Following an explanation of the Eureka Project, which studies the financing of higher education opportunities in California, introductory information is provided on the effects of student financial aid in California on both students and colleges. Some points to be considered in understanding the relationship between student aid and institutional finance include the magnitude of student aid in the budgets of colleges and universities; the impact of financial aid on a college's ability to fulfill its enrollment targets; the effects of different kinds of aid on institutions; the uniformity of the effects of student aid across all segments of higher education; institutional expanding or contracting as a result of changes in the flow of aid; institutional responses to the challenges of managing student aid; and the role student aid plays in furthering the missions of many colleges and universities in California. Financial aid falls into the categories of aid from government and private outside sources, aid from the institution from gifts and endowment funds, and aid from institutional general funds. Information is provided on: trends in student financial aid by segment; student financial aid programs and their impacts on institutional finance; and the role of student financial aid in institutional finance (by segment). The segment in which the connection between student aid and institutional finance seems most direct is in the independent sector. Tables, charts, and graphs are included. (SM)