This issue of "Policy Briefs" briefly examines the major sources of student financial aid and the relationships among grants, persistence, and degree attainment. Aid comes from federal and state governments and from institutions in the forms of grants, loans, and work-study. The positive effects of financial aid on persistence have been reported for all three forms of aid. In some studies the results are more pronounced among students who stay enrolled from the first semester to the second than on year-to-year persistence. Grants have often been found to be the best type of aid for promoting persistence, and they are most effective when targeted at financially needy students who need the aid in order to be able to afford to stay enrolled. One study found that for every $1,000 in state or institutional grants received in the first year, a student's probability of persisting into the second year increased 5 to 10 percentage points. Public institutions in the low-aid states have been found more likely to award institutional grants to students than were institutions in high-aid states. In both groups of states across all three sectors of higher education, need-based and non-need grants were different from one another. The policy implications of these research findings are discussed, and some questions state and institutional policymakers might ask about the use of state resources are posed. (SLD)