention may differ, with emergency funds preventing immediate withdrawal whilst ongoing grants provide the financial stability that supports sustained engagement.
Conclusions
This dissertation set out to examine whether university hardship funds reduce dropout risk and how need is operationalised in the allocation of such support. The evidence reviewed provides clear affirmative answers to the first question whilst revealing considerable complexity in response to the second.
Regarding the first objective, to synthesise evidence on the relationship between need-based support and retention, the literature demonstrates consistent positive effects. Rigorous quantitative studies employing quasi-experimental designs estimate substantial reductions in dropout attributable to financial support, with Italian evidence suggesting one-third of recipients would have withdrawn without grants and Portuguese research estimating forty percent reduction in dropout odds. Meta-analytic evidence confirms these effects across multiple studies, whilst qualitative research illuminates the mechanisms through which support enables persistence by meeting basic material needs and providing psychological reassurance.
The second and third objectives, concerning the operationalisation of need and its implications, reveal a landscape of varied approaches with different strengths and limitations. Income-based approaches predominate and offer administrative feasibility but may inadequately capture the complexity of student circumstances. Administrative proxies enable rapid identification but depend on the validity of underlying data systems. Direct hardship indicators capture current circumstances but require disclosure that may not be forthcoming. Multidimensional indices offer the most comprehensive assessment but require analytical sophistication to implement effectively.
The fourth objective, evaluating support for continued investment in hardship funds, is clearly addressed by the evidence base. The consistent finding that financial support reduces dropout provides strong justification for investment in hardship funds as a retention strategy. The magnitude of effects documented, particularly the Italian finding that grants increased completion by 7.8 percentage points, suggests that such investment yields substantial returns in the form of increased completion and the individual and societal benefits that follow.
The fifth objective, identifying gaps and future directions, points toward several priorities. Research is needed comparing the relative effectiveness of different needs assessment approaches in identifying students who would benefit from support. Longitudinal research tracking students beyond initial receipt of support would illuminate longer-term effects on completion and outcomes. Investigation of the optimal level and frequency of support would inform allocation decisions. Finally, research on barriers to help-seeking would support the design of proactive identification systems that do not depend solely on student application.
The significance of these findings extends beyond academic interest to practical policy implications. Universities face ongoing pressure to improve retention and completion whilst operating within constrained resources. The evidence that hardship funds represent an effective intervention provides justification for their provision, whilst the analysis of needs assessment approaches offers guidance for targeting limited resources effectively. As higher education continues to expand access to students from diverse socioeconomic backgrounds, the capacity to support those facing financial hardship becomes increasingly essential to the mission of widening participation.
Future research should prioritise experimental designs that can provide causal estimates of the effects of different support levels and needs assessment approaches. Comparative international research examining how policy contexts shape both the provision and effectiveness of hardship support would inform policy learning across jurisdictions. Qualitative research exploring student experiences of needs assessment processes would illuminate how operational approaches are perceived by those they are designed to serve.
In conclusion, the evidence strongly supports the effectiveness of hardship funds in reducing dropout risk amongst financially vulnerable students. The operationalisation of need, whilst varied, should aim to identify students facing genuine hardship that threatens persistence, whether through income-based, indicator-based, or multidimensional approaches. Continued investment in both funding provision and thoughtful needs assessment represents a sound strategy for supporting student success in an increasingly diverse and financially precarious higher education landscape.
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